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FEI Survey, FEI Comment Letter Seem to Contradict Each Other

The FEI Committee on Corporate Reporting (CCR) sent a comment letter to the SEC November 4, 2011 in which the concluded:

CCR believes thatthe changes in requirements proposed above would substantially lower the burden of preparing XBRL filings and bring the costs of preparation more in line with benefits. We note that application of existing protocols for detailed XBRL tagging will be effective for approximately 10,000 SEC registrants, including subsidiaries that follow limited disclosure, in July of 2012. All of the issues that large filers have experienced with detailed tagging could potentially be magnified when smaller, less-sophisticated companies attempt to comply. We therefore believe that action by the Commission is urgently needed.

FEI also published a survey SEC Reporting and the Impact of XBRL: 2011 Survey with these key findings of that survey:

  • The most significant challenges mentioned in complying with the XBRL mandate are getting educated on XBRL and addressing the review process.
  • XBRL had a limited impact on respondents’ SEC filing dates:
  • 72% of large accelerated filers (Tier 1 and Tier 2) reported one day or less delay due to XBRL; and
  • Over 90% of Tier 3 filers reported one day or less delay due to XBRL.
  • The majority of respondents found that XBRL was either somewhat or significantly easier the second time around.
  • Tier 1 and Tier 2 XBRL filers predicted a higher likelihood than Tier 3 XBRL filers of changing their XBRL process, with the vast majority of companies anticipating a change opting for an in-house software solution.
  • In-house and built in solutions continue to increase their significant market share.
  • Registrants using built-in solutions (software solutions used by in-house reporting teams in which the creation of the EDGAR document and XBRL instant report are fully integrated) are significantly more satisfied than those using other approaches.

Is it just me, or does the survey seem to contradict the comment letter? What do you think?

Posted on Sunday, December 4, 2011 at 08:49AM by Registered CommenterCharlie in | Comments2 Comments

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Reader Comments (2)

Remarkable the reach and impact of the established accountancy oligarchy in the US, and globally. Anything which challenges the failed status-quo of manual-effort-driven (read: billable hours) work and rework is challenged immediately by the white blood cells.

Unfortunately, that systemic response is directed at global standards designed to help investors and provide transparency. It is even more discouraging to see the biased communications distract public concern from the real problem at hand, the lack of credibility and reliability in many financial statements and the inability of the accounting profession to do anything meaningful to correct that problem.

Oligarchy in action!
December 4, 2011 | Unregistered CommenterPatrick Slattery
It does appear that the CCR recommendations to the SEC are not supported by the key findings of the survey. This could be related to the timing of the survey, and whether these results were skewed due to the fact that perhaps the Tier 2 group had largely not completed detail tagging when surveyed -- if that was the case. (Remember that only five hundred or so of the large accelerated filers had detail tagged before August 2011). So the 72% of ier 1 and Tier 2 survey respondents who stated XBRL reporting only added one or less day to their close cycle may still have been in the block tagging stage when surveyed.

That aside, from our experience, detail tagging is overly burdensome relative to any conceivable potential gain and we agree with the related CCR recommendations.

Standardization of what details need to be tagged so that tagged detals are limited, more comparable among issuers, and therefore more useful to the investing public is the correct cost benefit solution.

We would have to disagree with Mr. Slattery's comment. XBRL is the SEC's and the accounting profession's answer to increasing the reliability and credibility of financial reporting, and to restoring public confidence in the financial markets.

XBRL implementation was never going to happen "overnight," and there have been some potholes in the road to digitizing fiancial reporting data which can then be programmatically validated. Obviously, the regulators can improve the reach of their oversight with digitally reported data which can be programatically validated. And certainly one can surmise that investment analysts will be able improve their coverage of reporting compnaies -- both as to the breadth of conpanies analyzed and the depth of analytics performed.

Once some adjustments are made and all companies are reporting consistent and comparable digital financial data, there is a potential huge upside in increasing the competition among successful companies for access to capital.

The three year phase-in is well underway, and we agree some tweaking of the rules would seem appropriate. CCR has some very good ideas, and we also think that element comparability could be improved with some rewording of the element selection requirement at SEC EDGAR Filer Manual section 6.6.26. (i.e.: accountants need more leeway to select the most appropriate element rather than being required by this section to select the most definitionally "narrow" element.) This requirement is quite burdensome and its effect has been to significantly differentiate selected elements among companies, and between individual company's reporting periods.
December 8, 2011 | Unregistered CommenterCheryl Savage

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