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XBRL In 4 Hours? Press Releases For 10-Ks?

Melissa Klein Aguilar | March 13, 2007

At least one technology analyst is arguing that the time has come for the Securities and Exchange Commission to mandate that public companies file at least some periodic reports in eXtensible Business Reporting Language. And to demonstrate how simple the process is, the firm converted several companies' filings—including large companies like Boeing and General Electric—into XBRL in as little as four hours.

Robert Kugel, research director at Ventana Research, says past complaints about adopting XBRL—that it is an immature technology that lacks easy-to-use tools—are no longer valid. In a Feb. 22 research note, Kugel advocated that the SEC should require accelerated filers to tag their income, balance-sheet, and cash-flow statements all in XBRL.


“Based on my experience, I don’t see that this is much of a burden for any company,” Kugel tells Compliance Week. “Tagging the basic financial statements is extremely straightforward. The tools, even in beta, are easy to work with. It won’t take a lot of training to get people set up to begin this process.”

The SEC has said it will consider a requirement that companies submit their periodic financial-statement filings tagged in XBRL, but has been reluctant to mandate XBRL filing as companies struggle to implement the Sarbanes-Oxley Act and deal with shortened filing deadlines. Roughly two dozen companies are participating in a voluntary SEC pilot program using the technology.

Kugel says tagging financial data will make it easier for individual and professional investors to analyze a company’s results, particularly to compare companies on an “apples to apples” basis. The SEC envisions a world where such audiences will employ XBRL “reader” software that can quickly assemble tagged data into sophisticated, custom-tailored analyses.

“It would be extremely useful for investors,” Kugel says. “At the end of the day, they’ll have access to information a lot faster and easier than ever before.”

He recommends the SEC make tagging mandatory for annual and quarterly financial statements beginning with periods ending after Dec. 15, 2008, when he says the infrastructure for companies to file their basic financial statements using XBRL tagging will be in place and tools for automated tagging will be mature.

XBRL has a set of tags (known as a “taxonomy”) for U.S. Generally Accepted Accounting Principles that is “reasonably complete” for income statement and balance sheets. Kugel notes that the cash-flow statement portion is still incomplete, but scheduled to be updated in the coming months.

As part of his XBRL research, Kugel created tags for the income statement and balance sheet of seven companies from a range of industries and sizes. He used beta versions of two tagging tools, for which he received minimal training, mostly in the form of short demonstrations. While he had to create non-standard tags for all but one company, Kugel says most of the companies required few custom tags.

On average, Kugel says, employees should need only four to eight hours to learn how to properly use the tagging tool and another five to 10 hours to do the initial tagging. Once a template is established, it should take no more than an hour or two each quarter, and probably less, to put in the new numbers and make any necessary changes to the financial statement’s structure. Some time is also needed for an internal review, a review by external auditors, and an initial setup with the company’s financial publisher.

“The biggest hurdle isn’t the amount of hours it will take,” Kugel says. “What is an issue is what those custom tags are going to look like and ensuring that a company is using the right tag.”

In most cases, he says, deciding whether to use a non-standard tag will be a judgment call. “The people responsible for tagging won’t want to make those judgment calls, and auditors might feel uncomfortable in that role,” Kugel explains. To address that issue, companies, auditors and analysts need to come to an agreement on what those custom tags should look like, he says. Kugel recommends a “dress rehearsal” to provide a discussion among companies, auditors, and analysts to work out the treatment of the financial statement line items.

Kugel suggests that industry-specific working groups comprised of public-company representatives, securities-analyst groups that focus on a specific industry, and industry-focused practice leaders in audit firms should collaborate and make recommendations on where additions to the U.S. GAAP taxonomy would be helpful, and should develop a set of specific guidelines for applying XBRL tags.

For the text of Ventana’s research note, as well as extensive coverage of XBRL issues from Compliance Week, see the box above, right.

NYSE Clarifies Press Releases For 10-K Filings

The New York Stock Exchange recently cleared up confusion stemming from a rule change it made last year over whether listed companies need to issue press releases when they have filed their Form 10-K with the Securities and Exchange Commission.

As Compliance Week previously reported, the NYSE amended its rules last August to repeal the requirement that listed companies distribute a copy of their annual report containing financial statements to shareholders, provided that they post their Form 10-K on or through the company’s Web site; state on the Web site that paper copies of the audited financial statements are available upon request and free of charge; and simultaneously issue a press release announcing the filing with the SEC and stating that the Form 10-K is available on the company’s Web site.


Compliance with the new NYSE rule was confusing because the NYSE adopted the rule before the SEC adopted its e-proxy delivery rules, explains Andrew Thorpe, an attorney at Morrison & Foerster. “There is a mismatch where domestic companies cannot take advantage of the NYSE rule because they are still required to deliver annual reports to shareholders in paper form until July 1, 2007, which is when the SEC rules go into effect,” he says. “In the meantime, the NYSE rule appeared to require a press release without regard to whether or not a domestic company was delivering its annual reports in paper.”

However, as first reported by Broc Romanek, editor and chief blogger at, the NYSE clarified in its recent annual corporate-governance letter to listed companies that a press release isn’t necessary if the company delivers an annual report with financials to shareholders.

“The Exchange will deem a domestic company that distributes its audited financial statements to shareholders in compliance with SEC proxy rules to be in compliance with the requirements of Section 203.01,” the NYSE letter states.

Thorpe notes that the NYSE hasn’t yet said what it will do when the SEC’s e-proxy rules take effect, but he says the exchange is likely to require a press release for any company that doesn’t deliver its proxy materials, including the annual report, in paper form.

Under the existing electronic delivery regime, Thorpe says, most companies still deliver paper copies of their annual reports because those rules require informed consent of each shareholder. Thorpe says most companies already post their 10-Ks online because of pre-existing SEC disclosure requirements, but he says it isn’t common to issue a press release announcing the filing of a Form 10-K.

“Given the potential cost savings for companies with a large shareholder base, I anticipate that many NYSE-listed companies will take advantage of the new e-proxy delivery rules and will begin to issue press releases about their Form 10-Ks in accordance with the NYSE rule,” he says.

Related resources and coverage can be found in the box above, right.