The phone in my office rang. I answered.

“Hey, it’s me,” said the voice at the other end of the line. It was my guy at a small reporting company. “You need to write more about us small reporting companies!”

My guy at a small reporting company is the CFO of a business with $15 million in annual revenue. It’s listed on the New York Stock Exchange, mostly because the business is majority owned by some wealthy family that wants its assets to have liquidity. With a market cap of barely $25 million, he still needs to comply with all the usual requirements for an NYSE-traded company. So when my guy tells me to write more about small reporting companies—well, that could mean any number of headaches he has.

“XBRL,” my guy said. “It’s killing me. I found this one vendor whose software I use to help me tag the financials in my statements and footnotes, but the cost is $3,000 for one license. I just can’t justify that.”

My guy asked for recommendations on other XBRL vendors, or even just some quick comparison ranking so small fry like him—who clearly will do lots of tagging himself, rather than hire a firm or launch some larger project to handle the task—can have a better sense of how to proceed.

Vendor recommendations are not something Compliance Week provides, I said. I did rattle off a few vendors I know without any particular insights about the merits of their products. Lots of them, I warned, are merging their businesses of XBRL tagging software with other companies that handle the EDGAR filing of your financial statements. Then again, I said, if that’s what you want, you might as well use someone like R.R. Donnelley for the whole shebang—

“Ha!” my guy said. “Did you not hear the part about being a small reporting company?”

Fair point. My guy at a small reporting company then launched into his lamentation of XBRL compliance, much of it very valid. He must wade through 600 pages of checklists for each filing, to ensure all data is tagged correctly and matches data in HTML files submitted via EDGAR. (For comparison, his most recent Form 10-K submitted a few weeks ago is all of 58 pages.) He has virtually no staff to handle tagging, so he does the work himself. He has no sense of what vendors are worth the price they ask.

I looked up his company’s XBRL-tagged annual report on EDGAR, to see the fruits of his labor. Navigating through his various statements and notes was faster. The basic structure of the page, with a small side bar on the left side to let you jump from one part of a filing to another, all clearly labeled—that’s a fair bit easier than the traditional, text-laden EDGAR filing, where you spend plenty of time hitting Control-F to find a particular word or piece of data. If you want to compare key financial metrics among multiple companies quickly, XBRL is a nifty technology to do that.

The assumption, however, is that enough investors exist who want to analyze your financial data in this manner, so that it justifies the cost of XBRL compliance imposed on you the registrant. And no offense, I told my guy at the small reporting company, but you’re just so small I can’t imagine a lot of people care about your stock.

“No offense taken!” my guy said. “I like working at a small company. I’m OK with us being thinly traded. We know this.” His problem, he said, was marching through compliance obligations that allow other people to treat his company like a highly liquid member of the Fortune 500, when almost nobody actually wants to do that. “The footnotes,” he grumbled (he had more than 20 notes in his last 10-K). “Tagging the footnotes will be the death of me.”

Conversations like this one leave me pained, because my guy has a point: some compliance burdens border on the ridiculous for small companies, and shouldn’t exist. His arguments about XBRL compliance are compelling for a business of his size and nature.

The House  has already passed one bill, H.R. 37, that would exempt companies with less than $250 million in annual revenue from XBRL compliance. It is awaiting action in the Senate. I don’t know that I agree with that specific $250 million threshold, but exemption for some companies—very small, held by a few shareholders, with relatively straightforward financial operations—is harmless, enough.

I’ll still argue for some compliance obligations that should be universal for all public filers—such as Section 404(b) of the Sarbanes-Oxley Act, which originally required that a company’s internal control over financial reporting be subject to an annual external audit. The Securities and Exchange Commission stalled on implementing that provision repeatedly, until the Dodd-Frank Act of 2010 make the exemption permanent.

That’s a shame, because 404(b)’s whole point was to strengthen financial reporting and protect investors from fraud, restatements, and the like. XBRL, however… as much as I try to like the idea, it’s still largely a solution in search of a problem. And for plenty of small filers, the solution is so painful it becomes the problem itself.

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