Is there a cost burden with XBRL?

Lately, I have read a number of articles related to the future of XBRL and the Small Company Disclosure Simplification Act which is part of H.R. 5405, a financial services bill passed by the US House of Representatives on September 16, 2014.  While it’s unlikely that this bill will go anywhere before the end of the year, the passing of the bill in the House showcases the frustration businesses experience with XBRL.

For two decades companies have been reporting their financials to the SEC through the EDGAR system. Adding XBRL into the mix creates another layer of reporting for companies and requires more resources. For smaller public companies, this might seem like an unfair cost burden to place on them. 

However, if you dig deeper into the cost argument, it doesn’t hold much weight. Today, there are a number of reporting service companies, such as Edgar Agents, that help both large and small public companies convert their financials into XBRL. The cost of XBRL does not have to run in the tens of thousands. In fact, it is a fraction of that. For example, a survey done by Financial Executive International found that the average annual cost for small companies to file these reports is $10,000 (page 19).

At Edgar Agents, the average XBRL cost is much lower. We guide companies through the EDGAR and XBRL processes ensuring that everything is done accurately and on-time. We even offer an XBRL widget that makes posting XBRL documents on your corporate or investor relation website simple.  As a trusted partner, we take the burden out of XBRL tagging for our customers. 

Benefits of XBRL
There is an overwhelming need to bring more transparency to financial reporting. XBRL is designed to provide financial information in a standardized data format. This makes it easier for investors and analysts to compare and analyze10-K and 10-Q filings. It improves the flow of business information to the financial community (and third party investment sites). More importantly it helps companies gain control of their own internal reporting processes to streamline the reporting process to the SEC.

If some businesses are exempt from XBRL, the benefits of standardized data diminishes as financial analysts and the public will not be able to compare financial data accurately. It’s estimated that 60% of companies fall under the $250 million exemption. If only 4 out of 10 companies have to provide XBRL data, the goal of financial transparency is hardly met.

As the debate over XBRL continues into 2015, the cost argument no longer needs to be a barrier for any company – regardless of size. The process for converting financial data to XBRL has advanced over the last few years making it easier than ever (and more affordable) for companies to provide XBRL data to investors. 

Contact Edgar Agents today to learn more about our affordable XBRL tagging services.