AICPA sees 45% drop in XBRL costs for small companies
The cost of formatting financial statements in Extensible Business Reporting Language, or XBRL, for small reporting companies has plunged 45 percent since 2014, according to a new study by the American Institute of CPAs and XBRL US, making the requirement for using the data-tagged format more affordable.
The Securities and Exchange Commission began mandating the use of XBRL by the largest public companies in 2009, phasing in the requirements for smaller public companies over the next two years. XBRL technology was supposed to make it easier for investors and analysts to compare financial statements across companies and industries, but problems with data quality and consistency limited its usefulness, at least initially. Cost also posed a problem, especially for smaller companies, which often end up outsourcing the job.
To compare the expenses of XBRL reporting for small companies trying to comply with the SEC’s mandate, and to gauge pricing trends, XBRL US and the AICPA surveyed XBRL filing agents providing XBRL tagging and filing services to small public companies. They originally examined the pricing trends in 2014 and followed up with a new study whose results were published Wednesday. The latest study relied on pricing data from 1,032 small reporting companies using 13 different filing agents or service providers for 2017 services. XBRL is an organization that supports the implementation of XBRL business reporting services.
The study found that 68.6 percent of the companies paid $5,500 or less per year (compared to 29.9 percent of companies in the 2014 survey) for fully outsourced creation and filing solutions for their XBRL filings. Another 11.8 percent of the companies surveyed paid annual costs between $5,500 to as much as $8,000 for their full-service outsourced solutions. Only 13.1 percent of companies paid more than $10,000 in yearly costs, compared to 31 percent in the 2014 survey. The highest annual amount paid last year was $51,500, paid by one company; while the next highest cost was $38,800. The median cost of filing was $2,500, down 69 percent from the 2014 median of $8,000 per year.
“The survey indicates that the investment to standardize corporate disclosure data is not overly demanding on small businesses,” said Ami Beers, director of assurance and advisory services, corporate reporting, at the AICPA, in a statement. “It is clear the process has become more efficient over the years allowing vendors to price more competitively. This shows that the benefits of using XBRL exceed the costs because companies can reach more investors and provide analysts with easy access to more detailed financial disclosure information.”
The SEC is now allowing companies to use inline XBRL, a technology that promises to make XBRL easier to use and thereby less expensive.
Then-SEC Commissioner Michael Piwowar referred to the study in a statement during a June 28 hearing in which the SEC voted to adopt inline XBRL. “This is an encouraging trend, and I expect compliance costs to decline further as a result of today’s elimination of the requirement that operating companies and funds post Interactive Data Files to their public websites,” he said.