How can companies turn the Securities and Exchange Commission's XBRL mandate into an opportunity? By implementing an XBRL-enhanced document management strategy as part of their internal corporate filing workflow, which will both boost compliance and save money.Document management is based on applying the principles of structured content - documents that have been chunked into meaningful component parts and tagged in a systematic fashion. In the case of the corporate financial reporting process, the structure now being applied to financial content is XBRL, the financial XML standard that promises to transform, and perhaps revolutionize, how companies create and use their financial information to meet business objectives. With the SEC mandating the use of XBRL, now is the perfect time to take advantage of these two converging industry best practices.
Its standardized structure makes the application of document management systems possible for the corporate accounting sector, whereas in the past, the lack of structure had hindered the adoption of document management strategies.
Document management workflows have long been known to speed the delivery of corporate information materials, improve the quality and accuracy of content across the global enterprise, increase staff efficiency with content, and reduce publishing costs.
Going forward, successful organizations will apply document management practices to help streamline their corporate reporting processes.
OUT VS. IN
Most chief financial officers and external-reporting managers will probably opt for the short-term fix of "outsourcing" XBRL filing requirements to financial publishers. Considering the time constraints, this is a valid approach for the first 500 filers who are scurrying to comply by June 2009. It puts the burden of tagging accuracy onto a third party and simply adds yet another service fee to the cost of the corporate filing process, without garnering any real internal benefits to the organization.
However, in some cases, the filing process must be handled internally due to the complexity of the reporting requirements. Bringing the tagging effort inside, or "in-sourcing," initially offers the opportunity to gain a better understanding of the technology, as well as to examine the benefits of bringing XBRL-based structured content re-use into the corporate reporting process.
The more adventurous accountants might opt to "in-source" the tagging effort and assign an external reporting manager with the role of expert tagger, using one of the many XBRL-tagging tools that have cropped up in the past few months to fill the gap.
However, after the first few filing cycles, it becomes apparent that both approaches simply increase the burden on the corporate reporting department's limited resources and are just other versions of "cutting and pasting" content from one application to another. The key to success is automation - the manual "tagging" process must become an automated process that is integrated with the existing reporting workflows.
The sources for the filing's content can be connected directly to the corporate report generation workflow. Back-end accounting and enterprise resource planning systems now let users export primary financial statements to XBRL. Also, the commentary - management's notes and discussions or footnotes - are easily stored in content management systems that now support the storage and retrieval of XBRL content.
Aside from the filing's primary author and gatekeeper (usually the external-reporting manager), imagine how many "touches" it takes to get a filing ready for submission to the SEC. The filing process requires review and comment from multiple parties who review, re-use, and add value to the filing document: C-level executives (the chief executive, CFO, chief operating officer); internal audit; legal; corporate communications; investor relations; and the Webmaster.
With an XBRL-enhanced DM system, accounting departments can compose complex filings from multiple data sources, monitor the status of the review cycle, check in and check out the document, refresh data from the source when necessary, track changes, and enable re-use of the content for various publishing and investor communication needs in a connected, secure, distributed manner.
CONNECTING THE DOTS
XBRL is inherently a connective technology. As the document is assembled and circulates for review, it remains connected not just to the sources of the content (accounting systems, document archives, ERP databases) but to additional resources that enable the reviewers to make informed decisions.
For example, the U.S. GAAP taxonomy comes with a reference linkbase that connects concepts to their Financial Accounting Standards Board authoritative literature. So, if the reader is unsure of the definition of "fair value assessment" as described in the document, they will be able to click through to the most current online documentation on the subject.
This same capability could connect the reader to the company's accounting policies and procedures manuals and take the reader directly to the section that explains how the company interprets the FASB ruling on the topic.
Looking across an organization, you will probably see many examples of document management, structured content authoring, and XML already at work today. Marketing, technical publications, and sales and training departments have long been strong proponents and avid practitioners of document management.
DM systems enable content re-use by presales and sales departments, helping to improve win rates by allowing sales personnel to access a library of existing, proven RFP responses and standard content components to assemble custom-tailored proposals and correspondence. These same principles of document management are well-documented and ready to be applied to financial content.
Now is the time to apply these principles to the corporate filing process and reap the benefits across multiple departments. Content tagged and stored in a document management system can be re-used securely on an investor relations Web site; it can be securely reviewed and revised by internal audit review, legal, and corporate communications prior to filing; and best of all, the content can be updated and re-used in the next filing cycle, complete with version control and change management.
Leveraging the structure inherent in XBRL documents lets companies take advantage of recent advances in content management and publishing systems to create an end-to-end corporate reporting solution that includes authoring, reviewing, publishing, translation and management of financial information.
Going forward, it is key to have effective document management strategies in place for financial reporting, so companies should take advantage of this perfect storm - the requirement to comply with the mandate and the opportunities of structured content presented by the advent of the XBRL standard - and realize a measurable impact for their organization now.
Diane Mueller is the Canadian representative to the XBRL International Steering Committee, where she chairs the XBRL Working Groups on Rendering and Software Interoperability. Reach her at firstname.lastname@example.org.
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