I’m going to play devil’s advocate and challenge the XBRL reporting provider service companies by suggesting self-service will be the majority of the way the industry looks entering 2014 and beyond.
I would have said 2013, but so many companies remain confused by the plethora of choices when it comes to their XBRL mandate reporting duties. With this kind of learning curve, a good number of public companies will still rely on outsourced remedies for their XBRL for at least a short while longer, until they decide on an inhouse solution.
The complexities of the financial world are such that automation rules and individuality and any attempts to lasso the industry cannot easily be accomplished.
The recent 60 Minutes portrayal of the Lehman Bros. 2008 meltdown and the fact no one from Lehman has been held accountable for anything when representatives of the Federal Reserve and the Securities and Exchange Commission (SEC) were onsite at Lehman in the same building for most of the year leading up to its failure, clearly demonstrates that complexity.
What happens when something grows so sophisticated it cannot be charted, tracked or documented by human means?
It reveals a lack of human control for a process that has surrendered to automation sans human intervention.
XBRL as an investor tool, while valuable, is in its infancy and although changing quite rapidly, still permits all competitors a chance to deliver their reporting service offerings to potential clients.
Potential is a great word for XBRL.
The potential for XBRL remains unknown.
Potential in its every day sense signifies triumphs and abilities not yet fully realized.
What needs to happen with XBRL reporting in order for it to achieve its full potential is that it must become a “do it yourself” function entirely.
This is why the arena is still so competitive for self-provisioning systems that companies are developing and offering: there is not as yet an absolutely clear, self-provisioning, XBRL services provider market leader.
People used to employ the services of accountants almost exclusively before software allowed simple tax returns to be done on a personal computer.
Now XBRL is very much more sophisticated than a simple tax return and I’m not trying to suggest they are one and the same in terms of how software can provide a solution.
As relatively simple tax returns are done by many a layperson, the truly complicated tax returns still require assistance from certified public accountants (CPAs).
A huge swath of year-end tax processing CPAs felt the swing of the executioner’s axe once the likes of self-provisioning software like TurboTax hit the market, and became easier and better for the average person to use, with each successive year’s version.
Self-provisioning XBRL reporting services will similarly mature.
Currently there is an intense battle going on between more than a few providers new and old.
Many of the long-time industry pundits suggest a great deal of human intervention is required in order to accomplish XBRL reporting requirements for companies.
I acknowledge this may be something that is necessary now.
What will inevitably happen in the not so distant future, however, is that software will grow mature and sophisticated to the point of permitting companies to perform their XBRL reporting requirements themselves easily, and with confidence that the software error-checking and accuracy possess more than adequate integrity.
The roles of human beings in XBRL reporting will continue to diminish no matter what claims for necessary involvement to the contrary may exist for companies providing XBRL services that take that tack.
Software, not humans, remains the solution.
When software is intuitive, easy to use and accurate to the point companies no longer need to outsource their XBRL, this is when the necessity for professional accountants intervening diminishes.
Automation and software will only improve over time.
Unlike computer processing power, actual software code that permits XBRL process efficiency gains (in what our businesses must have in order to comply with SEC public company reporting requirements), will leave XBRL provider companies that insist on human intervention being necessary, in its wake.
Humans versus machines…
Which companies truly will have the right mix at the end of the day and become recognized industry leaders in XBRL reporting services?
Stay tuned.
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Dan Collier
Hey Bob, Again I agree whole-heartedly with your keen observations. However, I see the solution slightly different. Yes, automation is the key. But the creation of a secondary software (i.e. TurboTax analogy) is unnecessary.
I suggest that tagging at the source is where we will ultimately arrive. Enterprise Resource Planning systems (ERPs) like SAP, Oracle, People Soft, Sage and Epicor are the core of every large company’s financial reporting. These organizations are quickly recognizing the great opportunity in developing upon the software enhancements underway to begin addressing the complexities of XBRL tagging.
Once this is done, the step of creating an XBRL document will be eliminated. Taxonomy expertise will reside in house and existing company accounting staff will have the tools and knowledge to perform the review.
As we’ve discussed in previous blogs, with the introduction of newer and more sophisticated software capabilities, ALL of the traditional and ridiculously expensive services once provided by the “financial printers” are becoming quickly automated and commoditized. Content management and eCollaboration, eProxy, access equals delivery, self-filing capabilities, all technologies that shift expertise and ownership back into the clients hands. Resistance to change and fear of transparency has cornered the old giants into a position where it is increasingly harder to demonstrate value in the process.
My 34 years in the industry served me quite well and I am thankful for those years. Given the chance to come back, I’d have to say “Hell no”. To allow any of my 4 children enter the business – NFW!!
hittingthesweetspot
Hi Dan,
Thank you for your comments. A true, single source, all-in-one-as-the-document-is-formulated/completed, EDGAR, typeset and XBRL tagging solution makes quite a bit of sense to me, too.
It may be awhile until we actually get there, though.
Some XBRL reporting service providers’ current, self-provisioning solutions have the XBRL tagging process occurring after the document is EDGARized.
I see this process of auto-tagging the XBRL post document EDGARization continuing for a bit longer.
We agree the shift underway to self-provisioning software for XBRL tagging is one gaining enormous popularity and one that will march onward.
XBRL self-provisioning solutions will only get better and easier for clients to use as time goes by.
What’s really interesting to me is that in the years leading up to the XBRL mandate, I am not sure the SEC and industry leaders saw XBRL largely going the way of the self-filer.
Hindsight is, of course, 20/20, but now that XBRL is evolving the way it is, it only makes sense for reporting service provider companies to make their self-service solutions not only easy to use and compliant (to include all accuracy concerns), but scalable to add single source capabilities in the future.