An Expert Breaks Down XBRL Costs

BearingPoint XBRL Practice Lead Brian Hankin serves as the technical lead on his firm's work with the SEC on its $43 million effort to modernize the EDGAR system. He's also helped numerous client companies (mostly overseas) implement XBRL capabilities and is genuinely excited about the "beyond compliance" benefits of the SEC's imminent new rule.

Here's how Hankin breaks down XBRL costs for the publicly listed companies that will need to comply with the new rules:

1. Upfront Costs: These costs include software licenses, implementation and related services (consulting) costs ,and possibly training costs. Upfront costs most likely will be spread out over a three-year period because the SEC intends to design a phased approach to compliance (whereby more complicated XBRL tagging of footnote information will not be required until year two or three).

2. Ongoing Costs: If a company elects to manually tag the items in its financial statements, each filing process will likely require additional time and, possibly, cost (e.g., review by an outside XBRL publishing expert). Once the footnote tagging is completed, however, the ongoing cost is likely to be minimal regardless of whether the tagging is done manually or in an automated fashion.

3. Value-Added Costs: These costs are difficult to evaluate because the projects have yet to be performed and their purpose is to generate returns. "There is just a tremendous amount of value that companies can gain by creating a very structured interface for all of its financial information," emphasizes Hankin, who rattles off several process-improvement and efficiency opportunities, including automated tax (and other regulatory) filings, ERP modernization, internal controls monitoring, fraud detection, and continuous auditing.