The Securities and Exchange Commission has touted XBRL as a saving-grace technology that will meet investors' demands for more comparable financial statements across companies. But how much the implementation of data-tagging software will cost companies in the long run is still up for debate, even as a handful of volunteers continue to test it (see article here ).
One key cost could be the price of assurance. Accounting firms or other third parties may need to be hired to show that companies applying XBRL — extensible business reporting language — to their financial statements used the software correctly and tagged their financial data correctly. However, auditors are not saying how much they would charge for such a service, according to the SEC's Advisory Committee on Improvements to Financial Reporting (CIFR).
In my experience as a Big 4 auditor, I have to believe that the audit firms will view this as a new way to boost SOX revenue, which as we all know has been falling as companies have gotten a better handle on their compliance efforts. Remember, even former Representative Michael Oxley (R-OH) has publicly stated that the Sarbanes-Oxley Act (SOA) was never intended to have the effects that we’ve witnessed since its inception (which is par for the course when it comes to federal legislation). So if the audit firms totally missed the point of the SOA and proceeded to reap millions of dollars in audit revenues by blowing it completely out of proportion, why should we believe that they will ignore such a golden opportunity to do it again? These firms, like any for-profit concern, are constantly looking for new revenue streams, and I would be quite surprised if they passed this one up.
On the plus side, it doesn’t look like a fee increase will occur until late this year at the earliest. According to John White, director of the SEC Division of Corporation Finance, assuming an aggressive schedule, the soonest the SEC could require companies to use XBRL is this fall. So, if you’re a public company, especially a Fortune 500 company, you had better keep a close eye on this.
No related articles.
