Momentum is Building for Built-In Solutions
WebFilings Emerges as the Market Leader
In early December 2011, the Financial Executives Research Foundation (FERF) released “SEC Reporting and the Impact of XBRL: 2011 Survey.” With 300 companies participating in the survey, a clear trend emerged. Companies are bringing the XBRL tagging function in-house, increasingly with built-in solutions, as they search for control and efficiency in managing SEC reporting compliance. Built-in solutions, in which the creation of the EDGAR document and XBRL instant report are fully integrated, are, the fastest growing approach used by large accelerated, accelerated and non-accelerated filers.
The trend towards in-house XBRL solutions was also noted in a December 13 Compliance Week article written by Tammy Whitehouse entitled, “SEC Calls for Patience on Realizing Benefits of Move to XBRL.” According to Mike Starr, deputy chief financial professional for policy support and market monitoring at the SEC, many public companies are bringing their tagging process in-house after relying on third-party financial reporting service providers. Starr added he expects that trend to continue in 2012. According to the FERF survey, nearly all of the companies projecting a change from their current SEC reporting process anticipate adopting an in-house software solution.
Adoption of built-in solutions grew at a 39% quarterly (273% annual) growth rate in adoption over the last year amongst large accelerated filers. Built-in solutions have been deployed at 23% of large accelerated filers with WebFilings emerging in 2011 as the clear market leader.
The trend towards built-in solutions appears to be driven by a strong desire to maintain control over the entire SEC filing process and in particular to escape from the pencils down periods (the period prior to the planned filing date when no additional changes are accepted) imposed by outsourced XBRL solution providers. “I infer from the data that companies would like to have more control over the tagging process, leading them toward bringing it in house,” said William M. Sinnett, Senior Director, Research for FERF who led the study. “If you have an audit committee that wants to make a change to the financial statement at the last minute, it's very difficult to explain to the audit committee that there's a 'pencils down' process where you can't make any more changes while the financial statement is sent to the out-sourced solution provider to be tagged for the XBRL reports. If the committee proposes a change, then they expect the change to be made immediately. When you're dealing with an outsourced process, it's probably more difficult to make those changes.”
The phasing in of the final stage of the XBRL mandate will require roughly 6,000 Tier 3 XBRL filers to begin detail tagging starting with the June, 2012 10-Qs. This will intensify SEC reporting teams' need for more control and greater ability to respond to last-minute changes as access to outside XBRL services becomes more challenging. The adoption rate of built-in solutions by large accelerated filers (currently subject to detailed XBRL tagging) is expected to continue to grow and is a leading indicator for adoption by Tier 3 XBRL filers. Adoption rates of built in solutions amongst accelerated and non-accelerated filers over the last two quarters (since they became subject to the XBRL mandate) is consistent with that of large accelerated filers.
The FERF survey reported that “Registrants using built-in solutions are significantly more satisfied than those using other approaches.” Sinnett said that follow up discussions with companies failed to find even one case where a company was considering moving from an in-house software solution to out-sourcing of XBRL tagging.
WebFilings had the highest rankings in each of the XBRL metrics surveyed.
- WebFilings users reported 100% satisfaction rates with 96% of WebFilings respondents indicating “Very Satisfied.” This was consistent across Tier 1, 3 Tier 2 and Tier 3 companies.
- 91% of WebFilings customers surveyed indicated they had no “pencils down” with 5% denoting less than 1 day.
- 85% of WebFilings customers surveyed indicated that the XBRL requirements had no impact on their filing date with 6% denoting 1 day impact.
“We're very pleased with our overall customer satisfaction rating, which is consistent with our own internal surveys,” said Mitz Banarjee, Director of Customer Success. “But we're not satisfied with 95% to 97% of our customers being very satisfied. Our goal is to have 100% of customers very satisfied and we look forward to continuing to work with our current and future customers to achieve that goal.”
Download SEC Reporting and the Impact of XBRL: 2011 Survey to learn more.