The two primary resources needed to meet the interactive data SEC filing mandate are training (people) and technology (software).  The typical options for obtaining the necessary resources to become compliant with the SEC mandate generally range from completely outsourcing the XBRL filing requirements to bringing the XBRL tagging process in house.  Your choice should be based on your company’s particular circumstances.  The following discussion will identify the pros and cons of three options; (1) outsource completely, (2) bringing XBRL compliance in house, or (3) some combination of both.

Option 1: Outsourcing

If you decide to completely outsource your SEC filing requirement you still need to understand the specifics of the SEC mandate relative to your company.  The compliance responsibility ultimately is still yours so the reliability of the interactive data service provider is crucial when choosing your XBRL service provider.  This option avoids the costs of XBRL technology training and the extra infrastructure that is required to run the software, including ongoing maintenance fees associated with both the hardware and software.  The degree of XBRL expertise necessary to meet a filing requirement once every quarter may be a core competency that can be more efficiently outsourced.

Pros: avoids XBRL-related IT and training costs

Cons: you are not in control of your filing and your internal staff does not have the knowledge to verify the accuracy of the filing (which you are still responsible for)

Option 2: In House

Buying the technology and training your internal resources to meet the interactive data SEC filing requirements provides you with complete control of the final work product.  There is benefit to knowing the details behind the numbers in the external financial reports while selecting particular taxonomy elements for the financial statement line items.  The initial costs may be higher than completely outsourcing. However, over time the ongoing expense may be lower with a successful initial implementation of XBRL technology and training.  On the other hand, if you experience personnel turnover in your external reporting group, your training costs could remain higher over time.

Pros: you are in complete control of your filing

Cons: you incur significant initial costs for IT setup and personnel training with no guarantee of success or accuracy

Option 3: Outsource / In House Combination

When you choose to outsource the technology while bringing the XBRL expertise fully or partially in house, you are generally choosing the best of both worlds. The decision to choose this option should be based on your company’s desired level of control, turnover expected in the external reporting role, and the cost versus benefit of having in house XBRL expertise as opposed to outsourcing your XBRL needs. But remember, you can outsource your XBRL tagging, but you can’t outsource compliance. It is a good idea to have someone internally that knows enough about XBRL to verify the accuracy of your filings. The software as a service (“SaaS”) business model has been in use for over 10 years and is continuing to gain traction in the marketplace as an efficient , secure and reliable technology option. By relinquishing certain controls over the systems when you choose a SAS 70 Type II SaaS model, you are freeing yourself from the burden of ensuring the security of the data.

Pros: you maintain control over your filing, your overhead is less than it would be if you chose a full outsource or in house solution, you receive training and support from a dedicated team of CPAs who are XBRL experts

Cons: perceived lack of control over the data

At Rivet Software we overcome this perceived lack of control by offering a customer empowerment business model that allows you to be as involved as you want to be in the tagging process. You can choose to have your staff fully trained by our experts from the beginning or you can opt to have our team handle your tagging for you. Our most common professional services delivery option has been to provide full service for the first year (4 quarters) block tagging filing requirements, then training the client to perform the quarterly block tagging instance filing thereafter. Then we provide full service during the second year (4 quarters) detailed tagging filing requirement, then train the client to perform the full block and detailed tagging for each ensuing quarterly instance filing thereafter. We also offer a test filing to all of our customers before they submit their filing. Our XBRL professional services team is comprised of CPAs with industry specific knowledge. Our flexible training and tagging options are complemented by our secure SAS70 Type II managed hosted facility. The SaaS technology delivery model promises easier, speedier and less expensive implementations.

The value proposition of Rivet’s combined outsource / in house solution is hard to ignore. 

A few known facts from the final ruling for the Interactive Data for Mutual Fund Risk/Return Summary that you might be interested to know:

Compliance Date: The rule requires that all mutual funds must submit interactive data (XBRL) of risk/return summary information from the prospectus filed pursuant to rule 497(c) or (e). The first required submissions will be for initial registration statements that become effective after January 1st, 2011. The interactive filing must be filed after effectiveness of the related filing, but no later than 15 business days after the effective date of the related filing.

Liability: New rule 406T of Regulation S-T addresses the liability of and interactive data file. The liability provision is less severe than that of the full filing but it is only applied until October 31, 2014, and, thereafter, an interactive data file will be subject to the same liability provisions as the related official filings.

Data Tags: Under the rule, mutual fund companies are required to submit their risk/return summary information using the most recent list of tags released by XBRL US as approved for use by the SEC. Interactive data is required for the entirety of the risk/return summary information, including information for all series and all classes. One of the useful aspects of interactive data is its extensibility (filers can create custom tags to accommodate unique circumstances); however, the use of custom tags also reduces the ability for the public to compare similar information across funds. In order to promote comparability across funds, the SEC is adopting the rule provision that limits the use of extensions to circumstances where the appropriate element does not exist in the standard list of tags.

How to Prepare Interactive Data for Mutual Fund Risk/Return Summary

The process of preparing an interactive filing for mutual fund risk/return summary is not that different from preparing an interactive filing for a corporate financial report. However, compared to the complexity of the US GAAP taxonomies (which contain over 15,000 elements), the risk/return summary taxonomy is much, much smaller (< 400 reporting elements, what a relief!) and therefore should be simpler to understand and navigate.

With the Crossfire Reporting Platform, all company taxonomies and tagging templates would be reusable across funds for a given company. The following diagram depicts a typical process for a mutual fund company that uses Crossfire for preparing their filings.

Figure 1 – Using Crossfire to Prepare Interactive Data Filings

The Crossfire Wizard enables the preparers to create funds and classes automatically and dynamically to:

(1) Reduce the time to create the “dimension members” and prevent errors;
(2) Allow the preparer to just create a single extension taxonomy and dynamically attach proper funds and classes for interactive data filings.

Figure 2 – Crossfire Wizard Automatically Created Dimension Members based on Selected Funds/Classes

Within Crossfire, the preparer can easily format the BAR CHARTS (for annual return data) and create TABLES to disclose the Shareholder Fees and Operating Expenses data.

Figure 3 – Crossfire – Create Tagging Template/Populate with Data – Using Excel to Customize Bar Chart

Figure 4 – Create Tagging Template/Populate with Data – Using Excel/Word to Format Tables/Footnotes

Can’t Start Soon Enough

It’s time for mutual fund companies to start evaluating options for preparing interactive data based on the risk/return summary taxonomy. Lessons learned from the mandate of filing XBRL for corporate financials should also be valuable for executives in mutual fund companies.

So what can finance executives do now to lessen the pain? “My recommendation is that people get involved as far in advance as practical,” says Fred Bleier (chief accounting officer at International Paper) whose company ran into last-minute software glitches despite months of preparation and a test filing last year. (Read the article in CFO Magazine)

Start early, and look for solutions that are designed based on a deep understanding of XBRL, mutual fund risk/return summary taxonomy and EDGAR filing rules and you will guarantee success in 2011.

This is a sentiment that I hear over and over again from folks working in the modern corporate world. That’s why I can understand how the recent XBRL mandate can be positioned as part of a long list of regulations that turn accountants into law enforcers. But this assumption severely undermines the ability of XBRL to transform the financial reporting and analysis inside an organization; XBRL isn’t only about financial transparency for outsiders or Street analysts, it’s about the financial transparency within an organization.

The XBRL mandate is here, though, and the first step is to ensure compliance with the SEC. But we at Rivet also know the extraordinary benefits that XBRL can have for an organization. That’s why our Solution for SEC Corporate Filers minimizes the compliance burden and maximizes the benefit for an organization, all while keeping the customer in control.

One concern that comes up frequently from our clients is how to really be sure that the XBRL files produced will be blessed and accepted by the SEC. The validation tool in our product happens to be a beneficiary of Rivet’s 5 years and 100,000+ hours of experience with XBRL. Rivet’s developers, QA team and Professional Services team have been meticulous in their research and integration of the EGDAR manual and XBRL specifications. I have even seen one particular QA Manager with the EDGAR manual on in her kitchen! The validation tool in the Compliance Package runs the documents through three levels of validation: XBRL 2.1 specifications, EDGAR requirements and taxonomy calculation. And because the Crossfire products are web delivered, any updates from the SEC or XBRL US are quickly integrated into the validation tool and no software updates or installs are required by the user. This is just one of the ways that the Crossfire Financial Reporting Platform aims to make accountants’ lives a little easier.

I have also heard again and again from clients that while undergoing the XBRL vendor evaluation process, they couldn’t help but wonder if and how XBRL could be beneficial for them. Rivet has a way to make XBRL work for you. The Compliance Package includes an easy to use Excel add in which allows the user to pull all XBRL filings to the SEC into a spreadsheet to slice and dice to the heart’s content. Within seconds (not hours), our customers create KPIs, benchmark reports or any other kind of analysis one can think of. They can compare an internal quarter filing to competitors’ before it even goes live. They can create bar charts in Excel using publicly filed data without ever having to comb through their own or a competitor’s financials. In fact, Crossfire emails them an alert any time a particularly interesting data field is updated. Seriously!

Rather than becoming a compliance burden, the XBRL mandate has allowed Rivet’s clients to drastically improve and revolutionize their internal reporting processes, leaving them more time for analysis. With all of the slicing and dicing made possible by Crossfire, I might get that MBA in accounting after all.

I recently received an email forwarded by our VP of Sales. In the email, a valuable partner said, “Our customers have asked how we can help them fulfill their XBRL website posting requirement, including providing a human readable view of the XBRL files if desired. We have customers getting ready to live-file their August 10-Qs in XBRL and they’d like to be proactive and have all their ducks in a row and ready for the website posting requirement that will also kick in with their August filings.”

I know why this email was sent to me, and it put a smile on my face. When developing software, you ALWAYS, ALWAYS think that you are designing the features the customers would need and love, but you can’t always get them right. It’s so good to know that you have designed solutions that solve your customers’ problems.

If you are not familiar with the XBRL website posting requirement, here is a quick explanation.

In the new Dragon View Spring Release, we have upgraded the “report preview” to use the new XBRL rendering engine that Rivet has created for the SEC’s website in December 2008. We want our customers to have the confidence of knowing what their filings will look like before they submit to the SEC.

We didn’t stop at being able to display a human readable format; we also created an export feature that saves all of the reports and creates an HTML Reporting Book. To fulfill the website posting requirement, a customer needs to post the XBRL data (the company extension taxonomy and instance document). At the same time, to provide a friendlier version of the XBRL data, they simply needs to copy the HTML Reporting Book to their website. Problem solved. Most customers we talked to understand that they only NEED to post the XBRL files, but a lot of they WANT to also post the human-readable HTML files for their investors.

Here is a sample HTML Reporting Book. I took the reporting book created from Dragon View, and manually added a company logo and a chart to demonstrate that filing companies can very easily modify the look and feel of the reporting book before posting on their own website. Of course, customization is completely optional.

For filing companies, compliance doesn’t stop at providing valid documents to the SEC; it also means meeting the web posting requirements. We are delighted that Dragon View is able to provide added benefits to help our customers fulfill this requirement painlessly. As I said, it’s really good to know that the products we’re designing are able to deliver on the promise we made to ourselves, which is simply to design features customers will need and love.

You can find a detailed description of Dragon View on our website: Dragon View Features and Benefits.

If you would like to see a recorded demo, you can download the Free Dragon View Online Demo.

Out of the 10,000+ reporting elements available from the US GAAP taxonomy, how do you know that your company has picked reporting elements consistently used by other SEC filers? Or reporting elements used by SEC filers that are in the same industry as your company?

If you put on a reviewer’s hat, it might interest you to see how other filing companies have selected which reporting elements to use.  Rivet discussed this “benchmark” concept with all the major accounting firms, and they agreed that the benchmark capability would be beneficial to companies and both internal and external reviewers.  It would be especially useful if a company could compare their reporting element selections to the companies in their industry.

We are not suggesting that you should simply go with the flow and choose reporting elements based on judgments from other companies. Our belief is that if there is an easy way for you to benchmark against other filing companies, it might give you and your internal/external reviewers additional comfort knowing that the reporting elements you chose are comparable with other SEC filing companies.

Dragon View Spring Release, we have upgraded the Instance Document Information screen to give a highly summarized view of the XBRL documents being reviewed.

Let’s take a look at the summary information for a sample filing.

The company has used mostly “base” reporting elements (elements defined in the US GAAP taxonomy), and has only extended two elements on their own. No red light there. Furthermore, there are 26 out of 95 (27.4%) elements that were used by fewer than 25% of the SEC filers, but none of the elements selected has fewer than 25% usage by the companies in their industry. The benchmark results looked quite good, but it might worth the effort to take a look at the elements that were not commonly used by SEC filers.

If you decided to review more details, Dragon View Spring Release enables you to quickly narrow down the reporting elements that only fewer than 25% of the SEC filers have chosen. You just need to click on “custom” filter for the “Percentage of All SEC Filers” and specify that you want to see in this case, reporting elements that have a low usage percentage. If desired, you can open other companies’ filings and examine the elements selected to compare with your choices.

Dragon View is designed to refresh SEC/SIC usage data from our website in near real-time (every 30 minutes), so you can always have the most up to date statistical information available.

In the next version of Dragon View, we would go even further to “suggest” reporting elements that can be substituted when the usage percentage is low based on various search criteria.

For filing companies, compliance doesn’t stop at providing valid filings to the SEC; it also means that you are able to have confidence that the judgments in selecting the reporting elements can be validated and both internal and external reviewers have the tools to help companies make corrections when necessary. We are delighted that Dragon View is able to provide added benefits to help our customers feel confident and make intelligent, informed judgments.

You can find a detailed description of Dragon View on our website: Dragon View Features and Benefits.

If you like to see a recorded demo, you can download the Free Dragon View Online Demo.

Dragon View is a friendly XBRL reviewing tool that can be used before submitting to the SEC or other filing agencies. Even though Dragon View has been on the market for a few years now, with the rapid adoption of XBRL in many countries and the recent SEC mandate, we have taken another critical look and redesigned the application so it’s better suited for preparers who need to review XBRL filings for accuracy and presentation quality.

In order to give you in-depth descriptions of the specific features we created in Dragon View Spring Release, I have written a three-part blog that reveals the ideas behind the design and explains what problems we intend to solve with this new release.

• Part 1: How Rivet’s Dragon View can help companies review their XBRL filings before submission
• Part 2: How Rivet’s Dragon View can help companies benchmark against other SEC filers
• Part 3: How Rivet’s Dragon View can help companies fulfill the website posting requirement

Now, let’s focus on the features that can help companies review their XBRL filings before submission in Dragon View Spring Release:

For filing companies, compliance doesn’t stop at providing valid filings to the SEC; it also means understanding exactly what information has been included in the XBRL filing and how that financial information will be presented to the public. We are excited that Dragon View is able to provide added benefits to help our customers fulfill this requirement with flexible reviewing capability.

You can find detailed descriptions of Dragon View on our website: Dragon View Features and Benefits.

If you would like to see a recorded demo, you can download the Free Dragon View Online Demo.

There’s a lot of talk out there about how difficult XBRL is and how companies should not try to prepare their own filings but instead outsource it. We at Rivet Software work hard to make products that take the complexity out of XBRL so that you can do your filings in-house. One of the ways we do that is by hiring people like me, a CPA who understands financial reporting and how to create tools that are easy for non technical professionals to use.

Another way we do that is by including a robust validation engine with both of our tagging products – Dragon Tag and CrossTag. What validation does is make you aware of any problems your filing has before submitting to EDGAR. Our validation engine incorporates the XBRL rules pertaining to SEC filings as specified in the March 2009 EDGAR Manual (Version 11) which means that we will warn you if you are doing something that is out of compliance with the latest rules (for users not filing with the SEC, don’t worry, we only apply SEC validation against SEC filings so you won’t be bothered with unnecessary errors).

When you create an instance document with Dragon Tag or CrossTag, there are many XBRL errors you’ll never encounter. So I’ll focus on a few of the errors and warnings you are most likely to see.

Please remember that I can’t possibly explain how to resolve all the errors/warnings you may encounter in this blog posting but I can point you to something better: our professional services team. If you get stuck, just give us a call and speak to an experienced professional.

When Validation is Performed — On-Demand and Just-in-Time

First, let me give you some added comfort by explaining when validation is performed. Both products give you the option to perform validation on demand. In other words, just click a button and the instance doc will be validated and a window will pop up showing the errors and warnings. But, we don’t just rely on the user clicking validation. We also perform validation before report preview is run and before a filing package can be created. So if there is a fatal error in your filing and you forget to run validation on your own, the products will automatically run validation and will not let you proceed without fixing certain errors. That should give you some peace of mind.

Validation Error Types

Let’s get into the types of errors you will see. There are three main types of errors: XBRL errors, SEC related errors, and calculation errors.

XBRL Errors

XBRL errors come about because something in the filing does not agree with the XBRL specifications. There is no need for a normal user to get into them – you’re better off leaving that geeky stuff to us – but when you see these errors, rest assured that they are easy for you to fix. For example, each fact must have a date associated with it to give it the proper context. If you don’t have a date, you’ll get a red error listing the element and the message saying “Cannot find a valid reporting period”. Another example is most elements require a unit such as USD or Share. If no unit type is specified, you’ll get a validation error saying so.

These more serious errors are shown in red and listed at the top of the validation error list. These errors pertain to a nonconformance with XBRL standards and must be fixed before a filing can be created. The less serious grey ones may or may not need to be fixed. But, to be on the safe side, it would be good practice to fix all errors and warnings that are consistent with your filing agency’s rules.

SEC Errors

SEC errors and warnings are the ones spelled out in the EDGAR manual. These errors will not prevent you from creating an instance document for filing, but you will be warned before creating a filing that there are errors in the instance document. The difference between SEC errors and warnings is that an SEC error will prevent the filing from going through the EDGAR system while a warning will not. Here’s a list of some common SEC related errors and how to resolve them (I have not included any warnings on this list).

Calculation Errors

Another common error you’ll encounter is a calculation error. Let me provide some background on XBRL to explain this. The beauty of XBRL is that it is multi-dimensional. It’s not just used to report facts but it also is used to present those facts in the way the user intends and to verify the integrity of relationships within those facts. So if you are reporting sales of 100 minus cost of goods sold of 75 and gross profit of 25, XBRL can actually validate that these numbers add up.

This can be a blessing and a curse. A blessing because it ensures the integrity of the calculation relationships but a curse because you may see many errors that may not really be an issue with your filing. The problem is the base US GAAP taxonomy. It is very complex and includes many, many calculation relationships that may not apply to your financial statement. So you will get calculation errors. To resolve them, you have to change the relationships to be the way you want them. This can easily be done using our products and I’ll explain how below.

For example, say you get a calculation error that says “Calculation error for summation item Row 5 Column 2 – Accounts Payable and Accrued Liabilities, Current 650 does not match calculated total 850″

The first thing to do is switch to Calculation View so you can see the calculation relationships. At first, you may find it awkward looking at the taxonomy this way. But there are just two things you need to understand.

1. The parent is supposed to always equal the sum of its children.
2. A calculation weight exists for each element telling the system whether to add or subtract that particular element in calculating the total.

The screen shot below shows the calculation view of the balance sheet. From it we can see that the element that has the error, “Accounts Payable and Accrued Liabilities, Current”, is parent to “Taxes Payable, Current”. For this filing, we have made the decision that we don’t want Taxes Payable to roll up into Accounts Payable and Accrued Liabilities. We just want it to roll up to current liabilities.

To fix this, simply drag “Taxes Payable, Current” on top of “Accounts Payable and Accrued Liabilities, Current”. You’ll then get a prompt asking if you want this element to be “after”, “before” or “a child of” the Accounts payable element. Elect to put it after the element. The below screen shot shows what the taxonomy tree looks like after making that move. It shows that “Taxes Payable, Current” is no longer a child of “Accounts Payable and Accrued Liabilities, Current” but is still a child of “Liabilities, Current”.

Once you’ve made that change, you will no longer have that calculation error. I hope this discussion on validation helps make your XBRL tagging and filing experience smoother and remember we are available for questions through our response line. Go to http://www.rivetsoftware.com/Customer_Support/Default.aspx for contact information.

The US SEC announced April 13, 2009 as the effective date for the 500 largest public U.S. companies to begin filing their financial results using XBRL—an XML-defined standard used to analyze, exchange and report information by using tagged data elements. The ruling by the SEC demonstrates the growing global momentum for all companies to adopt XBRL for disclosing financial reports. At Rivet we have consulted with a large number of public companies and helped some of them by providing either tagging software and/or tagging services.

Some of the public companies in the first wave have elected to outsource the entire XBRL tagging service to service providers. From these companies we have heard over and over again that they believe the XBRL tagging process can be complex and intricate: the labels of the element tags must match the labels in the facing financials, various validation rules have been imposed by the SEC, and the taxonomies can often be complicated confusing.  It requires someone to make “judgment calls” in the tagging process.

It’s understandable that companies want to hire “experts” to help them navigate the XBRL landscape, especially for the first few filings they have to tackle. Once companies get more comfortable with XBRL, they might decide to take better control of the process but, until then, how can companies be certain that the XBRL filings created by outside servicing companies are accurate, complete, and compliant?

Recently, the Rivet team wanted to find a balanced way to assist the XBRL community so that preparers can effectively manage the government’s requirements and at the same time (1) gain practical, non-scary, knowledge of XBRL and (2) gain confidence that they are indeed compliant.

Dragon View Spring 2009 Release takes on a different persona

Have you used Dragon View in the past? If you have, you probably think of Dragon View as a handy utility that can be used to view XBRL taxonomies and instance documents. Now consider this; A viewing tool is a good start for a reviewing tool. This is our vision.

Dragon View can provide a high-level summary view and has the ability to enable reviewers (internal and external) to drill down and drill around to get a comprehensive view of the filing before it’s submitted to SEC. Should it have extremely flexible sorting, filtering, and reporting capabilities that put the reviewer in control? And how about enabling reviewers to record notes, comments, and even make recommendations inside the tool? What if it could benchmark a filing against its peer groups? How great would it be to have an integrated validation engine, so none of the validation exceptions can escape the reviewers’ eyes? Well, the possibilities are abundant and very interesting indeed.

Most of the features described in this blog will be available when we release the Dragon View Spring Edition in the next few weeks, and some would be implemented in subsequent releases. We believe these features provide innovative ways to help our customers review XBRL Documents. Most of  the features mentioned here are patent-pending.

DRILLDOWN/DRILL AROUND

Dragon View provides multiple drill paths that enable you to get a clear picture of the filing. For example, if you want to know what reports the investors would see when the filing hits the SEC, try “Report Preview”. If you are interested in how detailed numbers are rolled up to summary, you can view the “Calculation Details”.

BENCHMARK

If you put on a reviewer’s hat, it might interest you to see how “other” companies who are filing select which elements to use, wouldn’t it? It would be especially useful if you could compare your element selection to the companies in your industry or – better yet – in a custom peer group that you have created. If you are a Dragon Tag or CrossTag user, you will be glad to know that the “Help me Tag” functionality has found a new home in Dragon View too. Now a reviewer can utilize the “Help me Tag” functionality to suggest alternative elements for their internal/external clients.

TOTAL CONTROL

We believe that, as a reviewer, you want to be able to look at the available information in your own way. For example, you might just want to focus on the extended elements. With Dragon View you can “filter” the report and get just the extended elements. Perhaps you are interested in comparing your element selection against the peer companies in your industry and to “sort” by the SIC percentage. You can also output the reports into an Excel or HTML based reporting book. You are in control when it comes to using Dragon View as a reviewing tool.

Rivet is always on your side

We support your decision to perform the XBRL tagging in-house or outsourcing it to solutions providers—either to Rivet or to other providers. Regardless of your selection of the type of solution, we want to do our best to assist you in making sure that you are compliant, and that you are always in the driver’s seat when it comes to the disclosure of your company’s financial statements.