Now that the SEC is mandating that U.S. companies use XBRL to file their financial statements, the question becomes: What's the best way for companies to do so?

Mike Willis and Eric Cohen have the answers.

Willis, founding chair of XBRL International, and Cohen, a co-founder of XBRL itself, examined the data-tagging language and the benefits it offers businesses during a virtual seminar held on CPA Island, the MACPA's home in Second Life.

The question of how to adopt XBRL loomed large in the presentation. Willis and Cohen said companies have two choices:

Bolt-ons
Companies can employ a “bolt-on” solution in which XBRL is created after the financial reporting process is complete. “Company financial disclosures are typically loaded into desktop applications and then mapped to the U.S. GAAP taxonomy,” Willis writes this summary for the Hitachi XBRL Business Unit. “The software facilitates mapping of company data with the taxonomy, then creates the required XBRL formatted report.”

Bolt-ons can be outsourced (TryXBRL.com is one possible outsourcing solution) or created internally.

Either way, say Cohen and Willis, bolt-ons are not the most efficient ways of implementing XBRL. They require extra steps beyond the normal financial reporting process, and the bolt-on process is typically manual, which increases the risk of human error.

Embedding
Alternatively, companies can embed the XBRL tags directly into the financial reporting process. This puts XBRL into play throughout the entire process and offers a number of advantages over bolt-ons, including:

• seamless exchange of information between software applications;
• automation of manual processes, bringing lower costs and improved quality;
• enhanced transparency;
• enhanced drill-down capabilities with documented audit trail;
• enhanced testable controls;
• improvements in data quality and access; and
• better access to more relevant information, which results in better decisions.

On the downside, embedding probably is more expensive out of the gate, but those initial costs should dwindle as time goes on.

Your accounting staff also will have to know more about XBRL if you're going to embed the language in your reporting process, which will probably be a pain initially. Over time, though, isn't that knowledge a good thing?

So what are your next steps? Willis and Cohen recommend learning more about XBRL and its implications, identifying and prioritizing your implementation “pain points,” talking with your software vendors, then developing your strategies for implementation and governance.

Their seminar will be available as a webcast; keep an eye on the MACPA's CPE search engine for details.

In the meantime, tell us: How are you planning to adopt XBRL?