In my previous blog I talked about four steps to help scope the XBRL process for first time filers. The second step I described is:
“Review three to four of your key financial statements in the context of the current XBRL taxonomy.”
This should help you to understand the scope of the tagging challenge. You can review the XBRL Taxonomy, by clicking here. I thought I would provide a brief video as an example of how you could review the taxonomy.
Note: This Youtube video is best viewed in Full Screen mode, at 480px. Otherwise, download the file.
As many XBRL software and service providers spread “Fear, Uncertainty and Doubt” on the perils of the XBRL process, this article serves to reduce the uncertainty with information on the best approach for XBRL first time filers.
1. Start by talking to some XBRL service providers to become more informed about available solutions to understand available solutions and approaches. �
2. Review three to four of your key financial statements in the context of the current XBRL taxonomy. This will help you to understand the scope of the tagging challenge. To review the XBRL Taxonomy, click here.
3. Decide on the approach to filing the first time and price alternative options. There are basically three approaches to filing (1) File through your existing printer or CPA firm; (2) Purchase XBRL tagging software and bring the process in-house; (3) Use a collaborative approach that merges options 1 and 2 by using a software as a service provider.
4. Start the mapping and tagging process early with a practice run on an existing quarterly filling at least one quarter before your filing deadline.
To help with Step 3, Host Analytics is offering a free interactive mapping report for companies that are required to file for the first time in 2011. Click here to register for the free offer.
The following is a continuation of the storyboard on a modeling interface started on 2/14/2011 and provides examples of the second and third requirements:
Select or create prebuilt models to drive the calculations
Select and configure specific processes within the selected model
This allows the budget preparer to forecast and plan in a flexible user interface and allow them to change parameters and drivers of the model rules.
Click the thumbnail to enlarge image
This box identifies all the rules to be run associated with the models.
This line highlights the rules currently being edited
This area sets both the calculation method and the parameters that drive the method
The segments area identifies the scope of the calculation.
In this example the rule will be run for the for all the children under “applications” product segment.
In addition to a rules based approach to modeling, the system also needs to provide a template/spreadsheet based mini-model approach because many calculations can be cumbersome to construct using a rules based modeling approach but can be expressed rather easily in a spreadsheet model. The combination of the rules based approach and the mini-model approach support both macro and micro modeling.
An example of macro modeling would be adjusting sales by 10% up or down for a given division because of changing economic conditions and applying that change proportionately across the existing customers/product lines.
An example of micro modeling would be to adjust all the cost components (COGS) of products that leverage silver in the manufacturing process because of commodity price changes in silver (adjusting PPV).
Think of a mini-model approach as typical cost calculations you have in an Excel spreadsheet for a particular product or product line and imagine the ability to run this Excel spreadsheet against every product and save the results back to the database. Furthermore, imagine you have done that, didn’t like the results and which to rerun with different parameters.
This mini-model approach requires:
The ability to create an Excel like model that is database driven to maintain referential integrity.
The ability to assign an individual product, customer, or budget entities to a particular template for processing.
The ability to create a processing sequence out of these individual assignments of product, customer or budget entity and Excel like template.
The ability to run the process in the context of other macro business rules.
It is very refreshing to see companies anticipate the future by looking at external economic drivers and leveraging best practices in planning such as rolling forecasts and driving down goals into individual contributor action plans. Hopefully these techniques will become standard practices within all companies to mitigate the risk created as the business “clock speed” accelerates.
The year (or decade) of better planning
Throughout history, technology has come to the rescue at key pivot points when existing techniques had a strangle hold on an advancing economy.