Last week’s announcement by Clarity Systems that it has recruited J. Louis Matherne as Director, XBRL Services for the company, not only lays down the gauntlet to competitors but also exposes for the first time the scarcity of skills as US companies rush to prepare for mandatory XBRL filings. Yet industry sources say that if XBRL tools were easier to use then the skills problem would not be so severe. Gary Simon, FSN’s managing editor reports on a growing problem that the SEC may have overlooked.
Clarity Systems turns up the heat on competitors as it moves to plug the XBRL skills gap
Clarity System’s seemingly innocuous appointment of Louis Matherne, a veteran of the nascent XBRL industry, might have gone unnoticed had it not been for the manner of the announcement. The idea of a “Director of XBRL Services” is novel and possibly the first of its kind. But it begs the question, Why is it necessary at all?
Well, Clarity is obviously gearing itself up for inevitable clamour for skills as US companies adjust to a new era of interactive reporting. After several years of “will they?”/”won’t they?”, consultations and voluntary filing schemes, the SEC (Securities and Exchange Commission) in the United States has at last pressed the green light on ‘interactive reporting’ using the XBRL standard. Around 500 of the largest companies who file using U.S. GAAP with a public float above $5 billion will be required to provide interactive data reports starting with their first quarterly report for fiscal periods ending on or after June 15 this year. Other companies will be phased in over the next two years.
Bringing in an XBRL big hitter gives Clarity Systems a head start in a market place confused by the jargon and technology. It also nicely leverages Clarity’s positioning around their Financial Statement Reporting (FSR) product which seeks, among other things, to automate the production of the Annual Reports and Accounts. This was something that clearly enticed Matherne to join up.
"Louis has been deeply involved in the XBRL initiative since its inception, highlighted by his service as the founding president of XBRL International and involvement with the U.S. Securities and Exchange Commission's XBRL Taxonomy Project, where he was a member of the XBRL US team that developed the US GAAP taxonomies," says Mark Nashman, President and CTO, Clarity Systems.
Nashman also told FSN that Matherne’s role would be to lead, train and develop the services team at Clarity in preparation for the inevitable rush.
“XBRL skills are quite light on the ground and there are not enough people to support the volume of companies who are going to want the skill set at exactly the same time”, Nashman told FSN. “Many companies are going to wait until after their quarterly reporting and will be targeting the same window for their XBRL projects as everybody else,” he added.
But according to some industry commentators the skills shortage is being exacerbated by the lack of easy to use end user tools and applications. Corefiling’s John Turner, Chair of the XBRL Standards Board told FSN, “There are not very many XBRL gurus out there but if you are an end user then you shouldn’t need to know much about XBRL from a technical point of view. You should be able to consume and produce XBRL to your heart’s content. If you are building taxonomies and XBRL architectures then that is a different matter.”
Clarity’s Nashman agrees that friendly XBRL tools are thin on the ground. “Applications like ours provide functionality for XBRL extensions and tagging so that you don’t have to be an expert. It also allows us to scale up our support to satisfy demand.”
“Our aim is to make our clients self-sufficient rather than relying on us at every filing period,” he told FSN, promising that the impending release of Clarity FSR 6.5 scheduled for later this year will provide ground-breaking technology to make the job easier.
Charlie Hoffman, founding ‘father’ of the XBRL language and Director of Industry Solutions, UBmatrix, told FSN, “I believe it is the wrong thing to do to create more ‘expert’ people to use XBRL in its current state. The proper thing to do is to make the software easier to use. The whole point of XBRL is to enable one business person to exchange information with another business person.”
Airing some frustration Hoffman told FSN, “May be I have an idealistic view but I have been trying to get the right tools built in the market years before the SEC mandated anything, but the reality was that without the demand there was no one willing to supply.”
“The problems are caused by people using the language incorrectly. Businesses are not understanding the problem and creating unnecessary complexity. The XBRL engines are fine – the technical stuff is there. The problem is that the market has not had time to build the high level applications that business users need for creating taxonomies, instance documents and analysis.”
“Have a look at the SEC web site – there are over 100 filings but you can’t do anything useful with it. It is supposed to be interactive data and as a minimum, end users should be able to do more than they can do with HTML content on the Edgar database”, he added.
John Turner warns of the dangers of outsourcing the problem to financial printers and others who are gearing up to cash in on the XBRL boom and points out that end user tools are the real problem. “Whether this is manageable in-house depends on the tools companies are using. With some of the tools you need to know a lot of XBRL.”
Clarity’s Matherene adds, "Ultimately, this isn't a technology decision as much as it's an accounting one and CFOs shouldn't be abdicating this responsibility by outsourcing it to service providers, or adding a bolt-on product at the end. This is about controlling the process to reduce risk, improve efficiency and avoid errors from start to finish."
However, there may be a glimmer of light at the end of the tunnel. Turner, who didn’t want to be drawn on specific products says there are a number of new generation products in the pipeline that will be available “pretty shortly” though it has taken longer than he expected. However, it is early days and we are in less than ideal economic times for speculative development. Clarity has taken some bold steps – hopefully the rest of the software industry will follow.
