In just under a month – June 15, to be exact – another 1,200-some public companies will submit interactive, or XBRL-tagged, financial statements to the SEC. They follow the companies that made the jump a year ago, which were those with a worldwide public equity float of at least $5 billion. This year, “all other domestic and foreign large accelerated filers using U.S. GAAP will be subject to the same interactive reporting requirement,” according to the SEC. Then, a year from now, smaller reporting companies and foreign private issuers that prepare their financial statements according to IFRS will follow.

XBRL, or eXtensible Business Reporting Language, is a means of tagging data so that it can be manipulated and moved, yet still be readily identified. Say a company’s sales for the quarter were $5 million. That number is tagged so that no matter how the financial statements are sliced and diced, it’s clear that this particular $5 million figure refers to quarterly sales.

The promise of XBRL is clear: it makes assembling, analyzing, and comparing data more efficient, which provides companies more time to ensure the data’s accuracy. It also can make reporting information to government agencies easier, because the data can be assembled and tagged and then easily moved to create the variety of reports that may be required – without completely re-entering it all. “In XBRL format, it’s easy to reuse and redisplay data,” says Anthony Fragnito, chief executive officer with XBRL International, Inc., a consortium of 550 companies, financial institutions, and government agencies whose goal is to build the XBRL language and promote and support its adoption.

Even so, gaining the benefits of XBRL isn’t a slam-dunk. According to this report from KPMG, some of the initial financial statements created in XBRL contained errors, such as missing or inaccurate information. Behind most errors were the following mistakes:

• selecting an element from the U.S. GAAP taxonomy that was either too broad or too narrow for the line item

• creating a new element specific to the company when an existing element within the U.S. GAAP taxonomy would have done the job, and

• entering an amount with an incorrect sign or rounding.

The following steps can help your firm to avoid these mistakes and make the conversion to XBRL as smooth as possible:

• Allow enough time: That’s particularly true for companies that are reporting their annual Form 10-Ks in XBRL for the first time. Given the greater complexity of the report when compared to a 10-Q, extra time and manpower typically is needed to get the job done accurately.

• View this as a strategic initiative: “This is not just an IT project,” says Fragnito. XBRL can aid internal reporting just as much as it helps the reporting required for various government entities. For instance, acquisitive companies are finding that they can use XBRL to move data between different systems and entities without building expensive new frameworks, he adds.

• Implement XBRL as early in the reporting process as possible. Creating financial statements in an ERP system only to redo them using XBRL doesn’t make a whole lot of sense. “Our vision is for companies to implement XBRL further into the reporting process,” Fragnito notes. That boosts efficiency and enhances execs’ abilities to make well-informed decisions.

While getting up and running with XBRL involves a learning curve, most companies have found that the process isn’t as arduous as they feared, Fragnito says. “This isn’t the Sarbanes-Oxley that some made it out to be,” he says, referring to the massive implementation efforts many companies endured in order to comply with the 2002 regulation. ###