A guide to iXBRL outsourcing services

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John Stokdyk
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AccountingWEB.co.uk
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In this fourth and final iXBRL software and services review, John Stokdyk considers the options for organisations that engage outside partners to take care of iXBRL tagging for them.

In the space of 12 months, a new industry has cropped up to cater for UK companies and accountants who need iXBRL-compatible files to submit alongside their Corporation Tax returns. For practitioners and others who submit multiple returns, integrated accounts production/CT software applications may be a more economical long-term solution.

But the providers of outsourced iXBRL services have some persuasive arguments. This article will examine the pros and cons, and point to some of the key players in this new field. This group also includes many accountancy firms, from the Big Four down, who will effectively provide a managed iXBRL service for their corporate clients.

The introduction of mandatory Corporation Tax efiling with iXBRL accounts and computations from 1 April has triggered this short-term boom in iXBRL outsourcing, but Companies House, too, is also planning to make iXBRL the required format for statutory accounts from 2013. Third party providers offer an attractive stop-gap for this transitional period, but the market is likely to settle down into a more stable pattern when companies and their advisers come up with long-term working processes and systems to tackle the iXBRL challenge.

In 2009 the US Securities and Exchange Commission set corporate America on a similar path when it set in train a mandatory XBRL filing regime. Through its Edgar gateway, the SEC has been accepting “interactive data” in XBRL for years. The mandatory regime started with listed companies and as a result, the Big Four accountancy firms have considerable experience serving this market. They are now offering similar iXBRL services to UK corporates, and several specialist software developers and outsourcers have taken the opportunity presented by HMRC’s adoption of the standard to expand their services into the UK.

Why use a managed tagging service?

If you put your iXBRL work out to an outsourcer service, you won’t need to buy any software or change your internal systems - that’s the great advantage. Against that, you will have to balance some loss of control over the final iXBRL output, plus the costs of managing and monitoring your service provider. If you are likely to produce more than a handful of final accounts every year, it would be worth doing a cost/benefit analysis of bringing the work in-house against the ongoing commitment of paying someone else to do it for you every year.

However, there are other reasons to turn to third party iXBRL service providers, as several of them have argued:

  • Less impact on existing work processes and no need to install new software: “Putting together a set of statutory accounts for a larger company requires a lot of skill and diligence,” said Ernst & Young director Kevin Huby. While finance directors may have reservations about outsourcing, he added, “They recognise they will need a tactical solution to comply in year one, and then switch to automated accounts production.”
  • Buy yourself time to make a proper assessment of what’s needed: In a whitepaper published on AccountingWEB.co.uk,

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    SimplyXBRL commented: “Early adopters are really guinea pigs who give software companies a lot of money for the dubious privilege of helping them identify and eliminate bugs in what are essentially beta offerings… when the market has matured, the products have improved, you know more about the whole process and exactly what you need, you’ll be able to make a much better decision.”

  • Negotiate the transition more easily: Mapping your final accounts to HMRC’s 1,400-item minimum tagging list (or the 4,000+ taxonomies on which its based) is a painstaking process, not something that happens automatically.

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    SimplyXBRL says year one is when the “heavy lifting” has to take place. An experienced outsider can help you map your accounts at the outset, so you will be better able to take on the task at a later date.

  • Tagging is a non-core activity: “It’s not a good idea to put too much resource into a fairly mundane administrative task that doesn’t add value,” said Data Tracks managing director Will Mathieson. “Finance departments should devote their efforts to their main mission, which is to support the wider business. No amount of effort going into iXBRL will generate wealth.”
  • Economies of scale: Managed tagging, especially offshore, is lower cost. For companies that have a single year-end pack, the manpower software and training costs of in-house accounts production/iXBRL tagging work out higher than outsourcing it, argued Mathieson
  • Let specialists do the work: With the volume of accounts they are processing, outsourcers will be able to exercise better quality control than an accountant undertaking iXBRL tagging a few times a year. Packaged software is not as effective as word processors or spreadsheets at dealing with the exceptions and quirks that inevitably occur within final accounts - better to stick with the tools you know and let experts deal with the iXBRL output.
  • Stay current with technical changes and XBRL taxonomies: iXBRL is based on a set of data libraries known as taxonomies that are administered by XBRL International. At the moment there is a confusing number of taxonomies to get used to: UK GAAP, UK IFRS, HMRC’s own taxonomy (which it is working to align with Companies House), and its interim minimum tagging list. But new taxonomies are being developed for industry sectors such as mining and mineral extraction and not too far down the line there will need to be converged offerings for mid-size companies using the FRSME (and any small company international accounting standards

You can’t outsource all the responsibilities
Just because you’re looking to outsource iXBRL final accounts tagging to a third party doesn’t mean you can wash your hands of the task. Instead you’ll have to ensure someone is tasked with managing the relationship and reviewing both the flow of work and the end results.

“If you expect to upload a file to the Net and have it come back as a correct iXBRL file, it’s not going to happen,” warns

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SimplyXBRL’s business development director Toby Whiteley. “It’s an iterative process and there are judgments to be taken.”

The big danger of a short-timescale project is that the decision will be taken to outsource without assigning clear lines of responsibility, he added. “The it becomes something that can be dumped in people’s lap at the last minute.”

The terms of the engagement should be clearly documented, including the scope of accounts to be processed and the required timescales, and a lead representative on the client side should liaise with a named customer service representative.

From the top level down, processes need to be agreed on how to handle errors, discrepancies and interpretations that arise from the tagged accounts. Tagging is subjective, so there needs to be a structured way to pick up and deal with any problems that emerge.

For CT filing, it’s also important to identify who will actually file the completed return and its accompanying iXBRL computations and accounts - the company itself, its tax agent, or the tagging partner. Ultimately, the company and its directors are responsible for filing the tax return and the move from paper or PDF files to iXBRL does not change their responsibility to ensure that the submitted information is correct. So you will need to retain existing review processes and adapt them to ensure that the underlying iXBRL tags have been adequately checked. Good suppliers know this and should advise you on how to align their review processes with yours.

Experience from the US and other jurisdictions where XBRL has been used flags up a final risk the client should consider - ownership and management of the data. In an AccountingWEB workshop last year, Sage accounts production domain specialist Darren Ingles warned: “If you are going to use a managed tagging service, then please ensure that you will retain the rights to the mappings.”

Some companies that relied on outside providers to comply with early minimum tagging requirements,  subsequently found that when they took the task in-house to tag their accounts against the full taxonomies they would have to buy back the prior year’s tagging from their provider, he said.

HMRC-recognised iXBRL managed tagging service providers
As mentioned, the Big Four accountancy firms and several other top 20 players provide these facilities to clients. Services from both Taylor Cox and Neil Ellis Consulting have received HMRC recognition for their services.

As always, the HMRC list of commercial service providers is a good place to start your hunt if you are considering your options. A service provider does not have to be recognised to prepare an iXBRL file for submission for HMRC, but doing so demonstrates a reasonable commitment to ensuring they provide a competent service. If you prospective provider is not listed, ask them to explain why. Here are some of the other suppliers currently listed on HMRC's site:

Find out more with these iXBRL resources:

iXBRL discussion group

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By metcalr
22nd Feb 2011 07:42

Small clarification
Hi John

Just a small clarification to the above,The Arkk Managed Service is used pretty much exclusively by large corporates, not practitioners.
The solution in conjunction with Acorah is a different product altogether.
Thanks, Richard.

--
www.arkksolutions.com

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By metcalr
22nd Feb 2011 07:52

Retaining mappings
Comment from Sage above is a good point. Even though they're trying to
Persuade people ixbrl outsourcing is a bad idea, they raise a valid point.
We ensure that we give the tagged word or excel docs back to our clients if they want them so that they can tweak the mappings in our software either now or next year. Its not a throw it back over the fence approach and write a big cheque for a three year contract. People want at some stage to take control back.
--
www.arkksolutions.com

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22nd Feb 2011 18:10

"November will be crazy"

I've taken in a minor adjustment in the text to reflect Richard Metcalfe's clarification on behalf of Arkk (see first comment). While chatting with him about the current state of the outsourcing market, he said that it wasn't time for an 11th hour panic yet.

"Businesses know that managed tagging services can get them out of a jam at the last minute, but it's more about booking a slot right now. Figures from one of our bigger clients show that around 65% of companies have 31 December year ends, with the others bunched around March, June and September. We don't expect the summer to be busy, but November will be crazy," he predicted.

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24th Feb 2011 20:23

God's teeth!

There are only about 15 compulsory tags.  What's the fuss?

With kind regards

Clint Westwood

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By GaryMc
25th Feb 2011 08:10

Compulsory is just the start...

The compulsory tags get you through the government gateway and into the system.  Once you have negotiated that hurdle, you are in to the desert of minimum tagging.

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11th Oct 2011 13:57

Not a last minute solution

Hi John,

Rightly said, managed tagging services is not about being a last minute solution. Businesses will need to book capacity as early as they can to ensure that their work is done. We have already seen a significant increase in the number of booking we have had for iXBRL managed tagging services. I expect this number to increase even further as we move into November and December. 

www.datatracks.co.uk 

 

 

 

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