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XBRL: 10 Best Practices

July 17, 2009

XBRL will increase transparency, speed, utilization and understandability of publicly reported information. Getting XBRL reporting right is important to your company’s public image and financial value. Here are 10 best practices to consider as you begin to deploy XBRL inside and outside your organization.

Get started now: Starting early will allow time for the inevitable learning curve and unforseen implementation issues. Your mandatory implementation date will arive sooner than you think.

Thoroughly plan your XBRL implementation: A healthy planning process will provide some assurance that implementation steps are adequately covered. Surprises may still arise but you will be better equipped to deal with them.

Involve the appropriate implementation team: Some have sequestered the XBRL effort to accounting and finance. Involving the appropriate resources from across your organization will improve your XBRL implementation experience.

Outsource if you choose but don’t abdicate your role: You still have responsibility for XBRL reporting and the related internal controls even if you decide to outsource all or part your implementation effort. The right business partner can be very helpful, but they do not know your company like you do.

Implement internal controls that are Sarbanes-Oxley compliant: XBRL utilization involves certain standards and processes. Your implementation should be protected with appropriate internal controls just like your other business and financial processes.

Establish an XBRL internal audit program: Having an extra set of eyes reviewing and testing inputs, processes, controls and outputs will provide an extra layer of comfort that XBRL is correctly implemented.

Be careful with taxonomy extension: Too many custom elements can reduce the comparability of your XBRL reports with others in your industry. Taxonomy extension is fine, but only when there is not a standard taxonomy element that accurately provides the context for your data.

Use the same diligence with your XBRL Exhibit that you do with other SEC filings: The SEC has limited your liability with respect to certain SEC regulations for the first two years of XBRL reporting. Use that time to make sure that your processes generate XBRL exhibits that comply with securities laws.

Prepare for the SEC’s 21st Century Disclosure Initiative: Expect regulatory reporting to become more frequent and less paper based. XBRL technology is likely to speed the flow of information and reduce manual reporting.

Explore ways to utilize XBRL internally and externally: XBRL is a powerful information-sharing tool that can reduce human intervention, improve information accuracy, perform data validation, streamline movement through the reporting cycle and organize business information.

These are my Top 10 Best Practices for XBRL Implementation. If you have additional ideas or a different “Top 10”, please share them.

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