Alcoa, Inc. recently joined the SEC’s voluntary XBRL filing program. Their experience is a good example of what to expect and what is involved when a company decides to file its first XBRL report. What the team discovered was “the process is fast, it’s effective, and inexpensive and you’ll be glad you did it before the mandate comes.”
Although expecting to evaluate several vendors, Alcoa saw that the RR Donnelley EZ Start Solution was cost effective and full service. “Nothing else was needed”, says Alcoa’s Controller Matt Dinardo. His team realized that since RR Donnelley and EDGAR Online would create the XBRL documents, “we could just focus on the review process instead of having to tag each line item of our own statements.”
Dinardo was assigned an RR Donnelley project manager and they decided to start with Alcoa’s as-filed 2nd Quarter 2007 report. Within a day Alcoa had an XBRL translation which took about four hours to review. Subsequent reports took less than half that time, explains Dinardo, but “the first one was a learning curve. I wanted to carefully read and understand each tag definition.” He then routed the report with his comments to the Director of Financial Accounting and to Alcoa’s Manager of Corporate Consolidation. A conference call was scheduled for the next day to go over their comments and questions with RRD and EDGAR Online XBRL specialists.
“It definitely gives you a high level of comfort to be working with this level of expertise,” says Dinardo. “They were very knowledgeable and agreeable and understanding of the changes I wanted to make and could answer every question on the spot. It was a very efficient process.”
The next learning curve came with the 2007 10-Q report, which was more complex. It contained an additional financial statement, and a shareholders equity report that included an embedded financial statement. “The additional disclosures added a little time back into the review process,” says Dinardo, “but again, the experts were helpful and quick to have the phone conversation on short notice, review my requested changes, and deliver them next day.”
Various studies by the SEC and outside analysts have shown that it takes between 80 and 240 hours for a corporation to independently prepare, review and file their financials in XBRL. Asked if he thinks, in retrospect, he could have created the XBRL documents on his own, Dinardo says “yes, I could have selected most of the tags, and probably created my own custom tags, but the process would have taken a long time, and I would not have had the comfort level of knowing that the custom tags were appropriate to SEC requirements.”
Dinardo anticipates a third learning curve when the XBRL taxonomy is used to tag notes and the MD&A, not just line items numbers. “But having gone through it with the support and knowledge of a dedicated team of EOL’s experts we’re comfortable now using the nomenclature and understanding the mapping process. I know the people assigned to our team were deeply involved in helping develop the taxonomy, and that comes through—we have the experts at our side.”
Alcoa has 97,000 employees in 34 countries with various subsidiaries and legal entities. “Fortunately, they are all on the same general ledger,” says Dinardo, “but I see where XBRL would be a tremendous advantage to companies who are not in that situation. XBRL provides a lot of ease and efficiency in pulling information from different financial systems into a single format.”
As for advice to other companies considering XBRL, “Companies are worried about the new requirements. But you’re going to find out all the things you feared have no basis in fact.” Dinardo says “the process is fast, it’s effective, and inexpensive and you’ll be glad you did it before the mandates comes.”
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