Fresh Start for the New Filing Season
As we are quickly approaching the annual report filing deadline at the end of March, many companies who are gearing up to file their 10-K reports are also forced to allocate more resources for timely and accurate completion of their compliance projects, in the forms of additional labor hours and funds. It is no secret that this stretch of a few months is the most costly for many companies, as they have to have their annual and first quarterly reports submitted within the March to mid-May period. It is also in this period where additional costs arise, as 10-K annual reports usually cost more to complete, from increased costs of EDGAR and XBRL reporting to increased auditor and legal counsel fees for more stringent rounds of review. Though overall the regulatory compliance filings industry has lowered the cost for companies to have their reports prepared across the board, many, if not most companies out there are still being greatly overcharged for these services; larger reporting companies still spend several thousand dollars per report, and many smaller reporting companies spend nearly as much for their 10-K and 10-Q reporting.
While it is true that there is greater scrutiny from the SEC in terms of reporting accuracy, there still needs to be consideration taken for the high cost that reporting companies need to spend. The quality of accurate reporting remains the most important factor, of course, but the timeliness of both completing the work (which usually requires multiple rounds of review between the reporting company, filing agent, auditors, and legal counsel) and the associated cost should also have some priority. Especially considering the complexity of detailed-tagged XBRLs, reporting companies should take special care when choosing a filing agent, as there are larger filing agencies that have been around for many years who still make the most basic and rudimentary errors when detail-tagging XBRL reports. For example, there are large filing agencies that still go wild in their usage of extended elements, which are user-defined, custom-created XBRL elements outside of the standard taxonomy; though the U.S. GAAP taxonomy improves each year to cover more and more financial items, there are still filing agencies that ignore these improvements and take the easier route of creating their own custom extended elements, which often fail to correctly identify and define the financial items they are referring to.
So when choosing a filing agent for the upcoming back-to-back busy periods, we encourage reporting companies to truly take a look at their reporting, and ask the hard question of whether their filing agency can truly provide what they need, when they need it, and if it is at a fair price point, regardless of the history they may have with the particular agency. After all, there is no improvement and evolution when both work process methodologies and pricing guidelines become stagnant.