If you haven’t heard of XBRL before, don’t worry, many others haven’t either. Unless you enjoy following the actions of the SEC and their worldwide counterparts, XBRL doesn’t exactly come up at your usual dinner party. However, if you’re responsible for financial reporting at a SEC registered company or are planning to register your company’s shares with the SEC, then you should be familiar with XBRL and it’s potential impact on your financial reporting processes.

For the uninitiated, XBRL is an acronym for eXtensible Business Reporting Language. XBRL is not a new technology, but is a standards-based way to communicate business and financial information. There are a number of resources on the web to help educate yourself and your staff on the topic, such as the AICPA’s XBRL site. Whether you’ve heard of XBRL or not, one thing is for sure: whether you’re the director of financial reporting, a corporate controller, or the CFO for your organization, what you need to know about XBRL is that it will require planning and forethought and will certainly involve change to your existing systems and financial close processes.

Currently, the SEC does not require registrants to submit filings in XBRL format, though they did issue a proposed rule [PDF] on May 30, 2008 and are currently soliciting public comments until August 1st. This proposal may soon change things for registrants and investors alike. For registrants, there are a number of ways to tackle the implementation of XBRL reporting; some may opt to outsource the effort to their financial printers, others may convert their data ‘manually’ with easy-to-use software tools for each reporting period, and others may implement software solutions directly into their general ledger or ERM packages. Regardless of how one gets there, it is apparent that it will involve support from your IT and financial experts, and will likely require Section 404 considerations relative to the internal controls within the organization.

It is worthwhile to note that most major financial markets are moving in this direction, and XBRL is now mandated for financial filings in multiple jurisdictions worldwide. XBRL is moving ahead with or without us, and other US agencies such as the IRS and state taxing authorities are considering the merits of XBRL filings. Despite this, according to a June 2008 Compliance Week survey [subscription required] of 236 financial reporting executives, 55% have either just started researching XBRL or are not aware of the subject at all, and less than 20% of respondents have anybody on staff considered to be an XBRL expert.

The time is now to consider the effect of XBRL on your business and planning process. The short term effects of XBRL will likely be limited; just ask the early voluntary filers. However, it is clear from SEC speeches and proposals that XBRL is coming, and coming fast. Long-term benefits are likely to be realized by those businesses that are willing and able to embrace the technological change that XBRL will bring about, such as easier and faster access to competitive information and knowledge. If you haven’t already, I encourage you to learn more about XBRL and prepare for the forthcoming changes.

My inaugural blog for MFA has me thinking about transparency in business. After all, what is a corporate blog if not the embodiment of a transparent means of communication with one’s clients, colleagues, and interested stakeholders. Transparency has been, in part, facilitated by technology, and hence the birth of tools such as this blog. My goal each week is to use this tool, like so many of the technological tools before it, to deepen our relationship with MFA’s core constituencies and encourage open dialogues on a varying degree of subjects over time.

Like business in general, change is ever-present in public accounting. We must remain expert on technical financial reporting pronouncements that are continually evolving; we must continually demonstrate our expertise of complex federal, state and international tax laws; and we must have a solid understanding of the economic environment in which we all live and operate our businesses. One need look no further than to recent FASB actions to understand how the theme of transparency continues to pervade business. More and more, FASB projects are actively addressing the questions of fair value accounting, convergence of US accounting standards with international accounting standards, and simplification of the existing bodies of accounting knowledge – all great examples of how transparency in business and reporting continues to pervade every facet of what we do.

Having grown up in the 80s, my first introduction to the use of technology to speed up business was in the form of fax machines and so-called portable computers that probably weighed fifteen pounds without a modem or network access. Many enterprises did not have local area networks, the internet was barely known to most and the World Wide Web had yet to come into existence – I lived online in the limited world of AOL and couldn’t email someone unless they, too, were an AOL member.

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The world of e-commerce sales tax has been active of late, complete with high profile legislation that could in the end impact the way sales tax is applied to online retailers across the country. MFA has been vocal about the complex landscape, including a recent MFA article (just click the picture at right to read Four Questions Online Sellers Need to Ask About E-Commerce Sales Tax) and an audio interview with Rosanna DiFilippo, MFA Partner, Keeping Up With Online Sales Tax.

Well, the situation continues to evolve. On May 8, 2008, The New York Department of Taxation and Finance issued TSB-M-08(3)S, which further explains the legislation enacted effective April 23, 2008, which provides a presumption that certain sellers of taxable tangible personal property or services are sales tax vendors and are required to register and collect sales tax.

The new law amends the definition of vendor and provides that a seller is presumed to be a vendor if the seller enters into agreements with New York residents to refer customers to the seller. Specifically, a vendor includes persons who solicit business within New York through employees, independent contractors, agents or other representatives and as a result of, makes sales of tangible personal property or services to New York residents, which are taxable.

A New York State resident for sales tax purposes includes any individual who maintains a permanent place of abode in New York State; any corporation incorporated in New York; and any corporation, association, partnership, or other entity doing business or maintaining a place of business in New York State.

The Department explained that a seller of tangible personal property or services is presumed to be a vendor when two conditions are met. First, the seller enters into an agreement with a New York resident and for a commission or other consideration, the resident representative directly or indirectly refers customers to the seller, whether by link on a web site or by some other means. Second, the cumulative gross receipts from sales to New York customers as a result of referrals by all of the seller’s resident representatives total more than $10,000 during the preceding four quarterly sales tax periods. (more…)