Budgets soar to tackle iXBRL accounts

Innovation was behind the decision to revolutionise corporate tax returns. From 2011 they will have to be submitted in a computer language (iXBRL) that makes comparison easier for the taxman.

However, that revolution comes at a price, and technology companies have seen their research and development budgets rocket as they try to keep up with the mandated deadline of 1 april 2011 set by the government.

Who foots the bill?

So has the customer been left to pick up the bill? According to Sage, one of the largest accountancy software providers in the country, there are no plans to increase the price of products for customers that receive upgrades.

All accountants who use Sage's Practice Suite products, and have an annual licence, will receive an iXBRL update free of charge when they become available. Some customers who buy Sage software but are not paying a maintenance fee, so will not receive free upgrades, will have to pay for the new software, although the business has yet to outline a cost structure for that.

According to Jayne Archbold, MD of Sage accountants division, the research and development budget in her department to develop iXBRL (inline Extensible Business Reporting Language) was set at approximately 30%. However, this figure recently shot up to approximately 60% (see graph). Archbold said the increased cost is higher than the business expected however, it reallocated resources from around the business to accommodate the increase so costs do not have to be passed to customers. Sage spent 12% (£172.6m) of group global revenues on research and development for all its products for the year ending September 2009.

Budget busting

One of the largest suppliers of financial software to accountancy practices, IRIS, has so far used 75% of its R&D budget towards building and developing iXBRL upgrades in the last 18 months. Iris also claims customers will not incur higher fees on upgrades, although the business has yet to outline if there will be an increased cost for new customers.

IRIS spent £13m on R&D as a group for the year ending 30 April 2010, with the accounts division the largest in the group. However, the biggest impact to customers is not in terms of price rises however, claims Phill Robinson, MD of the accountancy division at IRIS. It is the reduction in the IT industry’s ability to deliver new features with resources devoted to iXBRL compliance and not on new technology.

The government has “stagnated” innovation in the technology sector as IT businesses are spending all their time on iXBRL rather than creating new products, he said.

So far IRIS has doubled its engineering team to cope with iXBRL with Robinson anticipating further iXBRL development as the country moves to International Financial Reporting Standards from UK GAAP.

IRIS and Sage both declined to outline the value of resources they allocated to iXBRL R&D. Digita/Thomson Reuters, a large supplier of tax software, declined to comment on any aspect of its R&D budget in relation to iXBRL.