XBRL Made Easy
Decode XBRL and avoid common errors. Learn from other firms' filing mistakes.March 3, 2011
by Ami Beers, CPA
Over 1,500 companies have provided their eXtensible business reporting language (XBRL)-tagged financial statements to the U.S. Securities Exchange Commission (SEC), which has received over 5,000 submissions since mandating XBRL Exhibits. "XBRL is part of a larger project to modernize the disclosure system and to move various disclosures to a structured or tagged data format," explained a representative from the SEC on a recent AICPA Webcast, Getting Ready for XBRL.The SEC also requiresmutual funds and credit rating agencies to provide information in an XBRL format and is evaluating other programs for additional information to be tagged in an extensible mark-up language (XML) format. During this program, representatives from the SEC, audit profession and a preparer from a public company provided their recommendations and best practices for preparing and submitting XBRL Exhibits.
Many companies have thoroughly prepared for their XBRL submission process, however some have had challenges. Regardless of the methods employed to create and submit the files (internally produced or outsourced), errors in the Exhibits were seen across the board. AICPA's recent document, XBRL Update-Observations and Recommendations for XBRL Implementations for SEC Reporting in the U.S (PDF),provides an understanding of some of the more common errors that have been observed from submissions to date and the related recommendations. Some of the prevailing themes included:
Companies have not tagged all information that is required under the SEC Rules including information in the parenthesis within the statements and some required schedules. Additionally, the second year of submitting XBRL files requires more detailed tagging of the notes and schedules to the financial statements, which has caused some difficulty for companies. Some missed tagging the individual amounts within the notes to the financial statements and amounts that were shown in superscript footnotes. Separate accounting policies are also required to be separately tagged in the second year, however not all companies got this right.
Selecting the appropriate tag is fundamental to the process because it provides users with the meaning for the accounting concept and allows comparability in analyzing the information among other companies. The SEC requires that the most narrow tag, based on definition and other attributes be selected from the standard taxonomy or the company will need to create an extension (i.e., their own element) when no suitable tag can be found in the standard taxonomy. Many companies selected the wrong tag from the taxonomy because of a number of reasons including: inappropriate definition, incorrect element attributes (element type or period type), a tag with a narrower definition existed or the tag was deprecated (a deprecated tag is one that has been removed from the taxonomy and should not be used in XBRL instance documents.) in the taxonomy. In many cases, companies unnecessarily extended the taxonomy (i.e., created their own custom tag instead of using a standard tag in the taxonomy) because of minor definitional differences or they could not find the proper tag.
There are many complex rules and requirements that companies need to be aware of in order to create and submit accurate XBRL files. The process requires more than just selecting the proper tag. Whether the process is in-house or outsourced, all companies are responsible for understanding these requirements. Many XBRL files submitted to the SEC included wrong information such as the inappropriate sign value (negative vs. positive) for the tagged amount, misused units of measure, improper decimals, wrong reporting dates and wrong calculations. These errors will have an impact on investors and may result in inaccurate analyses, unwarranted reliance and reputational risk to companies.
Getting It Right
XBRL files that are submitted to the SEC and do not pass the SEC's validation criteria will not be accepted and will actually be "kicked out" of the system. These filers may be deemed "not current" with their Exchange Act reports. However, not all errors will be detected by the automated validation system and other errors could require resubmission, prospective changes or other SEC action. Investors who intend to use the XBRL data may find information inconsistent with the HTML version of the EDGAR filing or not usable on the XBRL-enabled software because of technical errors. So it is important that companies exert their best effort to submit high quality and accurate files. Also, after the limited liability provision expires (24 months after the first XBRL Exhibit is submitted) the XBRL Exhibit will carry the same liability as the related traditional format filing. Therefore, it is important to get the XBRL right!
Starting the process sooner rather than later. Those firms that evaluate vendors and potential solutions well ahead of time will be in a better position when the time comes to start tagging. Internal resources and the current reporting process also need to be considered. The XBRL Exhibit is required to be submitted at the same time as the official filing (e.g., 10Q, 10K). It can take several days to complete the tagging regardless of whether the XBRL is created internally or outsourced which could impact already tight timelines. Firms that outsourced the tagging found that many interactions back and forth with the vendors were time-consuming, while firms that integrated XBRL into the reporting process with an in-house solution avoided such non-value added activities.
If you are a public company getting ready to embark on XBRL, the first step is to gain an understanding of the SEC's requirements. This information can be found on the SEC website consists of the SEC Rule, the EDGAR Filer Manual, SEC staff interpretations including the Office of Interactive Disclosure Interpretations FAQs and Corporation Finance Compliance and Disclosure Interpretations (C&DIs). These resources are updated frequently so it is important to keep abreast. AICPA XBRL resource center provides articles, webcasts, links and other resources to help you prepare for XBRL implementation.
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Ami Beers, CPA, is manager in the Business Reporting and Assurance and Advisory Services Team at the AICPA, and is responsible for building awareness and understanding of XBRL.