Wednesday, September 10, 2014

Top 10 XBRL Stories: Summer 2014, Part 2

by: Paul C. Bevins, Account Executive

This past summer has been full of big headlines for those in the eXtensible Business Reporting Language (XBRL) community. This article concludes a quick synopsis of the biggest stories of the these past few months, discussing the final five. (Part 1 can be found here)

Can you guess which headline took the top spot?

H.R. 4164 (now H.R. 5405) – This legislation remains in committee, and had been sitting on the back-burner with its authors awaiting an opportunity to add it a larger bill. This opportunity arose just last week as it was added to a larger reform bill, H.R. 5405, by Rep. Mike Fitzpatrick (R-PA) and others. The legislation proposes to effectively de-mandate the XBRL filing for all “small” public filers, those whose market cap is less than two-hundred and fifty million dollars annually.

Not only is this a very broad definition of a small company, but it would also eliminate the requirement to file XBRL for approximately three out of every five public companies. The Data Transparency Coalition, who advocate for data transparency and democratizing access to financial information for all Americans (both investors and public companies), noted earlier today:

“H.R. 5405, if approved by the House, introduced and passed in the Senate, and signed into law by President Obama, will dramatically restrict the availability of searchable corporate financial data to investors--and to the tech companies building investment tools.”

Congressional leaders such as Representative Carolyn Maloney (D-NY) have come out strongly against limiting open data requirements, stating, “We have to move forward not backward on XBRL.” Additionally, many have shared about, (i) the quality of XBRL data improving (and will so even more with SEC enforcement); (ii) the need for a complete data set to be able to harness the potential of the data; (iii) how the data is being used by investors now; and (iv) the potential of the standard in improving transparency should it expand to other sectors.

Uptick in Data Quality, Analysis, and XBRL Usage Tools – As the U.S. Securities and Exchange Commission (SEC) began to take a closer look at XBRL, public filers were more interested in reviewing their submissions thoroughly and improving their quality assurance processes. From XBRL US:

“These data errors are not the fault or responsibility of the SEC and they are not caused by the XBRL standard. They are the responsibility of the public company issuers that produced the XBRL financials and they can be easily fixed. SEC reporting professionals at public companies must recognize that the data produced by their XBRL is not an add-on to their HTML financial statements - the XBRL is their financials.”

As such, many organizations have stepped-up to the increasing demand for quality assurance and analysis tools. Here are a few examples:
  • Peer benchmarking was highlighted by Merrill Corporation and Calbench, noting that, “A great company is always pushing to keep ahead of its competition. To aid in this effort, a top-tier finance team should collect and analyze available data, not just to measure how the company is doing in comparison to its peers but also to see what insights can be learned by examining competitors’ strong and weak points. Until recently, this kind of data-driven peer benchmarking was a slow, tedious, error-filled process, involving hours wasted digging data points out of SEC filings. For this reason, many finance professionals avoided doing it altogether, but thanks to XBRL, the situation is changing fast.” You can read the entire article here.
  • Thinknum “allows users to share and collaborate on financial models without requiring them to email complex spreadsheets back and forth. Thinknum can also pull in data from the Internet, making it easier to value companies without creating spreadsheets from scratch.”
  • Rank and Filed showed clearly and concisely that XBRL is both useful and understandable. “It is promising to see an illustration that XBRL can be the useful, comprehensive, accurate, and understandable standard that was expected.” Read more here.
  • CompSci Resources offers XBRL audit|pro; this is a web-based XBRL quality assurance tool that works directly with the HTML to ensure completeness, consistency, mapping, and structure (per AICPA and EFM guidelines).
  • Calcbench offers the “Filer Portal” to give filers insight into how they can improve their XBRL filings; and Calbench also provided this reporton data quality.

Uptick in Reporting by Data Quality Watchdogs – Corresponding with the uptick in data quality tools, some organizations have made waves by reporting on the quality of XBRL filings. Many of these focus on common errors, and demonstrate that many of these errors can be fixed quickly by giving a small amount of attention to reviewing the filings. This is significant as it dispels a common misconception that the filings are so riddled with errors that they are not close to being useful. Tagnifi has published a few articles to this effect, as have Calcbench and 9-WSearch. Additionally, Rank and Filed allows everyone quick, understandable access to all twenty-five million documents that are publicly available on the EDGAR database. As such it simplifies the identification of filing anomalies as users can review consecutive quarterly and annual filing data side-by-side.

EFM 27, US GAAP 2014 – The United States Securities and Exchange Commission (SEC) released version 27 of the EDGAR Filer Manual (EFM) on June 17. This update did not contain too many surprises, but there were some notable updates that affected the latest XBRL filing season. First, you may not create extension concepts that have an instant periodType and non-numeric data type. Additionally, the newly published version of the EFM now allows a filer to select the same date as both the start and end date for a given context. Also, US GAAP 2012 was quickly expired, effective June 17. Why does any of this matter? Read more here:

And, the top story of the summer:

The “Dear CFO” Letter – This has been the biggest story of the summer relating to XBRL. From the SEC website:

“In July 2014, the Division of Corporation Finance sent the following letter to certain public companies regarding their reports on Form 10-Q and the XBRL requirement to include calculation relationships.”

Many articles and blogs have been written drawing insight from this. CFO’s at many public filers were likely asking exactly what an XBRL calculation was. It was also easy to see that the XBRL community welcomed the SEC publicly showing an interest in XBRL quality, and sharing the specific way in which they were going to be assessing XBRL filings. The most promising impact in the aftermath of this letter is that filers are now in turn more incentivized in ensuring the quality of their XBRL, not just getting it done to satisfy a requirement.

Stepped-up enforcement by the SEC will only accelerate the quality improvements, and will give investors and filers alike the ability to use XBRL in more meaningful ways. Quality will become the decision-making focus, and finding a knowledgeable, industry-leading software and services vendor will become more important than just getting a zip file with six files with the proper extensions uploaded to the SEC on time.

You can also read more about the favorable response to the SEC enforcement here:

This completes one list of the Top 10 stories for the XBRL community in the Summer of 2014. What do you think? Did we get this right? What else deserved additional attention?