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How To Comply With XBRL Requirements

Merrill Disclosure Solutions | January 21, 2014

Abstract

Abstracted from: An Overview Of XBRL Compliance By: Josef Rashty, CPA; CPA Journal Vol. 83, No. 8, Pgs. 67-71

Imposing order on the database. Accountant and educator Josef Rashty has written a history and an overview of how XBRL operates, primarily for the benefit of other CPAs. The SEC first mandated the use of XBRL in hopes of making its EDGAR database function more efficiently. Based on eXtensible Markup Language (XML, a generally recognized technological standard for a document-encoding format), XBRL supplies an identifying tag for every individual number in the financial statements and the notes of a public company's Forms 10-K and 10-Q. Tagging permits a computer program to read the financial data, thereby helping investors and analysts to obtain the data in a uniform way. When setting up XBRL filings, a company can integrate the filings into its financial system; implement them on top of the system (by using new software); or outsource the work to a filing agent, a printer, or a consultant.

Genus and species of compliance risks. Companies must be alert to compliance risks, the author warns. The chief risk is that the information in the XBRL filings conflicts with the matching EDGAR HTML files. A secondary risk is that the XBRL filings violate the EDGAR Filer Manual's intricate rules. The SEC eliminated two years of liability for incorrect XBRL filings if a company tried in good faith to obey the regulations and corrected its mistakes soon after becoming aware of them, but starting November 1, 2014, errant companies can no longer benefit from this dispensation. Another risk is that if a company misses its XBRL filing's due date, it cannot use short-form registrations (e.g., Form S-3) and will not be regarded as having sufficient public information accessible for Rule 144 purposes. Regulation S-T permits two grace periods of 30 days for certain XBRL filings, but Rule 12b-25 extensions are specifically not available for XBRL files, only for a tardy Form 10-K or 10-Q.

Auditors' role in the XBRL family. There is no regulatory requirement that an independent auditor take part in an XBRL filing and no audit requirement for an XBRL filing under Section 404(b) of the Sarbanes-Oxley Act. Nevertheless, the author suggests, a company may contract with an independent auditor to carry out an agreed-upon procedures engagement to assist management in making sure a filing is comprehensive, correct, and consistent. The American Institute of CPAs (AICPA) is updating its Statement of Position 09-1, Performing Agreed-Upon Procedures Engagements That Address The Completeness, Accuracy, Or Consistency Of XBRL-Tagged Data, which offers guidance on such an engagement. [Editor's Note: The updated paper, Statement of Position 13-2, is now available.] An independent auditor cannot, however, perform significant analysis of an XBRL filing in a review engagement. An in-house auditor can assess XBRL-reporting risks, suggest improvements in XBRL internal controls and procedures, assess the independent auditor's function, and review and opine on the sufficiency of service-providers' control reports.

Classes of tag traits; SEC kingdom's sterner future. The AICPA XBRL Assurance Task Force's Principles and Criteria for XBRL Formatted Information, published in August 2012, specified the required attributes of XBRL tagging. All data should be formatted at the obligatory levels; mapping elements, as well as numbers and relationships, should be consistent with the source information; and XBRL filings should be properly structured. The SEC will evaluate XBRL filings more strictly in the future, the author believes, since the end of its modified-liability period is approaching. The Commission finds that grave errors and discrepancies, which prevent analysts and investors from fully using XBRL data, continue to occur. It will issue comments shortly, causing some filers to amend their filings.


Abstracted from CPA Journal, published by New York State Society of Certified Public Accountants, 3 Park Avenue, 18th Floor, New York

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