By Evan Condran. Filing with the SEC is complex, time consuming and high stakes. XBRL and EDGARized HTML reports serve as an official declaration to the public of the financial health of your company. As a member of the compliances services team at Certent with extensive SEC and XBRL knowledge, I understand the importance of telling an accurate financial story. If you are reading this, you are probably heads down in a 10-K busy season and considering clicking away from this blog post. However, incorporating processes surrounding negative instance document values, calculation linkbases, XBRL rendering, validation checks and a review of extended elements, will improve the data quality of your SEC filings. These concepts are difficult to comprehend, but with time and education you will gain a better understanding and make drastic strides. Having a comprehensive disclosure management solution can also provide guidance, but for now including these 5 concepts into your review process will improve the data quality of your XBRL filings.
- Negative Instance Document Values – The SEC XBRL Staff Interpretations issued on June 11, 2013, highlight negative instance document values as one of the critical areas XBRL filers need to focus on. To determine whether or not a negative instance document value is appropriate, you must take a closer look at the element and its associated attributes. If the element is a one-way concept, it typically should not have a negative instance document value. A one-way concept has an element ID and definition that expresses only “an expense”, “a liability”, “proceeds from”, or “an increase to equity” and should only have a positive instance document value associated with it. If the value were negative for a one-way concept the element ID and definition would be too narrow, and the value assigned to the element would not make sense. Elements that represent two-way concepts are element IDs and definitions that have verbiage such as “ProceedsFromPaymentsFor”, “IncomeLoss”, “AssetsLiabilities”, or “IncreaseDecrease”. If you find a two-way concept and a negative value you should review to make sure the negative value makes sense balanced on the balance type of the element. If the element “NetIncomeLoss” is used with a credit balance and the value is negative, you are reporting a loss that is a debit balance. If you are reporting a positive instance document value then you are reporting income with a credit balance.
- Calculation Linkbases – In July of 2014, the SEC provided a “Dear CFO Letter” which discussed what could happen if an XBRL filer did not have calculation linkbases in their XBRL filings in accordance with EDGAR Filer Manual rules 6.14 and 6.15. It seems that XBRL filers aren’t purposely excluding calculation linkbases, but a lack of understanding is prohibiting filers from doing so. A calculation linkbase improves the quality of the data because users can see the roll ups of calculations and the relationship of the values and elements. For example, a classified Balance Sheet would have line items that are current assets with a total for current assets. The line items would be children and current assets would be a total as a parent in the calculation relationship. This allows the user to identify what component elements make up current assets and ensure that the balance foots correctly compared to the HTML filing.
- XBRL Rendering – This is your completeness check to make sure you have met all of the XBRL requirements for labels to match the source, correct calendars used, correct scale, and ensure all level 1, 2, 3 and 4 facts are rendering. Print out the XBRL rendering and the HTML or Word document of the 10-Q/10-K and tie out all labels, calendars, and values. Remember, there is no requirement for the XBRL rendering to match the HTML document exactly, so understand the limitations of the XBRL rendering engine and don’t change your XBRL tagging solely to achieve a desired rendering.
- Validation – Before submitting your XBRL files, make sure to complete a thorough review of your validation. Many validation tools test against EDGAR Filer Manual rules, business rules, calculation summations, and consistency warnings, but be aware that this does not replace test filing with the SEC. Reviewing a comprehensive validation every quarter will allow you to consistently improve the XBRL data quality of your filings.
- Review extended elements – It is critical that filers review extended elements, especially after converting to a new US GAAP Taxonomy, as new elements are added with each release based on modeling changes, ASU changes, and corrections of the taxonomy. “While this customization accommodates unique circumstances in a filer’s particular disclosure, the Commission acknowledged that the use of customized tags could potentially and unnecessarily reduce the comparability of inter-company data, particularly when a suitable standardized tag was otherwise available.” (Staff Observations of Custom Tag Rates). As a member of the compliance department working on XBRL filings each and every day, extended elements are commonly found where a US GAAP replacement is available. Typically, filers are not aware of the US GAAP replacements because they do not have a thorough understanding of the US GAAP Taxonomy. Reviewing extended elements and searching for potential US GAAP replacements will increase the filers’ knowledge base in XBRL and also increase the data quality of their XBRL filings.
Paying close attention to these 5 elements will provide you with a greater sense of security that your XBRL filings are accurate and complete. With the SEC promising to perform a more thorough examination of XBRL tagging, including these steps into your processes will help keep your company in good standing. Pulling together your 10K can be overwhelming, but it is essential to ensure that your company’s disclosure documents share with the public precise information about financial performance. The Essential XBRL Quality Checklist is another tool that can help keep you and your team on the right track. Happy Filing!