Greater transparency, lower filing costs, reduced risks and better data quality – these long-promised benefits of XBRL are finally becoming a reality. As the XBRL landscape continues its swift evolution, we discussed the latest developments with five experts – as well as with a representative of the SEC.
Vintage Question > In your view, what are the biggest challenges currently being tackled by filers when it comes to implementing XBRL?
Jaret Klekota > When it comes to implementing XBRL, the main issue for registrants is coordinating and incorporating all of the quality-control activities in their process. The close of the financial statement and the SEC submission process is already a busy time. And they need to make sure that they understand the complexities and risks of XBRL. A lot of clients use third-party XBRL creation providers, and we help to make sure that these third parties are following all the necessary rules. We want to be sure that our clients are comfortable that these tags truly represent what their financial statements are disclosing.
Campbell Pryde > One of the major issues currently is with extensions. The main problem with extensions is that there are elements in a taxonomy which exist but are not being used, and someone goes in and makes an extension for it instead. Our Data Quality Committee, of which Vintage is a founding member, has started addressing that issue with more comprehensive guidance on where and when you should use extensions. A lot of that is just getting decent guidance out there. I don’t think it’s fair to say that extensions are a bad thing, however. I think they are bad when used inappropriately, and the main cases are when a company creates an extension with an element that already exists in the taxonomy.
Or, secondly, they create an extension to differentiate an amount which is immaterial. If it’s immaterial, then why create it? But that’s actually quite common. It’s largely a matter of making people feel comfortable with that, which I think will help drive the issue out of the systems.
Pranav Ghai > I agree with Campbell – the custom tags are an issue. The idea of these custom extensions is that your metric doesn’t quite fit what the taxonomy wanted it to, so you create something special.
But the problem is that there’s no linking between the base taxonomy and that extension. These things become step-children and it’s much more difficult to figure out the logic. If you’re comparing three or four companies — let alone 10 or 20 — if a couple of them have extensions, it becomes very difficult to compare them, even if they are ostensibly the same thing. One of the things Calcbench has done is a lot of extension mapping.
Ilya Vadeiko > Although we do not work on the filing side, we observe a fair amount of variability and inconsistency in disclosure reporting. Some filers are clearly struggling with reporting their face financials consistently. We believe that this usually results from the fact that the filers do not use or look at their own XBRL data from the point of view of investor relations or business analysis of their peers. This feedback loop should help improve implementation and eliminate issues in meaningful choices of XBRL elements.
Hudson Hollister > The most difficult part has already been done by every company, because XBRL is already mandatory. But XRBL electronically expresses how all the numbers relate to each other. So you’ve got to have somebody who knows how to do that. Some of the software products out there, like the ones offered by Vintage, give you an interface to do that, which makes it much easier. You don’t need to be a data expert.