The SEC talks XBRL (part 2)

Parsing the data: While Inline XBRL reporting may allow for more streamlined filing, XBRL data has already opened the door to faster and better analytics for companies and investors alike. We discussed the latest developments with five experts – as well as with a representative of the SEC, Mike Willis, assistant director of the US Securities and Exchange Commission’s Office of Structured Disclosure, for his views on the hot-button issues surrounding XBRL.

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Vintage question > What are the biggest challenges being tackled by those filing when it comes to XBRL?

SEC > At a macro level, the biggest challenge is addressing the growing number of XBRL structured compliance requirements from regulators (e.g., taxation, statutory, registrars, financial services, securities) in countries around the world migrating from paper and unstructured electronic formats to structured digital formats. This transition from paper to structured standardized information is providing enhanced automation opportunities and thereby increasing challenges for enhancing remaining manual reporting processes and controls (e.g., quality assessments, reporting validations, disclosure best practice and risk benchmarking, etc.).

At a micro level – realizing that the judgment required for GAAP reporting is also relevant for structured reporting concepts. Professional reporting judgments are very applicable when assessing appropriate element selections; and when to/or not to create company specific extensions; and how to consistently model disclosures across time periods and/or companies in common industry groups. These are possibly new and somewhat unfamiliar skills for some reporting professionals that may work to enhance their communication capabilities well beyond the targeted compliance requirements.

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Finally, leveraging new software capabilities specifically designed to facilitate  standardized reporting processes, controls and risk assessment capabilities. Supply chain standardization of information results in a set of common economic outcomes (e.g., lower cost, accelerated frequency, improved quality, more timeliness, etc.). Visualizing these new process and control enhancements and identifying new software capabilities enabling these outcomes is a challenge for many filers as well as software vendors. For example, the taxonomy reference linkbase has been available since the initial GAAP Taxonomy was published; however, the open source Inline Viewer was the first software to provide topical search report capabilities for filers and their stakeholders.

Vintage question > What are some of the ways you think XBRL implementation and financial data gathering can be improved? What do you see as some of the possibilities for the future in the realm of structured data?

SEC > At a macro level – implementation as a standardization vehicle rather than a compliance requirement with application to earlier processes and controls earlier in the reporting supply chain. At a micro level – standardization enables a range of process and controls enhancements including:

  • Improved automation of validation and quality assessments;
  • Improved automation of benchmarking and peer assessments;
  • Simplified data collection processes from internal data stores and external sources;
  • Improved process and controls automation to reduce reporting costs;
  • Enhanced presentation options and thereby reusability and consumer personalization;
  • Improved timeliness of information for management decision analysis.

Vintage question > What are some of the main benefits and challenges involved in implementing iXBRL?

SEC > Some challenges to consider when implementing Inline XBRL include:

  • iXBRL adoption by software vendors and service providers is a required capability critical for filer implementation. Since the exemptive order was released, SEC staff has participated in XBRL US hosted webex sessions that target software vendors and service providers.
  • Filer realization of benefits provided by the iXBRL Viewer as previously outlined. Filers can find the Inline XBRL Viewer embedded within the EDGAR Previewer and the EDGAR Test filing processes.

We welcome any technical implementation questions at StructuredData@sec.gov. As for the benefits to consider when implementing iXBRL, they include:

  • iXBRL doesn’t define how the disclosure is presented (as with XBRL rendering), thereby providing filing professionals with complete control over how disclosures look in the final report.
  • Improved data quality capabilities via the Inline XBRL Viewer’s data quality filters help highlight common data quality-related topics, making them more transparent to reporting professionals.
  • Expanding the benefits of structured Inline XBRL disclosures by both filers and their stakeholders (e.g., adapting the open-source Inline XBRL Viewer to enable new features • and data).

Vintage question > For investors, what possibilities does structured data open up? How can they analyze the data made more easily available by XBRL? Is this direct tagged comparison important?

SEC > The most obvious possibility is more timely access to exponentially more data than has been traditionally available from data vendors. Enhanced access to detailed disclosures commonly found within the notes to the financial statements is one area that may be particularly useful to investors and analysts.

Another possibility for investors is that structured data enables faster and better analysis. Investors can not only more cost effectively assess more information but may also increase the range of companies they follow. Greater efficiency with higher-quality investment decisions is a win for all investors, particularly as it provides better opportunities to assess small-cap companies by making it easier and less costly to access and analyze their disclosures. Lowering data access costs while increasing data access provides highly relevant possibilities for all investors, particularly those interested in small-cap companies.

Direct disclosure comparison is important for some investors’ assessments. That said, many investor valuation assessments are highly judgmental, resulting from insights on unique company business practices, processes, and models, and these are reflected in unique company disclosures. While some disclosures may be highly comparable – particularly within a single industry sector – some valuation assessments may rely on time series changes in company operations, segments, product and other unique company disclosures. The structured data quality consideration here is to consistently model disclosures – regardless of their highly comparable or company-unique nature.

(NOTE: The iXBRL Viewer is open source and freely available for technical user adoption here: http://arelle.org/2016/03/08/edgar-update/)

* The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees. Therefore, the views expressed here are my own, and do not necessarily reflect the views of the Commission or other members of the staff of the Commission.

 

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