June 18, 2018

The SEC’s Tumultuous Love Affair with XBRL

Did the SEC commit to XBRL half-heartedly? Are they waiting for something better to come along? In the beginning, it was easy to argue yes. Fast forward 6 years and the SEC is still holding on to the XBRL — for better or worse. And, as flawed as it may be, XBRL/iXBRL looks like it is here to stay.

Going Concern last wrote about XBRL in 2011… claiming that XBRL is really happening. Recall that:

XBRL, the acronym for eXtensible Business Reporting Language, means that the data contained within financial reports is constructed as individual elements, rather than blocks of text. Each piece of data comes with an identifying tag and is linked to accounting definitions or rules. So, a number that makes up annual revenue has a different identity than a number that goes into payroll expense. The result? The data becomes “computer readable,” or interactive, so analysts, investors and regulators can easily compare one set of financial data to another.

I’m here to confirm, it did indeed happen. And, here’s an update on what we have to show for it after 6 years.

iXBRL is spicing things up

While plain-vanilla XBRL is still around, in June 2016 the SEC started allowing firms to file using inline XBRL (basically XBRL 2.0, which integrates tagging into a company’s required HTML filings rather than keeping it separate). According to a recent article PwC’s James Dreyer wrote for CFO.com:

iXBRL offers numerous specific benefits, for both public companies and users of public-company financial information. By putting this information into a single unified document, iXBRL can help companies streamline their reporting processes, decrease preparation costs, eliminate the risk of errors, and improve the quality of structured data.

The SEC’s voluntary pilot program to use iXBRL rather than XBRL will run until 2020. Then, the SEC is going to decree if the new filing format lives up to the hype of being better than ever.

Data tagging errors still exist

Unfortunately, “better than ever” is a relative term. The bar was low to begin with. In 2013, Chairman of the House Oversight Committee Rep. Darrell Issa said that as many as 1.4 million XBRL errors occurred. Even with the new and improved iXBRL to streamline tagging, errors and miscategorization may cause some headaches.

According to attorney Gary Emmanuel as quoted in Inside Counsel:

[XBRL is] a data format that has been plagued by problems since its introduction… since the XBRL exhibit is generated after the completion of the conversion process of a Word document into EDGAR format, this has resulted in discrepancies between the XBRL information and EDGAR file that slipped through the review process.

He did admit that there may be brighter days ahead, saying:

Inline XBRL allows the XBRL generation process to be conducted at the same time as conversion of the Word document into EDGAR format thereby streamlining the entire process. By incorporating XBRL into the main EDGAR document, rather than as a separate file, it is hoped that this will result in more accurate XBRL data, reduced XBRL generation costs, and a shorter EDGAR conversion process.”

iXBRL lacks oversight and assurance

Relying on XBRL/iXBRL tagged data is still iffy, after almost a decade. The idea of structured, machine-readable data from every company in the world is a glorious thought. Oh, the insight you could gather. So long as it’s accurate!

But, there’s no oversight to guarantee its accuracy. There are no required assurance services that focus on verifying the accuracy of XBRL tagging. It’s a free-for-all. For example, who cares if the independent audit report is clean when the tag for revenue is swapped with net income? Right now, no one.

Rob Blake, who helped with the early creation of XBRL, told CFO.com in late 2013 that the SEC needs to put “some teeth around really bad XBRL submissions” by punishing companies for inaccuracies. He thinks that’s really the only way to get CFOs to provide accurate data.

Sure, the blame always lands on the CFO. But, maybe, it’s the responsibility of the vendors who supply disclosure-management solutions to ensure that tagging is idiot proof? At the very least, Dreyer recommended that the CFO gets a SOC 1 from the iXBRL software vendor.

Or, maybe it’s everyone’s responsibility, at every level? Is education the only way to ensure errors don’t trickle into SEC filings? After all, the resources are readily available and the XBRL gurus (aka the Taxonomy Architecture Guidance Taskforce) even update their glossary regularly. A new glossary version was just released last week.

I guess we will have to wait and see if the SEC plans to force people to switch to iXBRL in 2020. I know, it’s a nail-biter. My guess is it will be pushed off until 2025 at least. Did I mention the SEC was half-hearted about XBRL?

Image: iStockPhoto/XtockImages

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Webinar | Recruitment Timing and the Application Process for Government Accounting Careers

Webinar host, Chris Lezovich of the IRS, provides recruiting and hiring timelines for government accounting careers with various agencies, as well as the specific process steps for students to take. Additionally, Lezovich highlights the scoring mechanism used to evaluate candidates, and help students determine the best way to position themselves in the application and interviewing process.

Panera Bread Combines Free Markets and Nonprofits in Missouri

In a test run to see if expenses can get covered at the end of the day, Panera Bread has opened a unique new location in Clayton, MO that combines the benefits of nonprofit status with the fundamental principle of the free market system: let the market determine what an item is worth. But it adds a unique qualifier to the traditional concept of the need determining price: human nature.

The menu is exactly the same as other Panera locations (sick foodies can check that out here if they aren’t familiar with Panera’s offerings) but instead of charging a fixed price for each item, this special little spot will ask only what customers can afford. “Take what you need, leave your fair share,” says the sign at their entrance, just in case one is confused by such a foreign transaction model. No prices? Do we even know how to value items independently any more?

Panera is hopeful that the “Cares Cafe” model will thrive and grow to a series of donation-based stores that rely more on empathy than capitalism. “Hopefully we’ll be able to open them across the country, but our original St. Louis location must succeed first!” tweeted the fine folks behind Panera’s official Twitter account.

Can someone confirm Missouri rules on sales taxes related to the sale of food? And is it a sale if the exchange is really a donation? I’m really confused.

Anyway, not everyone is thrilled about this concept. Though it is obviously well-intentioned, the donation model may not necessarily transfer outside of St Louis. Trends consultant Marian Salzman reality-checked USAToday saying “while young people are very much attuned to helping out and making a difference, if they find themselves sitting next to other customers with whom they don’t feel comfortable, they’re not coming back.” You know, as in the possibility of homeless and otherwise destitute individuals (of which our country has plenty nowadays) lounging around with the nerve to eat a cheap meal.

Hedging against operating losses, this particular location has one slight difference from other Panera stores: its bread (except for sandwich bread) is really day old product from other locations around the St Louis metro. Hey, nothing wrong with getting the most out of inventory with a horrible turnover rate.

In the end, it’s hard to say whether this nonprofit experiment will float but if it does, Panera wants to open two more within six months. Good luck with that.

Adrienne Gonzalez is the founder of Jr. Deputy Accountant, a former CPA wrangler and a Going Concern contributor . You can see more of her posts here.