Magazine article Strategic Finance

SEC and FASB Filing Updates regarding XBRL

Magazine article Strategic Finance

SEC and FASB Filing Updates regarding XBRL

Article excerpt

There are several recent developments affecting the 2009 eXtensible Business Reporting Language (XBRL) Reporting Mandate from the Securities & Exchange Commission (SEC) that you need to be aware of when preparing 2013 filings. The SEC is signaling a focus on filing quality by enforcing extension element requirements and rolling out the Accounting Quality Model (AQM). Additionally, the Financial Accounting Standards Board (FASB) recently released two guides to help filers tag their financial statements: the U.S. GAAP Financial Reporting Taxonomy Implementation Guide--Subsequent Events and the Definition Components & Structure style guide. This column summarizes these developments.

Extension Enforcement

The creation of extension elements for units of measure is now prohibited if the unit of measure already exits. An extension element is a customized XBRL tag that a filer creates if the element doesn't exist in the taxonomy being used. In February 2013, the SEC began enforcing the use of units of measure that are defined in the XBRL International Units Registry (UTR) (www.xbrl.org/utr/utr.xml). EDGAR (Electronic Data Gathering, Analysis, and Retrieval) filings that violate this requirement will be rejected. The UTR is a standardized list of units of measure, such as euro (EUR) or gallon (gal), that are attributes of an XBRL concept. For example, if a company's Accounts Receivable account were assigned the XBRL tag AccountsReceivableGrossCurrent, it would also be assigned a unit of measure attribute for the account's applicable currency, such as euro (EUR) or U.S. dollar (USD). The broad implication of this announcement is that the SEC is taking steps to discourage the use of unnecessary extension elements, a practice that undermines comparability of XBRL financial statement filings. Expect additional restrictions on extension element use in the future.

Accounting Quality Model

The SEC's Accounting Quality Model that was discussed briefly in the December 2012 XBRL column is taking shape and is predicted to be in use by the end of 2013, if not sooner. The model is populated with XBRL data collected from SEC financial filings (i.e., 10-Ks and 10-Qs). The objective is to identify companies' outlier data or, in the words of Craig Lewis, director of the SEC's Division of Risk, Strategy, and Financial Innovation and the Commission's chief economist, "data that stick out from the pack" by showing signs of earnings management. Fraud detection isn't the main goal of the AQM; rather, it's to promote high-quality financial reporting. There are concerns that the model will flag "false positives"--results that don't represent the dark side of earnings management--and legitimate accounting disclosures instead. The model is being designed to minimize "false positives." Financial statements that indicate fraudulent reporting could be referred to the SEC's Office of Compliance Inspections and Examinations (OCIE) or the Division of Enforcement for further review. …

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