In a Toppan Merrill webinar broadcast, three experts from different markets sectors discussed XBRL’s success story:
- Mike Willis, Assistant Director of the SEC’s Office of Structured Disclosure.
- Emily Huang, CEO and co-founder of idaciti (which makes tools for analyzing structured data). Ms. Huang explained how Inline XBRL brings a company’s financials to life and how painfully apparent XBRL mistakes are to investors and analysts.
- Mike Schlanger, Vice President of Solution Sales at Toppan Merrill. Mr. Schlanger offered best practices for filing high-quality XBRL disclosures.
Today, we'll cover: Best practices for high-quality XBRL
To listen to the full webinar, click here.
Toppan Merrill’s Mike Schlanger reiterated a question he had posed at the start of the webinar, a question that all SEC filers should ask themselves: “Do you have the appropriate process controls and oversight in place to ensure that the XBRL and EDGAR submissions tell the same story?”
As Ms. Huang and Mr. Willis demonstrated in their presentations, many companies are still submitting XBRL and EDGAR files that tell two different stories. Their disclosure teams are unaware of these flaws, and the filers are not using the free validation tools that would help them detect some of the most obvious errors. The result? Unwanted
scrutiny from SEC staff, who are likely to wonder what else may be going on in the file that warrants investigation. The largest offenders include filers that prepare XBRL without any outside help or rely entirely on an outsource solution with minimal review.
At a minimum, suggests Mr. Schlanger, all filers should run checks of their XBRL tagging through the free XBRL rulesets offered by the XBRL US Data Quality Committee.
However, he emphasized, filers need to know where this automated validation should end and expert human review should begin. “As good as it is, it’s important to understand the limitations of computer validation. Judgment, knowledge, and expertise of both accounting and XBRL are critical. If you’re counting on a computer validation only, you run the risk that you will have errors in your XBRL file.”
After 10 years of XBRL, it may be time to review your company’s process of filing preparation to determine whether it is truly adequate. He offered several XBRL best practices for filers, including:
- Run your files through the XBRL rules offered by the XBRL US Data Quality Committee.
- Have your filing reviewed by experts (humans, that is), who can catch other tagging errors or needless extensions and can suggest improvements.
- Review your XBRL-preparation process and team skills. Do you have the in-house oversight and controls to ensure your XBRL and EDGAR submissions are correct and tell the same story?
- Know the dangers of poor XBRL quality: unwanted SEC attention; liability; reputational damage.
Filers must recognize the SEC’s omniscient XBRL capabilities, Mr. Schlanger suggested. “The SEC might be seeing things in your file that you do not even know about.” He stressed the importance of an adaptive approach to XBRL disclosure, one that fully understands the vulnerabilities which XBRL can expose for any SEC filer.
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