The article “Accuracy Essential to Success of XBRL Financial Filing Program,” by Eileen Z. Taylor and Matt Shipman, NC State News, June 8, 2009 — has been widely talked about recently in XBRL circles.
The key sentence in the news story about the academic paper states:
“The researchers are concerned that, if the upcoming XBRL filings do not represent a significant improvement from the voluntary reports, stakeholders in the financial community will not have any faith in the XBRL program – and it will be rendered relatively ineffective.”
Wrong on at least two counts. First, to assume that the quality of XBRL submissions in the formal, rule laden, error checking mandatory XBRL program is going to be as error ridden as the sand-box, free for all no rules VFP is flat out wrong. I suggest the authors of the paper read the Edgar filing manual, chapter 6, which details hundreds of rules that must be followed for an XBRL exhibit will be accepted by the system. In other words, almost every error found in the VFP by the researchers will rejected by the SEC and require correction.
Second, validation programs can correct some of the accounting errors introduced into XBRL filings, responsible and knowledgeable humans at filing corporations must review submissions prior to filing. The management team is responsible for the data contained in the XBRL exhibits. The SEC has specifically stated that they expect corporations to have in place an XBRL preparation process that is documented and tested in a similar fashion to other required internal controls. An accounting error on any future XBRL exhibit is an indication that the company does not have sufficient internal controls in place.
No, I’m not expecting the startup to be perfect. However, I do expect XBRL filings to be as accurate or more accurate that existing HTML EDGAR filings.