The Government Information Transparency Act (H.R. 2392), introduced May 14 by Rep. Darrell Issa (R-Calif.), would standardize the collection of business information throughout agencies. It would require agencies to use a single data standard known as eXtensible Business Reporting Language (XBRL) and require that collected information be made readily available for public access.
Of course, this begs the question of what data will be collected. Once decided, a taxonomy can be easily assembled that would collect the data in a uniform way. Software companies in the XBRL space have developed web-based html driven fill in the blank data collection devices that convert cell entries into XBRL unseen by the end user. This requires a mind shift from a report-based approach to a data-based approach to receiving feedback on TARP projects. It also requires government agencies to centralize their data requests rather than each agency develop their own required paper-based reports.
The key again is to formulate the taxonomy, collect the data, then develop reports using a common data repository. To see how this approach can work, take a look the Dutch Taxonomy Project ) or the Bank of Japan project detailed here http://www.xbrl.org/CaseStudies/BoJ_XBRL_06.pdf
Lynn Turner, the outspoken and former SEC chief accountant under Arthur Levitt, is again in the news straight talking about what is wrong in the world of accounting. His straight talk has earned him a reputation as a beacon for clear financial reporting and no non-sense. I had the pleasure of meeting Mr. Turner in 2002 while speaking as a conference at the University of Northern Colorado. My topic, XBRL, was very new to the entire audience except for Lynn. Then something completely unexpected happened.
In the middle of my talk, Lynn raised his hand like traffic cop and said “Stop”.
The next few words surprised me and stuck with me to this day. Lynn said, “Neal, I’m a believer and supporter of XBRL. In fact, I wrote the speech for Arthur Levitt when he mentioned XBRL back in 2000. But please promise me that whenever you speak in public about XBRL remind people that you must get the accounting right first.”
When the shock of being stopped in mid-sentence by the former SEC chief accountant wore off, I thanked Lynn for his comments and continued with my talk. Later, as I reflected upon what Mr. Turner had said, the idea of putting accounting first began to resonate. You see, XBRL is a unique new way to tell the world about the accounting choices your company has made. Each line item and soon, each numerical value in the footnotes to financial statements will carry additional information about the label, definition and authoritative reference associated with each value. Never before has the accounting behind the numbers been so exposed.
Getting the accounting right will be a process that will evolve over time. For example, I do not expect the newly released 2009 Us GAAP taxonomy to be perfect. Each individual line will require careful review by the management team during the time-compressed close to file cycle. Review processes will be tested and tweeked as the XBRL becomes a critical part of the correctness and timliness of the corporate SEC filing.
Problems are also likely to surface from outside filing companies. The taxonomy will be “stress tested’ when over 500 first phase filings begin this June. I expect to hear reports of missing elements and errors in the taxonomy. We will also hear about cases where the use of the XBRL taxonomy exposes interesting things about corporate accounting that might not be right. As Lynn Turner admonished over seven years ago, companies need to get the accounting right first, then correctly tag the results in XBRL.
The SEC has posted newly summarized XBRL compliance information on their website (http://www.sec.gov/info/smallbus/secg/interactivedata-secg.htm ). The guidance is directed towards small businesses but contains a concise description of the program for all companies. Information covers: the three year phase-in period, certification requirements, third-party involvement, Modified liability, consequences of non-compliance, web posting, grace periods, due dates, applicable financial statements, required formats, optional early compliance, and other helpful resources.
The information is not meant to replace the rules as published in the EDGAR Filing Manual (Chapter 6, Interactive Data), located here: http://www.sec.gov/rules/final/2009/33-9002.pdf.
The bottom line is that each company will be responsible for the content in their SEC XBRL filings and should become very familiar with all reporting requirements. http://www.sec.gov/info/smallbus/secg/interactivedata-secg.htm is an excellent place for companies large and small to begin to explore the SEC’s XBRL mandate.
It was a dark and rainy night. She toiled way past normal quitting time for all but accountants with Securities and Exchange Commission (SEC) filings deadlines looming. Cranking away on her first XBRL SEC filing, Debbie became quite frustrated. "I know what is supposed to go into all of these "other" accounts, but XBRL just doesn’t care," she lamented. You see, Debbie is the accountant who knew too much.
Debbie is not alone. In a recent conversation with Louis Matherne, former XBRL International President and Director, XBRL Services for Clarity Systems, the situation described above is actually a common occurrence for accountants tagging XBRL filings for the first time. He suggested a simple example:
The company balance sheet says "prepaid expenses and other". "Other" is there because it represents several accounts that aggregated to the balance sheet become immaterial as separate items. The registrant, however, knows what it is and thinks they should create a new taxonomy concept that better captures the details of "other". No where in the financial statements or footnotes to the financial statements do they describe what that ‘other’ is."
The object of using XBRL for compliance with the SEC mandate is to present the company’s required financial statements and footnote disclosures, not to expose the preliminary accounts and internal decisions the led to the final, top level reports. XBRL is not meant to extend, expand or further explain legal filings. It simple puts your disclosures into a machine readable form. The last word comes from Matherne: "XBRL for the SEC is primarily about the disclosure of the accounting".
The US GAAP XBRL taxonomies can be found here.
The Accountant Who Knew Too Much
Over the last few months, I have become acquainted with the wonders of the 140 character “tweet”. For those of you who are not “tweets”, I am referring to the combination of instant message and social networking that has converged at www.twitter.com. In essence, twitter asks “peeps” a simple question, What are you doing right now? In 140 spaces, you can communicate what you are thinking or what you have just read on the web. Long URL’s are easily truncated leaving enough space to communicate simple messages. If you find people that are doing or reading about interesting things, you can follow their “tweets”.
In efforts to keep up on XBRL, I use Yahoo and Google key word alerts as well as selected RSS feeds from the SEC and others. I have found, however, that this system falls short of the daily updates the people using www.twitter.com are providing for me. Its amazing how effective a 140 character message can be in sending you directly to fresh web content relevant to your interests. To improve my “hit” rate, I’ve added a few Tweet favorite tools such as tweetdeck (www.tweetdeck.com), TwitScoop, WeFollow, and MrTweet. Join up and send me a note. I’d love to follow you!