In order to understand what “Quality Tagging of XBRL” is, an analysis of the many components of a submission is required.
Fundamentally, XBRL quality is determined by two important factors: firstly the preparation of the XBRL needs to be in logical continuity with all the other filers, secondly it must deliver the same information as the traditional financial statements prepared in HTML.
High quality XBRL is prepared in a manner which can be used easily by consumers of that particular data. This data must be prepared in consistency with other filers. It is difficult to gauge the manner in which XBRL will be used in the future. However, in order to ensure that there is best possible usability of XBRL is through the following: tagging, structuring of information, individual investors accessing the data directly or through the SEC.
It often becomes difficult for organizations to ensure that they are in sync with the company preparing their reports. Edgar Solutions is an expert in handling all XBRL filings and understand that the individual preparing the report must have relevant knowledge of the governing rules and regulations including GAAP, as far as XBRL is concerned.
US GAAP taxonomies
The Financial Accounting Standards Board (FASB) produces US GAAP Financial Reporting Taxonomy Implementation and Reference Guides. The Board provides guidelines on the usage of the GAAP taxonomy. The guides are helpful in achieving consistency across different companies. Hence prepares must take these guides into consideration.
XBRL Specifications 2.1
This is another pivotal rule that XBRL filing organizations must adhere to. XBRL filers can have it easy on this one, as it is not something that is to be read and understood in depth. The reason being, that most XBRL preparation software comes handy with all the required specifications. Most of the filers today are working in adherence to this specification.
EDGAR Filer Manual
All filing companies must ensure that they follow all the instructions in the EDGAR Filer Manual pertaining to XBRL. Even though some parts of the filing process can be checked through XBRL validation software, most others do not need any form of human involvement. So the resultant action being that prepares of the XBRL files must also be in knowledge of the EDGAR Filer Manual so that XBRL is created correctly. The EDGAR Manual covers everything from the selection of the relevant tags, to giving the XBRL documents a name, as well as other detailed information on the preparation of XBRL. Consistency cannot be achieved unless all the instructions are followed. In spite of the necessary precautions taken, there is possibility of errors in the XBRL preparation. The reasons for these errors can be either a lack of knowledge or an improper application of the given instructions.
US GAAP Taxonomies
All filing companies need to be prepared and consistent with both the format and structure of the US GAAP Taxonomy. XBRL professionals who have been working for a long time have now realized that it is impregnable that familiarity with US GAAP TAXONOMY must be achieved, if we are to have optimum quality XBRL. In order to prepare XBRL accurately, it is important that the taxonomy is understood thoroughly. It is important for its application across organizations and companies.
In case of the financial statement disclosures, there is a list prepared by the US GAAP Taxonomy, where standard tags and an appropriate structure of the tags are included. This structure of the tags includes tables, axes, standards, line items and all the other elements. In order to achieve consistency, it is important that structures and formats are followed in the best possible manner. However, it is not that easy. There are pertinent challenges like a large number of tags, almost 15000 of them. Added to the previous fact, there are annual updates in the US GAAP taxonomy, which consequently leads to changes to the structures and formats in some of the areas.
There is no doubt that high quality XBRL should have the same information as do financial statements like HTML. It is important to note that a careful analysis of both HTML financial statements and files analyzed by the relevant software need to display the same results. In order to make this happen, the quality of the data in both the files, must be such that they divulge the same information. To be able to achieve this level of consistency, one requires a good understanding of both the HTML financial statements and of the XBRL files. In-depth understanding of the US GAAP rules for accounting and of SEC observations are a must for creating a good quality XBRL. Edgar Solutions has a strong team that can assist clients with meeting their filing requirements in this area.
Organizations that repeats such fundamental mistakes, assume that running a software validation on XBRL files often gives no problems as the final result. Since, it gives such results, it means that the files are all sound and valid and can be filed on SEC.
ENSURING INTERNAL CONSISTENCY :
SEC staff FAQ’S/ Observances
SEC staff observations and FAQ’S are important to be understood before XBRL’s are submitted. These observations are an account of the most significant and common problems that the staff has observed. Some observances include instances where XBRL and financial statements have different positions on the same story. Some of those situations can include: wrong calculations, improper axis member combinations, untagged rules and regulations, and other unnecessary extensions. It is important to note that most of these errors are a result of the wrong applications of the EDGAR Filer Manual instructions. Hence the importance of understanding all the rules and regulations of XBRL submissions.
Knowledge of Accounting
Individuals preparing XBRL must fully understand all accounting terminology behind the disclosures of the company, apart from the accounting significance of the different elements of US GAAP Taxonomy. It is important for all the mapping of the relevant financial disclosures, so that they convey the correct information. A high quality XBRL cannot be achieved without a strong knowledge of accounting and the elements of US GAAP taxonomy. Filing firms rely heavily upon the preparers which are lacking in sufficient knowledge of accounting, hoping that the last person reviewing has the knowledge of accounting, so as to be able to correct the errors present in XBRL filing. However, this reliance can be a problem for the preparers, as without proper knowledge, there can be errors in XBRL tagging and structure. It is also possible that the preparer might not have the required understanding of the accounting knowledge in identifying all the errors. Edgar Solutions has to its credit a pool of highly experienced CPA’s who possess sound accounting and SEC knowledge. The preparation of XBRL must be conducted right the very first time through the collaboration of individuals who possesses the required accounting level of US GAAP taxonomy and accounting terminologies, thereby reducing any risk of errors in the XBRL files.
The adherence to quality components should be consistent in XBRL and HTML financial documents. Even though validation is an integral step, it does not mean files are free of errors. Most of the errors cannot be detected by the filing software, resulting in poor quality submissions. If errors are to be reduced and resolution is made, then it is important that there are qualified professionals who are adept at all the above mentioned quality components. Edgar Solutions is your source for XBRL preparation and error-free filings.