SEC staff issues communications to XBRL filers
Yesterday, the SEC staff issued two documents of interest to registrants that submit interactive data (XBRL) exhibits along with their filings.
One is a “Dear CFO” letter1 (that has also been sent to a number of public companies) posted to the SEC’s Web site by the staff of the SEC’s Division of Corporation Finance. The letter reminds registrants that the XBRL rules “require that [registrants] include calculation relationships for certain contributing line item elements for [the] financial statements and related footnotes.” Registrants are advised to “take the necessary steps to ensure that [they] are including all required calculation relationships” in their XBRL files.2
The other document, Staff Observations of Custom Tag Rates, was posted to the SEC’s Web site by the staff of the SEC’s Division of Economic and Risk Analysis. The observations outlined in the document arose from the staff’s assessment of the quality of a sample of XBRL exhibits submitted from 2009 through October 2013. Although the staff noted a decline in large filers’ use of custom XBRL tags during the review period, it did not observe a similar decline in usage by smaller filers.3 The staff noted that “[s]maller filers currently have an average custom tag rate almost twice that of larger filers, inconsistent with our expectation that smaller filers should, as a general matter, have simpler financial statements that are easier to standardize.”4 Further analysis revealed that this trend may be partially attributable to smaller filers’ use of certain third-party providers, leading the staff to posit that “in many instances the high custom tag rate may not be determined by the unique reporting requirements of a filer or available taxonomy, but an artifact of the reporting tool or service used.” The staff expressed its intention to continue monitoring registrants’ use of custom tags and indicated that it may issue further guidance or take additional action in the future.
The release of these documents now, after a two-year period of limited communications by the SEC staff on XBRL data quality issues, may indicate renewed staff efforts to assess and improve the accuracy of data in XBRL filings. While the full extent of the staff’s intentions is not yet apparent, registrants are advised to continue to assess their overall XBRL compliance efforts, particularly related to the subjects addressed in the newly posted documents. Registrants, particularly those that use a high proportion of custom tags or have incomplete calculation relationships, should expect continued SEC staff scrutiny. In addition, registrants should not assume that the EDGAR system’s acceptance of their filing indicates the filing’s completeness or its compliance with SEC requirements. Moreover, companies are reminded that they are ultimately responsible and liable for ensuring that their XBRL exhibits comply with SEC rules, even if the companies retain third-party providers to create their exhibits.
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1 Sample Letter Sent to Public Companies Regarding XBRL Requirement to Include Calculation Relationships.
2 Registrants should review the requirements in sections 6.14 and 6.15 of the EDGAR filer manual.
3 The staff used the term “smaller filers” to refer to U.S. GAAP filers that are not large accelerated filers.
4 In the staff’s sampling of the most recent XBRL exhibits as of October 30, 2013, “smaller filers accounted for 96% of filers with high custom tag rates: defined as those with overall custom tag rates of greater than 50%, i.e., more than 50% of the filer’s line item tags were custom tags created by the filer as opposed to standard tags selected from the XBRL U.S. GAAP taxonomy.”
