Out of the Clouds and Into Reality: XBRL for the Business User

SEC XBRL Check #2: Custom Tags and Labels

The second bullet point of data quality issues the SEC mentions in the proposed corporate ruling is:

• Identify, count, and provide the staff with easy access to non-standard special labels and tags

This one cuts to the heart of the tagging process itself (even though the SEC in typically understated fashion puts it a #2) and a book could be written on it. I'm sure books will be written on it. We may write a book about it.

But the first thing to point out is that the SEC is going to count the number of custom tags (custom definitions) that you create. I think we should assume that also means they will compare that number with other filers, probably your peers, as well as how your use of custom tags changes over time. Your mission, whether you choose to accept it or not, is to use standard tags wherever possible and create new tags only where you need to in order to support the way you currently report your financial information.

We believe the best way to accomplish that is to combine your own expertise about your company's accounting policies with taxonomy expertise. Perhaps you will take the time to familiarize yourself with the new GAAP taxonomy or hire some outside help. But the combination and a close review of the output are essential to completing this task.

The next point is that the SEC intends to look closely at custom 'labels'. This probably takes two forms:

• the custom captions or stub labels that you apply to the data so that the viewable XBRL reads exactly like your official report
• the custom definitions you apply to custom tags

The first one is pretty straight forward: Apply your own captions to all the tags. Don't rely on the available captions in the standard taxonomies.

The second one is pretty straightforward as well and means providing an adequate definition for any custom tags you create. It's probably best to follow the standard taxonomy's lead and make it as verbose as possible so that SEC reviewers can understand exactly what you're talking about. If they're going to take the time to look at the definition it may be worthwhile to keep them happy. And not just SEC reviewers but anyone looking at your data will have access to those definitions because they go with the data wherever the data goes. If the tag is the bar code then the definition is the nutritional information.

Next up, Preparers Guide practices.

-- Ed Hodder

Liability Protection Proposed for SEC XBRL An Illusion?

Here is a nice piece on liability issues for XBRL data in the proposed ruling put out by Cleary Gottlieb Steen & Hamilton LLP. In particular, they talk a bit about the dual liability of XBRL data compared with the "viewable form". Key graphs below [my emphasis]. As we've been saying to folks in person we think it is worth your while to download the proposal and consider commenting to the SEC.

'Although the proposed rules exempt the machine-readable "interactive data file" from liability as described above, proposed Rule 406(b) of Regulation S-T provides that "interactive data in viewable form" will be subject to liability under the securities laws to the same extent as the related official filing. As proposed, "interactive data in viewable form" is defined as the financial statements and other information displayed when the interactive data file is converted to human-readable format using a viewer provided by the SEC in a manner that results in such information being displayed identically in all material respects to the corresponding financial information contained in the related official filing.

'Because the definition only applies to viewable financial information that is in fact displayed identically in all material respects to the financial information in the traditional filing, proposed Rule 406(b) by its terms appears to stand for the unremarkable proposition that viewable financial data that is substantially identical to the financial data in the traditional format filing will be subject to same liability. Surprisingly, the proposed rules do not expressly address the liability that would attach to viewable information that is not displayed identically in all material respects to the data in the related official filing. We expect comment letters on the proposed rules will seek a clear statement from the SEC that the liability protection afforded by proposed Rule 406(c) extends not only to the interactive data file but also to the viewable information resulting from processing that file, whether that information is processed using the SEC's viewing software or otherwise. Absent such an interpretation, the protections afforded to the interactive data file would be illusory, because a plaintiff would simply base its cause of action on the viewable information created by processing the interactive data file.'

-- Ed Hodder