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

Truth About Mandate Valuation: It's Not What You Think

**NOTE:  This post has been updated based upon information provided during the SEC's XBRL webcast on March 23, 2010.  Specifically, Scenario #1 has been updated to reflect the fact that companies can fall out of a mandate Group and for a period of time stop submitting XBRL to the SEC but only in certain circumstances.**

With the 12/31 filing season all wrapped up and companies fast preparing for their 3/31 submissions, the topic of valuation for participation in the SEC XBRL mandate rears its ugly head.  General consensus previously was that once a company was "valued" and knew what XBRL group it was in, it could move on and not worry about revisiting the topic.  While true in one regard (valuation dropping), it's not true in the other (valuation rising) and it's the latter that will cause companies a bit of problem.  Let's examine both scenarios.

Scenario #1 - Valuation Decrease:  A company, once in an XBRL mandate Group, can fall out of a mandate Group and get an exemption from submitting XBRL to the SEC.

Example:  A 12/31 company that was over $5bln in valuation as reported 12/31/2008 (as of 6/30/2008) and thus is in "Group 1" of the XBRL mandate falls to non-Large Accelerated Filer status (i.e., "Group 3" of the mandate, valuation less than $700m) for 12//31/2009  (reported as of 6/30/2009).  Given the valuation decrease, it would seem that since the company has already started submitting XBRL data to the SEC under the mandate, they must continue to do so.

Verdict:  A company that "falls out of" a mandate Group at the end of their fiscal year can "decelerate" from an XBRL mandate standpoint and get an exemption from having to file XBRL documents for a period of time, until their new Group (in this case, Group 3), starts submitting XBRL.

Open Item:  This updated guidance from the SEC during their March 23rd webcast at face value appears at odds with their XBRL Compliance and Disclosure Interpretations (CD&I); specifically, Question 105.06 states that if a company's valuation changes from $6bln to $3bln, it does NOT decelerate and must continue providing XBRL documents.  Reading between the lines, it seems that if a company moves from mandate Group 1 to mandate Group 3, deceleration does occur...but a company moving from mandate Group 1 to mandate Group 2 (i.e. they're still considered a Large Accelerated Filer) does NOT decelerate.

Scenario #2 - Valuation Increase:  A company not currently submitting XBRL documents to the SEC that sees its valuation increase to a level of an already-submitting mandate Group is subject to a "rapid acceleration" feature and forced to submit XBRL documents effective the next quarterly reporting period.

Example:  A 12/31 company that had a valuation of $3bln as reported 12/31/2008 (as of 6/30/2008) and thus was not a member of Group 1 sees its valuation increase to over $5bln as reported 12/31/2009 (as of 6/30/2009).  It would seem that since the initial Group 1 valuation period had passed, the company is still on track to file XBRL as part of Group 2 for their first quarterly period on/after 6/15/2010.

Veridict:  The increase in valuation causes the company's XBRL mandate status to accelerate to Group 1 effective 12/31/2009 and force the company to pick up the tagging schedule of Group 1 companies accordingly.  In the case of this 12/31 company, the company has to provide its 3/31/2010 Q1 to the SEC at Year 1 tagging level, and its 6/30/2010 Q2 (and all future submissions) at Year 2 Notes detail tagging level.  This company ends up being on what I call the "Rapid Fire" XBRL submission plan where the company does only a single filing at Year 1 tagging level and then moves immediately to Year 2 detail tagging.

Although Scenario #1 tends to cause a bit of mandate happiness for companies, Scenario 2 causes complete fear and apprehension for those companies that see their XBRL submission schedule accelerated...and for good reason.  We've already seen a number of companies hit by this rule, and I expect the same thing to happen a year from now as companies that were not Large Accelerated Filers become one (assuming but not limited to 12/31 year ends).

If you're not sure about the impact Scenario #2 on your company, send an email to ask-oid@sec.gov to confirm.  No time like the present to confirm what amounts to be some potentially bad news.

- Rob

Update to SEC EDGAR Filer Manual Now Available

Today the SEC made available a DRAFT version of the EDGAR Filer Manual that includes changes to Section 6, the Interactive Data (XBRL) section.  Draft Version 14 is available for download here, and includes the following changes:

6.5.2 Corrected to clarify that an EDGAR submission may have at most one XBRL instance attachment;

6.5.21 Relaxed and 6.5.26 added to accommodate filers having multiple classes of shares outstanding;

6.5.21 dei:DocumentFiscalYearFocus and dei:DocumentFiscalPeriodFocus are now required for some filings;

6.5.31 Removed; footnote arcs do not require the order attribute;

6.7.12 Correction to example showing presentation link role definitions;

6.6.10 Clarification of restrictions on whitespace in xlink:label contents;

6.16.2 Removed; dimension-default arcs need only conform to XBRL 2.1 and XDT 1.0 constraints.

Rolling the K to the Q: Extension Taxonomy Impact

With most mandate Group 1 companies coming off their 12/31 10-K XBRL submission and already preparing for the 3/31 XBRL submission, the company's extension taxonomy comes into focus a bit more than in the previous filing seasons.  The reason for this is that as companies roll from the K to the Q, there exists extension taxonomy information that is typically no longer necessary in the following specific areas:

• Cash Flow and Statement of Stockholders Equity (SSE) - K contains more rows/more detail than the same reports in the Q
• SSE - Only reported in the K, not in the Q
• Notes and/or Schedules - Not all those reported in K are in the Q

As the 12/31 10-K extension taxonomy is rolled forward to prepare for the 3/31 10-Q, the 3/31 taxonomy typically inherits the information used for the K.  The decision point for a company is whether or not to leave this additional taxonomy information (elements/tags, report section) from the K in as part of their extension taxonomy for the Q.  This extra information, while not necessarily harmful at a technical level, could cause increased review risk (harder to review something that doesn't have any tagged data associated with it) and potential rendering issues (data "flow through" on the SEC Viewer/Pre-Viewer).

The SEC EDGAR Manual is silent on this topic, and the SEC has commented that a company could take either side of the argument and thus appears content to not really have a formal opinion.

Our take:  Why include anything in the XBRL submission that ultimately doesn't need to be there?  Unfortunately the adage of "what you can't see can't hurt you" doesn't apply to XBRL.  Remove the unnecessary extension taxonomy information to keep your XBRL files as lean-and-mean as possible.  Anything that helps minimize potential rendering issues and overall review/approval risk while not harming analytics/comparability is a good thing. 

- Rob

SEC Updates XBRL Viewers

Today the SEC announced updates to their XBRL Viewers. Overview information can be found at:

http://www.sec.gov/spotlight/xbrl/viewers.shtml

The updates to the rendering engine that drives their Viewers include:

• Support for rendering submissions based on the Mutual Fund Risk/Return Summary Taxonomy (available when the final 2010 taxonomy is published at http://sec.gov/info/edgar/
  edgartaxonomies.shtml)
• Support for rendering submissions using multiple currencies
• Support to display element references and definitions when not referenced in the DTS in accordance with the EDGAR Filer Manual.
• Support for display of 'nil valued' line items, such as Commitments and Contingencies on the Balance Sheet.
• Updated source code to include the source for the complete set of rendering engine libraries and open source Excel and charting modules
• Various additional bug fixes

Although I was hoping these fixes would be released sooner, I'll take them now...without complaint.  These fixes are very important and should help reviewers of XBRL documents more easily get through a couple of pain points.  A specific shout-out goes to 20-F/40-F filers as the multi-currency fix is way good!  Although some might say this is just "lipstick on the pig" but in this case, take the lipstick and run...=)!!

We'll be analyzing the SEC source code for additional insight into what's changed, and working on our Bowne Viewer to support it...more information on both coming shortly.

- Rob