With companies going global and looking to expand in an ever-changing economic scenario, business reporting has taken on a completely new form. It is no longer about merely communicating to the regulator about the company’s performance, but covering every aspect of business communication – to the investors, stakeholders, and regulators.
Through all this, the financial reports filed with the regulator every quarter continue to remain the primary mode of communicating performance. In 2009, the US Securities and Exchange Commission (SEC) mandated XBRL filing along with the EDGAR HTML format, in an attempt to make electronic data available to users of the information for analysis, etc. While HTML (the human-readable part of the document) provided easy readability, XBRL (the machine-readable part) took care of standardization, comparability, and easy extraction of data from the filed reports.
In essence, both the formats were meant to carry the same information, but was that really achieved?
Scope of SEC Reporting for Companies
The SEC requires every number in the financial statements and footnotes to be tagged in XBRL format. The underlying implication with XBRL filing is that the same facts need to be present in the EDGAR HTML format as well. While this is the expectation, it certainly isn’t the end state in many cases. In our 10 years of working with clients on their SEC filings, IRIS has seen facts reported in several EDGAR HTML and XBRL filings that are not in sync with each other. With the rush to meet deadlines, making last-minute changes, and working on numerous versions of the report, it becomes tough to keep both formats in sync throughout the process.
Why XBRL and HTML Data are Out of Sync
Let us examine the possible reasons that might lead to the data being out of sync: –
This more often than not happens where companies still following the ‘traditional’ model of compliance reporting where the preparation of the 10-Q and 10-K documents are still using word file and excel files on individual desktops. and multiple versions of the document are floating around across various desktops. Not just that, XBRL and HTML documents are created separately, and every number then is compared to ensure that the HTML and XBRL documents are in sync.
If the company was using some software for the creation of its report, it is likely that it is not a single source software. A single source software is one that generates both the XBRL and HTML from a single source file, leaving no room for such an error.
All said and done, it may happen that the reviewers of the document checked the accuracy of the HTML document only, completely missing out on comparing it with the XBRL version to look for consistency.
Sometimes, the issue can be with the software itself. There are cases of companies filing amendments to their original filings stating that due to technical reasons the numbers were different in XBRL and EDGAR HTML. There are compliance applications that have smart features to identify facts in the document that require tagging. If the said company was using such a platform with a single-source feature, the probability of incorrectly tagging facts or not tagging some facts at all would have been much lower.
Lack of Awareness of the Reporting Technicalities
Apart from processes or technology, one more area leading to such errors is the lack of awareness around the XBRL standard itself. Though the standard has been around for several years, XBRL has been treated more as a compliance burden. Reviewers of XBRL from the company may also not be completely aware of XBRL reporting requirements and the tagging aspects. Examples of these include assigning right dates, analyzing the signage to be given to the numbers, use of dimensions, applying new tagging methods as part of taxonomy upgrades, units, scales, etc. Errors in the technical aspects of XBRL reporting could also lead to XBRL and EDGAR HTML documents being out of sync.
The Solution to this problem?
Introducing Inline XBRL
Inline XBRL or iXBRL has come as a blessing for prepares who are wary of the way XBRL looks. Inline XBRL provides a visual, human-readable form to XBRL data. So while your data is still machine-readable, inline XBRL ensures that you can check and eyeball your numbers as well on the HTML document, reducing the chances of your XBRL and HTML being out of sync. The SEC is encouraging companies to transition to iXBRL on a voluntary basis due to its many advantages. The main benefits include a reduction in review time, improved data accuracy, and an efficient review and finalization process.
IRIS CARBON®, our cloud-based, collaborative disclosure management platform is a single-source application that ensures your HTML and XBRL documents are always in sync. We always encourage our customers to transition to iXBRL to avail its multi-fold benefits through our platform. Our platform is backed by expert teams who have more than 10 years of experience with SEC filings.
With us, you are always assured that filings with the SEC are of the highest quality and standards.