The XBRL US Data Quality Committee has been working hard since its inception in June of 2015. Let’s take a look at the accomplishments and initiatives of the committee as of Mid-February 2016.
Who and what is the Data Quality Committee?
According to a recent comment letter to the SEC, the Data Quality Committee (DQC) operates as a committee under XBRL US, which is a nonprofit, member organization with a mission to improve the efficiency and quality of reporting in the US by promoting the adoption of business reporting standards. The mission of the DQC is to develop freely available guidance and validation rules to eliminate inconsistencies and errors in XBRL data, improving the accuracy of filings and facilitating automated analysis of financial information. Members of the DQC represent XBRL service providers, data aggregators, analysts, the accounting profession, and academia. In essence, the DQC has a mission to make XBRL data easier to use.
To achieve this mission, the committee has focused on two major factors standing in the way of widespread adoption by data users; common errors and variability in reporting. According to Campbell Pryde, CEO of XBRL US and an active member of the DQC, much of the early focus on improving XBRL prior to the formation of the committee was on errors only. Between SEC staff observations, SEC XBRL pre-viewer, FASB XBRL guidance, XBRL US research, white papers and events, information on how best to prepare financial documents for submission to the SEC has been a bit scattered. The DQC seeks to consolidate this data into Approved Guidance and Validation Rules.
Whereas the SEC has a regulator’s focus and the FASB has a US GAAP taxonomy focus, the people at XBRL US and its members felt it was time to not only consolidate the available guidance but to add the perspective of data preparers, data aggregators and investors. Since June of 2015, the committee has been busy writing guidance rules that “help public companies detect inconsistencies or errors in their XBRL-formatted financial data. The rules identify potential errors such as incorrect negative values, improper relationships between elements, and incorrect dates associated with certain data.”
The makeup of the committee, which includes DataTracks, has people representing the participants of every fascist of the financial information supply chain including data analysts, CPA’s, data aggregators, investors, EDGAR filing companies and academia. The simple plan for the group is to first clean up the data, then clean up the reporting. On the reporting side, Campbell Pryde explained the data users’ frustration with a simple example, reporting debt. According to his example, five SEC filers could be holding the exact same debt instrument on their balance sheet and report it five different ways. The problem is they are all correct.
The members of DQC have committed to publishing reporting guidance on issues such as the best way to report pension disclosures by establishing a process. First, a proposed method of addressing the reporting issue comes before the DQC. Once vetted by committee members, the proposal is then exposed to the public for comment. Once the comments are considered, the DQC will publish approved guidance. Early reports indicate that filing agents are in agreement to incorporate the guidance of the DQC. The guidance and validation rules are freely available to all.
You can follow the activities of the DQC by registering for webcasts of committee meetings, reading the posted minutes, and participate in commenting on suggested guidance. With broad-based financial reporting community support, we can all participate in the improvement of XBRL. According to Pryde, the process of quality improvement in XBRL is a continuous process that starts with cleaning up errors and gathering consensus on improved methods of reporting. We will continue to monitor the activities of this group in the DataTracks XBRL blog.
DQC supports Inline XBRL
In a January 26, 2016 letter to the chair of the SEC, the DQC put its full support behind Inline XBRL. The report had the following to say about Inline:
“We understand that the SEC staff is developing recommendations for the Commission’s consideration to allow filers to submit XBRL data inline as part of their core filings, rather than filing XBRL data in an exhibit. We believe that the use of iXBRL in the filing preparation process will contribute to improvement in data quality and will slow allow for a better user experience.”
The promise of inline XBRL is that instead of filing two documents, one in HTML and one in XBRL, a filing could be filed with a single document. This action would eliminate any errors introduced by having separate filing documents and would also have a positive effect on management review. No longer would filers attempt to change their XBRL document to make it look good the SEC renderer which typically introduces unintentional errors. Stay tuned for more on inline XBRL, or simply iXBRL, in the months ahead.
About DataTracks: DataTracks US is part of DataTracks Services Limited, leaders worldwide in preparation of financial statements in EDGAR HTML, XBRL and iXBRL formats for filing with regulators. With a track record of over 10 years, DataTracks prepares more than 12,000 XBRL statements annually for filing with regulators such as SEC in the United States, HMRC in the United Kingdom, Eurofiling compliance reports in Europe, Revenue in Ireland, ACRA in Singapore and MCA in India.
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