How to Improve XBRL Data Quality: Public Comment Period on Initial Rules Underway
Public companies have been providing financial and other information to the investment management industry for decades. From providing printed reports, to making the information electronically available through corporate websites or regulatory agencies, technology has played a role in changing how this information is delivered. And every technology change is accompanied by growing pains as issues are sorted out.
Globally, regulations requiring public companies to provide information in an extensible business reporting language (XBRL) format has steadily increased. And similar to prior technology changes, the implementation has faced some challenges. In the US, the quality of the information provided in the reports is one such challenge.
Why? The XBRL taxonomy associated with the US Generally Accepted Accounting Principles has many thousands of data elements from which a company may select. This has led companies to tag similar, or even comparable, items differently. The use of extensions, while consistent with the guidance provided, has further exasperated the usability of some information. To address issues such as these, XBRL US partnered with several filing agencies and the American Institute of CPAs (AICPA) to create the Center for Data Quality.
“To realize the full economic benefit of XBRL, investors and other consumers must have access to accurate and reliable XBRL data,” Barry Melancon, CEO of the American Institute of CPAs and chair of the XBRL US Board of Directors, said in a June announcement. “This industry-funded initiative will make it substantially easier for companies to create consistent, good-quality financial statements in XBRL format.”
The efforts of the initiative will be directed by the Data Quality Committee (DQC), whose membership represents software providers, data aggregators, institutional investors, the accounting profession, and academia. Along with CFA Institute, other user-focused organizations on the DQC include Bloomberg, Calcbench, S&P Capital IQ, and Credit Suisse HOLT.
The DQC will oversee the process of guidance and rules development intended to remove inconsistences from XBRL reports. This will include the solicitation of public input to the proposed guidance and rules before the recommendations are finalized. And ultimately, providing updates and insights to the US Securities and Exchange Commission and Financial Accounting Standards Board staffs.
The DQC hit the ground running last month with the release of the first set of items for public comment. Based on earlier reviews conducted by XBRL US and other members of the Center, the DQC released seven items for comment. These items are intended to clean up reporting practices on a range of straightforward topics such as the tagging of dates, inappropriate usage of negative values, and where there are clear relationships between certain taxonomy elements.
“Technology is rapidly converting reporting from an 8.5-by-11 format to individualized data elements,” said Mohini Singh, ACA, director of financial reporting policy at CFA Institute and its representative on the DQC. “Our efforts should remove obstacles from the systematic consumption of reported information.”
The public comment period for the initial DQC rules is open until 14 Sept. 2015.
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