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Congress Will Not Ban XBRL – pressure for improved quality will remain

Thursday, October 24th, 2013

Along with the entire XBRL and Data Transparency community, RDG Filings has been closely following the proposed bill circulating through Congress on the committee level that would exempt as many as 80% of public companies from the XBRL requirement (see page four of this memo from the Financial Services Committee for details). RDG was not alone in thinking that the proposal would be an unfortunate step backward in the move toward increased transparency and availability of public companies’ financial disclosures. While there are certainly improvements to be made to both the data quality and to the SEC’s enforcement, RDG firmly believes that XBRL is a tremendous advancement and that rolling it back or doing away with it altogether would be a mistake.

Happily, today it was released that the bill will not be introduced, and the push to abandon or delay the XBRL requirement will stop (at least for the time being). XBRL has already been adopted by many countries around the world, and it is the future of financial reporting. RDG agrees with Columbia University’s Center for Excellence in Accounting and Security Analysis that there is a “clear demand for timely, structured, machine-readable data” among investors.

Much of the XBRL data that is currently required by and submitted to the SEC is not of a high enough quality to properly satisfy this demand, and Congress should continue to pressure the SEC to improve XBRL data quality. However, simply eliminating XBRL altogether is not a fix, it would, rather, just be a reversion to 1930’s technology.

Please get in touch with any questions.

Stewart Walker – SVP, Director of Sales

415.643.6017

Posted in SEC Compliance, SEC News, XBRL News, XBRL Quality Assurance | Comments Off on Congress Will Not Ban XBRL – pressure for improved quality will remain

The Takeaway from the XBRL-US Conference – Data Quality Is Paramount

Monday, October 14th, 2013

RDG Filings was happy be at the recent XBRL-US Conference in Las Vegas on 23-25 September. As in years past, the conference provided an invaluable forum for the exchange of ideas from people across the entire XBRL spectrum. It was exceptionally informative, and the primary takeaway—from all perspectives—is that the quality XBRL data will be improving.

Daryl Issa, the Chairman of the House Government Oversight Committee, began the proceedings with a recorded statement that continued the themes of the critical letter he had written to the SEC only two weeks prior to the conference. Craig Lewis, the SEC’s chief economist and director of the Division of Economic Risk and Analysis, which oversees the SEC implementation of XBRL, followed with comments of his own that addressed the criticisms that had been lobbed at the SEC regarding data quality and enforcement. Lewis discussed the Accounting Quality Model (aka: AQM or “RoboCop”), which is an analytical tool that will trawl corporate filings to flag high-risk activity for closer inspection by SEC enforcement teams. In order to protect the “deterrence factor” of the tool, Lewis assiduously avoided giving details with regard to how RoboCop will work and what precisely it will be looking for. He made clear that he did not want to give away any secrets about the tool to protect against the discovery and exploitation of potential loopholes. When asked directly how companies can avoid being flagged by the RoboCop model, he would only go so far as to suggest that companies be sure to review their XBRL data prior to submitting it. He did say, however, that RoboCop will “not be a static model,” but rather will continually be updated and improved over time.

After these two introductory statements, the theme for the remainder of the conference was established, and for information you can see more of the presentations and panels here. The theme was XBRL data quality. The SEC itself talked about their mechanisms for enforcing enhanced quality, analysts and other end-users of XBRL data discussed the varying usability of shabby versus quality data, and there were a number of sessions on the proper creation of XBRL code. RDG was very happy to be at the conference both to continue enhancing our expertise and to introduce our XBRL Quality Assurance Services.

The end of the limited liability period in combination, the SEC’s recent movements toward increased enforcement, and the inability to analysts and other end-users to utilize the existing data have all combined to push XBRL data quality to the forefront of the conversation. Many of the companies we spoke with at the XBRL-US Conference had been in touch with their audit firm about potentially reviewing the XBRL files, and they were glad to learn about what we can offer as an alternative. RDG’s QA Services are similar to what you might receive from an audit firm, but there are additional aspects to our service that offer greater value. Briefly put, our QAS include:

1) Access to a dedicated XBRL expert CPA from our QA team

2) Detailed, manual, CPA review of your XBRL files

3) Application of the most robust automatic validation tools available

4) Full set of easy to read reports and consultation with your XBRL expert CPA to review findings.

RDG brings something vital to the table that most audit firms do not. We offer the manual CPA review of your XBRL filings, but we also have years of experience actually constructing XBRL filings. That experience gives us knowledge and expertise to more effectively de-construct and review XBRL filings than an audit firm that has never created an XBRL filing. RDG’s CPA expert will thoroughly analyze your filings, applying the regulations established in the EDGAR Filing Manual and adhering to XBRL best practices as established by the FASB, the AICPA, and the XBRL-US Consortium in order to ensure precision and compliance in the four primary aspects of XBRL filings: Accuracy, Completeness, Mapping, & Structure. Additionally, we will also work with you to clearly explain our recommendations and work with you to implement those changes.

Please get in touch with any questions, or if you’d like to setup a call or demonstration to learn more about what we can do for you.

Stewart Walker – SVP, Director of Sales

415.643.6017

Posted in SEC Compliance, XBRL Filings, XBRL News, XBRL Quality Assurance | Comments Off on The Takeaway from the XBRL-US Conference – Data Quality Is Paramount

Daryl Issa vs. The SEC? Not So Much. They’re On The Same Page About XBRL Quality

Thursday, September 19th, 2013

The chatter and the headlines have been pretty excited. “The House Government Oversight Committee Chides the SEC Over Low Quality XBRL Data” is about as exciting as political theater about XBRL can get. However, this kerfuffle actually means only one thing: The quality of XBRL filings is going to have to improve, and soon.

When Daryl Issa, the typically anti-regulation Republican Representative, calls the Obama-appointed Chair of the SEC, on the carpet over the quality of the XBRL data, the take-away is bigger than political bickering — It’s that the movement toward a higher standard for XBRL filings is now too fast for a u-turn. XBRL is here to stay; only the height of the bar will change.

With his September 10^th letter, Daryl Issa openly questioned the SEC’s efforts to move toward the use, analysis, and enforcement of XBRL data. Even a cursory glance at the code being created by in-house filers and by some of the outsource providers will show that Issa’s criticism is completely valid. Additionally, if his numbers are accurate—1.4 million errors found with zero Comment Letters sent—the SEC has a fair amount of work to do to bring a critical mass of the XBRL filings in line with the necessary standards of usability. All that being said, however, one cannot rightfully conclude that Mary Jo White, the SEC Chair, is not committed to XBRL or the enforcement of a higher standard for it. Since her appointment to the Chair, she has established three new fraud detection initiatives that will certainly be utilizing XBRL data as a primary element. The SEC has also recently rolled out its AQM-Robocop tool that will be analyzing XBRL quality on an automated basis every day.

The House Government Oversight Committee wants enforcement of higher quality XBRL data, and the SEC already agrees. If you’re an SEC Filer, it’s time to be certain your filings are of the highest quality possible.

RDG Filings offers exhaustive XBRL Quality Assurance Services. RDG has the knowledge, expertise, and experience to ensure that your XBRL documents are usable for the analysts and not vulnerable to the AQM-RoboCop and any future analysis tools deployed by the SEC.

Stewart Walker – SVP, Director of Sales

415.643.6017

Posted in SEC News, XBRL News, XBRL Quality Assurance | Comments Off on Daryl Issa vs. The SEC? Not So Much. They’re On The Same Page About XBRL Quality

XBRL Is Increasingly Becoming The New Standard

Thursday, August 15th, 2013

Back in April – in a development that RDG Filings was rather excited about – Citi, The Depository Trust & Clearing Corporation (DTCC) and XBRL US announced that Citi had begun “sending XBRL-formatted dividend announcements related to ADRs for which it is the depositary bank to DTCC through The Depository Trust Company.”

While this development was not directly related to RDG Filings day-to-day work as a SEC Filings agent that specializes in full-service XBRL filing for corporate and mutual fund filers, we were pleased to see the value and importance of XBRL financial reporting enthusiastically endorsed by Citi and the DTCC.

Alan Smith, Managing Director, Citi Securities and Fund Services (SFS) said, “We’re pleased that Citi has taken a key role in an initiative that ultimately will result in better, faster and much less expensive data for the marketplace.”

And Dan Thieke, DTCC Managing Director, Asset Services said that with the DTCC receiving “thousands of announcements from issuers and intermediaries every day. XBRL enables us to take that information directly into our systems without manual intervention, thereby reducing risk and cost and boosting efficiency and accuracy.”

XBRL is the future of financial reporting, and the value of this relatively new tool is contingent upon the quality of the code created. RDG Filings is committed to the present and future of XBRL reporting, and as major part of that commitment, RDG is committed to creating the highest quality XBRL possible.

Posted in XBRL News, XBRL Quality Assurance | Comments Off on XBRL Is Increasingly Becoming The New Standard

The Truth About The SEC’s RoboCop & The Importance of XBRL Data Quality

Monday, August 12th, 2013

If you find the deluge of information on the internet (and filling up your inbox) regarding XBRL, SEC Compliance, and the end of the Limited Liability period for SEC Filers, to be a bit overwhelming — you are not alone. We here at RDG Filings think so much of this information glut stems from certain sales tactics that hope to benefit from hysteria and misunderstanding. However, every now and then we find an article or a blog-post that is truly helpful and important. John Carney and Francesca Harker’s recent online article for Forbes is a valuable resource to anyone seeking to pick the value from the online rubbish.

The article from 8/09/2013 is titled “How SEC’s New RoboCop Profiles Companies For Accounting Fraud.” Carney and Harker offer an excellent explanation of the SEC’s new fraud detection tool—Accounting Quality Model (aka: AQM or RoboCop)—operates, and how corporate filers can avoid being flagged as potential wrongdoers by automated system. The authors also briefly profile Mary Jo White, who was recently appointed the Chairman of the SEC, and discuss the “renewed commitment by the SEC to seek out violations of financial reporting regulations” that she brings to the SEC.

When President Obama introduced Mary Jo White as the new Chairman for the SEC, he warned that “You don’t want to mess with Mary Jo.” To back that up, Ms. White, in an interview with the Wall Street Journal after her appointment said: “I think financial-statement fraud, accounting fraud has always been important to the SEC. It’s certainly an area that I’m interested in, and you’re going to see more targeted resources in that area going forward.”

You can read about some of the new initiatives the SEC has recently introduced under Mary Jo White’s leadership in a previous blog post by RDG Filings, but all the new initiatives are made possible primary by Accounting Quality Model (“AQM” or “RoboCop”) and the advent of XBRL filing. According to the Forbes Article, RoboCop “is an analytical tool which trawls corporate filings to flag high-risk activity for closer inspection by SEC enforcement teams.”

As Carney and Harker explain it, “RoboCop’s objective – to identify earnings management – is not a novel one.” It is not the analytical strategy that is unique, and it would not in-and-of-itself be concerning to SEC Filers. However, it is RoboCop’s “proficiency that should worry filers.” The SEC’s RoboCop is capable of extending the traditional earnings management approach “by including discretionary accrual factors in its regression.” Additionally, it is the speed with which RoboCop can raise potential red flags about a filing that is revolutionary for the SEC’s enforcement teams. As the Forbes article explains: “RoboCop is a fully automated system. Within 24 hours from the time a filing is posted to EDGAR, it is processed by the AQM and the results are stored in a database. The AQM outputs a risk score which informs SEC auditors of the likelihood that a filing is fraudulent.”

RDG wants to highlight this article for you because it not only offers a good explanation of the AQM-RoboCop system, but it also explains how it will affect SEC Filers. It could be easy to overlook the fact that all of the SEC’s new enforcement tools and initiatives are made possible by XBRL, and creating quality, compliant, and clean XBRL filings will only become more important as the SEC moves forward with these new strategies. Filing excellent XBRL documents will be the first and most important line of defense against the AQM-RoboCop system flagging your company for further SEC attention. Carney and Harker write that “because RoboCop is an automated system looking for oddities, it is unable to account for mistakes made. This is particularly important because the AQM relies on the newly-mandated XBRL data which is prone to mistakes by the inexperienced. Sloppy entries could land your company’s filing at the top of the list for close examination.”

As Carney and Harker state, software is unable to account for mistakes made. The next logical deduction is that it doesn’t matter which of the various software programs you use, because what’s more important is the person using the software, and their expertise in creating the documents.

Yes, we at RDG Filings are pleased that this article so strongly validates of our service model. Additionally, we think this article highlights this fundamental truth about XBRL reporting — If you do not know what you are doing, you are prone to XBRL mistakes that will put your company at risk of being flagged. It takes human understanding, experience, and expertise to build excellent XBRL filings; software cannot do it alone.

RDG Filings has years of experience doing XBRL tagging and filing, and we offer unparalleled Quality Assurance Services that will ensure your filings far exceed the standard of SEC compliance. RDG Filings has the knowledge, expertise, and experience to ensure that the AQM-RoboCop tool being deployed daily by the SEC are far less likely to flag your XBRL filings. Additionally, RDG can give you the support you need should the SEC’s examiners contact you with questions, because as Carney and Harker explain, the SEC’s “increased reliance on an automated model means examiners will come across filings with high risk scores which have not engaged in any fraudulent activity.” This means that “exam teams will be in more frequent contact with filers and will also more readily accept legitimate explanations for filing decisions. “ RDG Filings will ensure your XBRL filings are held to the highest standards, and we will also be a resource to help you “respond quickly to inquiries with a reasoned explanation for accounting choices.”

Carney and Harker conclude that it “is more important than ever for corporate filers to understand SEC enforcement strategies, especially the AQM, in order to decrease the likelihood that their firm will be the subject of an expensive SEC audit.”

We at RDG could not agree more with these conclusions, and we can help any SEC Filer who wants to know that their XBRL filings exceed SEC validation requirements, and will be in line with the enhanced standards, protocols, and guidelines already put forward by the FASB, the AICPA, the US-GAAP, XBRL.US, and others.

This is what we do at RDG Filings. Please get in touch if we can be of service.

Stewart Walker – SVP, Director of Sales. 415.643.6017

Posted in EDGAR Quality Assurance, SEC Compliance, SEC EDGAR Filing, SEC News, XBRL Filings, XBRL News, XBRL Quality Assurance | Comments Off on The Truth About The SEC’s RoboCop & The Importance of XBRL Data Quality

XBRL Data & the SEC’s Enhanced Enforcement Efforts

Wednesday, July 17th, 2013

In line with the rumblings we have heard over the past couple of years from SEC representatives at various XBRL conferences and events, the SEC has recently announced three new initiatives that will expand and improve its Division of Enforcement. The official announcement does not expressly mention XBRL, but it is plainly evident that the advent of this data has given the SEC new abilities to analyze filings and to identify inaccurate or fraudulent financial statements.

The SEC is touting these initiatives—the Financial Reporting and Audit Task, the Microcap Fraud Task Force, and the Center for Risk and Quantitative Analytics—as signaling their “increasingly proactive approach to identifying fraud” and improving their ability to “bring more cases aimed at deterring these types of unlawful activity.” RDG Filings has long been convinced that while the primary purpose of XBRL is for use by analysts at the end of the line, XBRL will also provide the SEC with an unprecedented tool in its enforcement efforts. The SEC says that these new initiatives will make particular use of “analytical techniques and computing capacity with special expertise in data mining.” You can read more about these new initiatives in this article from Compliance Week.

RDG Filings is convinced that while companies participating in fraudulent behavior have new reason to fear the SEC, the real takeaway for all public companies is that with the SEC utilizing XBRL more aggressively to find reporting irregularities, it is all the more important to have your financials accurately prepared by XBRL and compliance experts.
Nobody creates better XBRL than RDG Filings, and no do-it-yourself software can provide your company and your Officers the peace-of-mind they need now that the SEC is using XBRL data in their policing efforts. Contact RDG if you would like more information about our full-service XBRL filing and our XBRL Quality Assurance services.

Posted in SEC Compliance, SEC News, Uncategorized, XBRL Filings, XBRL News, XBRL Quality Assurance | Comments Off on XBRL Data & the SEC’s Enhanced Enforcement Efforts

XBRL Provider Myth: “Legacy” vs. “New Wave”

Wednesday, June 26th, 2013

If your company is currently working with a printing company to get your XBRL and EDGAR filings, you may have heard from them that they are a ‘legacy’ company, or that they are the “oldest company listed” on the NYSE. You may have heard this pitch as an excuse for overcharging you for XBRL and EDGAR filings. XBRL is not yet 5 years old. I have a difficult time seeing how it makes sense for a company to use its status as old guard ‘proven commodity’ to thereby claim that inflated prices are reasonable for a service that has not yet existed for a half-decade. It is undeniable that your current provider may be a long-standing printing company. However, a legacy for financial printing does not necessarily mean that the XBRL services they provide is of high quality, and I disagree with the notion that this legacy grants permission to charge more than is necessary for SEC filings.

Here are the facts: RDG Filings has been around 25 years. RDG has been providing EDGAR and compliance related services since its inception, and RDG has been doing XBRL since its inception in 2009. I would hardly argue any of these facts represent RDG as ‘new wave.’ RDG provides you with excellent XBRL filings, superior service, far more reasonable editorial timelines, and your costs will be reduced substantially.

RDG Filings is a privately held company that is not beholden to shareholders or to our ‘legacy’ on the NYSE. RDG Filings is beholden first and only to our clients, and we are committed to providing them with the best full-service SEC filings available.

-Stewart Walker, Director of Sales.

Posted in EDGAR Quality Assurance, SEC Compliance, SEC EDGAR Filing, XBRL Filings, XBRL News | Comments Off on XBRL Provider Myth: “Legacy” vs. “New Wave”

Be Practical, Not Scared of XBRL Limited Liability Expiration

Wednesday, June 5th, 2013

Let’s be practical (not afraid) about XBRL Limited Liability expiration

How the Fear Campaign makes it sound:

Some of our competitors are saying: “Once your company’s grace period ends, your XBRL files have the exact same material error liabilities as your traditional EDGAR HTML files….In the event of a misstatement or omission of a material fact in the XBRL files, the company along with its officers and directors can be held legally liable and be subjected to civil and criminal liability.”

The truth in this statement is “Yes, the documents are both deemed “filed” and liability is assumed for errors between the two formats of EDGAR and XBRL. They should match. If a company is attempting to defraud investors, and cannot prove it was an honest mistake (via Quality Assurance and a trail of some kind) then you are in trouble. More than likely, the SEC will issue a comment letter and ask why something is different or tagged in a specific way. The majority of the time, the worst case is an explanatory Correspondence filing or an amended filing explaining the error. While significant and potentially expensive mistakes, the reality is a world apart from “civil or criminal liability.”

Looking through the XBRL industry’s (service & software providers) websites, it is clear that a fear campaign has been the approved method for attracting business. RDG doesn’t believe in taking advantage of being the XBRL experts. Companies should be cautious, yes. However, is instilling fear really necessary? We believe that should be left to the ghosts. First, anyone reading this should note that the same fear campaign was instituted by these same companies when the original XBRL mandate was put into effect. While the task of preparing XBRL is a large one, it is not something to be afraid of. The sky will not fall when limited liability expires, but it is something to prepare for. Proper preparation of your company’s XBRL filing will minimize any impact of more detailed review of XBRL filings by the SEC.

Posted in EDGAR Quality Assurance, SEC Compliance, SEC EDGAR Filing, SEC News, Uncategorized, XBRL News, XBRL Quality Assurance | Comments Off on Be Practical, Not Scared of XBRL Limited Liability Expiration

XBRL Quality Assurance – Layman’s Terms

Wednesday, May 22nd, 2013

Layman’s terms of what should be done to assure quality in XBRL filings:

1. Unless you have years of XBRL tagging and taxonomy expertise in your financial reporting group, a software solution or web filing solution will probably not offer you enough support for quality assurance with regard to the technical and subjective portions of XBRL.

2. There is no one-size-fits-all approach to designing a quality XBRL filing. Regardless of limited liability protection, each company should manage XBRL risks within its risk appetite, define a comprehensive process to identify all the sensitive areas events, and make sure the company utilizes a provider with a clear XBRL quality assurance framework.

3. Since the SEC does not indicate any requirement of audit of XBRL documents, most auditing houses do not provide XBRL tagging services and they are not the experts in taxonomy creation or XBRL creation software. In fact, the SEC specifically omits auditors from having to offer certification of XBRL documents.

4. Companies need to focus on the quality of their reporting as soon as possible. There should be a full review of the tags used by both automated checks and by a person familiar with your XBRL tagging, and with expertise and understanding of your industry. This person should not be completely objective to the taxonomy creation because there are several ways to present XBRL information depending on the circumstance/situation at hand. Even more confusing to a machine is the fact that each of the variations can be compliant with the SEC.

5. Validate the document for completeness and structure, independently, irrespective of whether the document is built in-house or outsourced to an XBRL service provider/ printers.

6. Have a communication record between your team and a way of tracking what improvements and changes were made quarter over quarter, and most importantly, why they were made. This is what will matter. From our own experience in this matter, it helps to have a person involved because computers are not good at explaining themselves to a group or the SEC.

7. In the absence of formal SEC guidance, it is important to establish a policy to assess material XBRL errors and a process to determine whether an amendment filing is required.

8. If you are planning on maintaining control internally, your company should stay current with the latest approved XBRL taxonomy. Upon each release that has been approved by FASB and the SEC (typically between February and May each year), your team should compare and utilize the newest version to the previous version used and look for areas of improvement.

9. Stay abreast of all FASB guidance, SEC staff observations, regulations and the current AICPA exposure draft on XBRL quality attributes. Avoid last-minute surprises by being aware of the latest developments and best practices from the SEC and XBRL US.

10. As XBRL reporting standards and taxonomies evolve, monitoring the changes above is crucial to a continued quality assurance in your company’s filing.

Posted in SEC Compliance, SEC EDGAR Filing, SEC News, Uncategorized, XBRL News, XBRL Quality Assurance | Comments Off on XBRL Quality Assurance – Layman’s Terms

What Does XBRL Limited Liability Expiration Mean to You?

Thursday, May 16th, 2013

The Facts on limited liability:

What is the limited liability provision as stated by the SEC Rule 406T by SEC?

In summary, the rules offer a 24-month grace period where the SEC considered your XBRL as “furnished” not “filed.” That meant that mistakes within your XBRL documents were viewed as errors in good faith, and carried no penalties if corrected promptly.

Example: A smaller reporting filer should have submitted its first interactive data (in a Form 10-Q) for the fiscal period ended June 30, 2011. This would have caused its limited liability to expire, for the filings of fiscal period ending June 30, 2013.

When the limited liability window closes, XBRL exhibits will have the same liability provisions as regular filings under the anti-fraud provisions of the Securities Law.

(Click here to view the rules)

What this means in plain-English:

After the expiration of limited liability, Rule 406T calls for a “good faith effort” by the filing entities to submit accurate interactive data with SEC. The SEC has not defined what a “material error” is, but they will issue comment letters and request explanations for irregularities that they find, just as they would with EDGAR. The main difference is that XBRL is much easier to search for inaccuracies.

If your company is filing correctly, the data in your EDGAR and the facts required to be tagged in your XBRL filings should match. Simply put, the content should not be different between the EDGAR and the XBRL.

Companies need to focus on the quality of XBRL services prior to filing with SEC.
Your company’s XBRL documents will be validated by SEC and questioned upon expiry of the limited liability window.
Ensuring accuracy of XBRL filings with SEC is gaining traction with the impending expiry of limited liability clause.

Posted in SEC Compliance, SEC News, XBRL News, XBRL Quality Assurance | Comments Off on What Does XBRL Limited Liability Expiration Mean to You?