martedì 1 novembre 2011

Will Assurance be required on XBRL Tags?

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Will Assurance be required on XBRL Tags? Resources Global Professionals Finance & Accounting Blog Thursday, February 04. 2010 Will Assurance be required on XBRL Tags? The SEC issued a mandate to require all registrants to "tag" their SEC filings using XBRL over a 3- year period. The largest companies began tagging their filings for periods ended after 6/15/09. For the first year, registrants are permitted to "block tag" their footnotes. This means each footnote can be one tag. For the second year of reporting, companies will be required to detail "tag" all of the different data points in their footnotes. This is expected to significantly increase both the effort and the time spent tagging information. All along, the regulators, such as the SEC and the FDIC (which has required financial institutions to use XBRL for their call reporting since 2005) have been the largest supporters of moving to XBRL. One of the benefits they tout is the ability of users, such as investors and analysts, to take the XBRL data and more easily analyze and compare companies. These users have, however, been slow to begin using the technology. Presumably, once we have critical mass of SEC registrants tagging their financials using XBRL, more users will utilize it.

Currently, the XBRL data is considered "furnished not filed" which effectively limits the liability that may be associated with the data. However, if XBRL data is ultimately used as it is intended, that is, for users to analyze and compare, once has to wonder how long the SEC will tolerate this limited liability. Additionally, at some point, to be useful investors and others will demand some sort of assurance on the data. Many organizations are working on guidance and standards for "auditing" XBRL. These include the PCAOB, the ACIPA, the IAASB, and others. In fact, just today, the UK's Accounting Principles Board issued audit guidance for providing assurance on the data.

Many companies have outsourced the effort to others, mainly to their financial printers. If assurance is going to be ultimately provided, it is critical that companies consider that in their implementation, particularly as it relates to the detailed tagging required in Year 2. Make sure that you have internal folks who can validate the data and the the preparation of the XBRL data is part of your Disclosure Committee purview. Expect that at some point management will have to "certify" the validity and the internal controls around the preparation and reporting of the data, not to mention that your external auditors may be required to provide assurance on it.

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