The SEC is enforcing XBRL
Many people have been skeptical about the SEC’s commitment to XBRL and its efforts to enforce data quality. It’s been over a year since the SEC has issued any guidance about XBRL filings. The press has perpetuated the myth that no one wants to use this data despite the calls for better quality that have been heard on Capitol Hill. In addition, the SEC’s new Accounting Quality Model (AQM), also known as RoboCop, has been making headlines about the importance of data quality.
But wonder about the SEC’s stance no more—we now have a crystal clear message from the SEC that it is concerned about what's in your XBRL filing. The Division of Corporation Finance issued a Dear CFO letter last week, putting filers on notice that the SEC is looking at data quality, and the staff is also noticing some pervasive problems that it wants to see fixed.
Dear CFO letters are issued when the staff identifies a problem occurring in many filings that should be fixed immediately. Since filings may only be reviewed once every three years, this is one way to ensure that everyone is aware of issues and that they're taken care of in a timely manner.
The letters are actually sent to very few filers—and if you didn’t get one, that doesn’t mean that your filing is without errors. Passing SEC validation does not indicate that it is compliant with XBRL rules and regulations. You always need to do a thorough review of your calculations to make sure they’re correct and complete as well as a review of your filing as a whole. This isn't something you can outsource to a third-party.
Congress is watching, too, and is putting pressure on the SEC to do a better job of improving data quality. The Dear CFO letter may be an indication that this pressure is having an impact. We may see more enforcement responses from the SEC.
What other XBRL quality issues are on the SEC’s radar?
Extensions are also a hot topic. Many filers continue to use unnecessary extensions, and the SEC is continuing to monitor this area. For more information, see our guide, How to Eliminate Unnecessary Extensions.
We’re aware that data aggregators have brought data quality issues to the attention of the Division of Corporation Finance and that filers have promptly amended their filings to correct these problems.
Recently, a dozen filers with significant scale errors in their filings were required to amend their XBRL filings. The Division of Corporation Finance doesn’t have to issue a comment letter to require an amendment—they can just pick up the phone and make a call to your CFO.
Why should you care?
Your XBRL filing now carries full liability, and now you know the SEC is watching. Take this opportunity to give your filing a thorough review, and make sure you’re in full compliance with the XBRL rules and regulations.