XBRL for Mutual Funds: What's All the Fuss?

SEC proposes tightening of mutual fund regulations
November 21, 2013
Effective January 2011, the SEC required that mutual fund companies report the Risk/Return Summary sections of their annual prospectus (SEC Form N-1A and prospectus filings under Rule 485 and 497) using machine-readable eXtensible Business Reporting Language, or XBRL. For all practical purposes, these XBRL reports are bar-coded versions of the human-readable versions.

The XBRL tags allow computers to read and search your reports in much the same way as cash registers read bar codes. This improves the usefulness of the information you provide to investors, by giving them your report in a form that can be automatically used by computers. Additionally, it eliminates the need to retype any of your information in order to use it for their analysis.

While bar codes typically include relevant information about an individual item, an XBRL filing also includes information about how an individual item relates to other items in that report.

To allow companies time to become comfortable with XBRL, the SEC provided a period of limited liability for the filings which expired two years after a company's first XBRL filing. Mistakes are going to happen—when companies discover a mistake, the rules require that they correct that mistake promptly, whether they were under the limited liability provisions or not.

Mistakes in XBRL filings have been receiving more attention recently, as Congress and investors are putting pressure on the SEC to require companies to fix errors in their XBRL filings. You can read more about this in our recent business brief, Regulatory Trends: XBRL, Leases, and Disclosure Overload.

Until now, SEC comment letters have primarily focused on general compliance with the rule—filing your XBRL exhibit and posting that exhibit to your website. Given the increased interest in the quality of the contents of filings, we expect the SEC to begin issuing comment letters on tagging errors in the near future, possibly within the next six to nine months.

Since your XBRL filing now carries the same liability as your HTML document, this is a good time to review your process for creating XBRL filings to make sure those filings are error-free.

As mutual fund companies tackle XBRL tagging, they must evaluate several types of solutions that can be used for the fund reporting process. Ultimately, you must decide between a solution that creates an XBRL filing as an entirely separate, additional process after your SEC filing is finished or a solution that integrates XBRL tagging into the process of creating your SEC filing.

Companies who are using these integrated solutions have increased control over their entire reporting process, including their XBRL filings. Coupled with internal process improvements, many companies have increased their knowledge of XBRL and streamlined the overall SEC filing process.

Wdesk integrates XBRL into your process from the beginning. Wdesk will give you confidence in your fund document as you increase your control over the entire process—from document creation to XBRL tagging.

Not quite ready to take it all on yourself? Work with Workiva team of XBRL experts, and let us do the tagging for you. We'll even help you review. Wdesk can make a simple filing a reality.

Click here to request a demo to see it for yourself.
Joseph Howell

About the author

Joseph Howell is Executive Vice President, Strategic Initiatives at Workiva. Prior to cofounding Workiva, he served as Chief Financial Officer for a number of public and private companies. He also serve as the cofounder, organizer, and community moderator for the SEC Professionals Group.