Driven by Global External Reporting mandates,XBRL/iXBRL has emerged as the language of electronic business reportanisations rely on it to publicly express their most important financial results,risk profiles and performance metrics.In many cases electronic filings have replaced published Quarterly/Annual reports as the most reliable,nsistent and widely-used source of information about what a mpany does and how well it’s performing.XBRL standardises data to improve mparability and nsolidation,and the benefits are rapidly expanding with the maturation of the filing process.But there’s a hidden danger that undermines the suess of electronic reporting and unfortunately,“the devil’s in the details”.

Electronic filing relies on two fundamental principles:

?Aurate data that is extracted from systems or regulatory reports,and

?A framework of regulatory rules (e.g.,us GAAP)and data definitions (taxonomy)that is mplete,nsistent and can be merged with the standard provided by the regulatory agency

Unfortunately,the selection of data and definition of custom taxonomy elements (in cases where customized taxonomies are allowed)are largely manual processes,and as a result subject to human error.To further mplicate the situation these errors often go undetected during the report generation process,as many preparers lack the knowledge or tools to properly identify,understand,and rrect them before submission.In most cases these errors only surface during the data aggregation process,which is typically too late for the filer to resolve them.As a result,anisations may not even know the extent of the errors and innsistencies that are being published in their name,or the potential risks these errors may expose them to.

Causes of underlying errors

XBRL/iXBRL depends on the rrect association between the taxonomy and the appropriate data (mapping).Depending on the regulatory agency,taxonomies are either fixed (no modification is possible by the filer)or variable (customisations are allowed,but extensions must nform to guidelines).This leads to the first set of challenges:

?Fixed and variable taxonomies –Both fixed and variable taxonomies require rrect mapping of the data.Aurate data mapping requires a mplete understanding of both the regulatory taxonomy and the filer’s business and reporting information.

?variable taxonomies -variable taxonomies require mplete and aurate definition of taxonomy extensions,a process that is very time-nsuming,often very subjective and requires very specific and detailed knowledge about the filer’s business.

Data definition and mapping errors are often not apparent by looking at the rendered output.Inrrectly defined ncepts,ncept selection and taxonomy modeling issues,in addition to misapplied tags may or may not result in warnings or errors during the verification process.The errors and innsistencies themselves may only be regnised by someone with the means and experience and tools to find them,and only resolved if they have the time to understand and rrect them.

Due to the challenges outlined above,many anisations initially opted to outsource their electronic filing process to third-party service providers.While this may have alleviated the immediate need to understand XBrl/iXBrl,this benefit became rapidly overshadowed by the risks of undetected errors as well as the ongoing requirement for changes and the irrepressible desire to shorten the report production cycle.The benefits of outsourcing are often outweighed by the recurring demands of:

?ongoing maintenance –For many anisations the initial effort to prepare their electronic filings was expected to be a “one-time”effort with minimal ongoing effort.For many however,the ongoing maintenance of their mappings and taxonomy results in nsiderable effort and st.Taxonomy changes are routinely introduced by regulators,changes result from evolving business requirements,and changes are triggered by enhanced reporting.All of these require evaluation and potentially an update to the mapping and definition of electronically filed data.The effort/st/time to implement these changes is often magnified by the extra fees charged by outsourcers for such changes,which can lead to frustration,high sts and missed filing deadlines.

?streamlining the reporting cycle –every anisation is under pressure to rce the time/st of reporting,but many are unable to do so because they cannot influence the critical piece of the process that is outsourced,and often executed at the end of the reporting cycle.The only choice they have to rce the overall time/st of the reporting process is to bring the electronic filing process in-house,and execute as much of it as possible in parallel with the traditional reporting process.

?Demand for reporting auracy -Without the knowledge or ability to verify the electronic filings these anisations are totally dependent on their third-party providers to understand their data,map/define it rrectly and perform the necessary quality assurance to verify that their work has been done rrectly.Despite the fact that anisations spend millions each year to prepare and ensure that their regulatory reports are rrect and mpliant,they are often unable to apply their high standards of reporting to verify the auracy and mpleteness of their electronic filings.

Acrding to Avi Sucharevski,Director of XBrl services at cundus,“large anisations that place an incredibly high priority on reporting auracy are realising that outsourcing the electronic filing process can lead to a significant number of electronic filing errors and innsistencies.In many cases these errors are not visible without detailed analysis,but they can result in material misrepresentations of reported data.”

Outsourcers have the knowledge,but not the risk

The challenge is that most of the knowledge about their taxonomy and the electronic filing process is in the hands of their outsourcer,so anisations must often play “catch up”to understand what was done and why.To beme self-reliant,anisations realise they not only need to learn the essentials of XBrl/iXBrl,but specifically how their taxonomies are designed and regulatory data mapped.No longer willing to depend on third party providers to make critical reporting decisions,they now realise that they need to develop the in-house technical expertise to ensure that reporting decisions are aligned with their anisation’s objectives and the quality of their electronic filings matches that of their other regulatory reports.

The good news

The good news is that anisations are realising the importance of increased attention to quality and the risks involved,and are taking steps to understand and resolve their reporting issues before they are flagged by regulators or held liable for mistakes by investors.They are reviewing their customised taxonomies and XBrl/iXBrl filings thoroughly to determine if the regulatory filing rules have been fully implemented,and if not,taking steps to rrect these errors as quickly as possible.

Solution

To gain the knowledge they need to rce these reporting innsistencies and errors,anisations are:

?investing in advanced training for their reporting teams to enable them to adopt electronic filing “best practices”and

?evaluating their electronic filings to identify the errors/innsistencies and determine the optimal resolution strategy.

To assist in this effort software developers and service providers offer a wide variety of analytical tools and services to help anisations learn how to beme “self-filers”.Some solutions involve the use of both electronic tools and a manual review to ensure mpleteness and nsistency.Mr.Sucharevski offers the following,“Our XBrl HealthCheck program is both a mprehensive automated analysis and manual review of an anisation’s electronic filings to quickly and aurately identify errors and innsistencies.

anisations are often surprised at the number and potential impact of these errors,and relieved to learn they can bring the process in-house,resolve the issues quickly and take steps to ensure they don’t reour in the future.”

Once an anisation mpletes this analysis and remediation,they are much better equipped to maintain their taxonomies and ensure the quality and auracy of their filings in the future.In addition,this increased awareness and involvement allows anisations to be less dependent on their outsourcers,which results in increased opportunities for st and time savings during the report preparation process.

As anisations look for ways to maintain their high standards,promote their mpany’s values,shorten their reporting cycles and rce sts,in-house preparation of electronic filings will only beme more prevalent.The first step in gaining ntrol of the electronic filing process is to understand how it works today and the magnitude and impact of any quality issues that exist.“Once an anisation realises how much they’re spending to have a third-party generate what may be innsistent or inaurate results,the decision to first evaluate and ultimately assume ntrol of the process,just makes good business sense.”Mr.sucharevski says.

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