Are Small Companies Responsible for Inaccuracy in XBRL Tagging?

The financial industry has made it very clear that accuracy in XBRL tagging is still a major problem in financial reporting. A consortium was even created to solve this issue. Although there are a few different theories explaining why XBRL tagging contains so many inaccuracies, one obstacle we can all agree on is that smaller companies continue to outsource their work to third-party providers that have little interest in doing anything but the bare minimum to ensure compliance, according to an article in investing.com. We agree, but we also wonder why these smaller companies aren’t researching their filers more closely. The article in investing.com claims that larger companies have the resources to ensure XBRL accuracy, while smaller companies contract their XBRL work to cheap third-party providers. In our opinion, the main problem starts with the smaller companies not being aware of how their filing agents work. Not all third-party filers work under sub-par standards. Unfortunately, some quality filers get lumped in with other sub-standard ones when referring to outsourced XBRL work. So, be sure to interview your filing agent before your next filing to determine which side of the coin your filer operates. Check our blog for the right questions to ask. Last week we posted an article on our blog, listing the types of answers you should be asking your filer to ensure your documents are accurate, as well as compliant. We believe the key to accuracy in XBRL reporting lies with your filer’s proofreading skills. Be sure you know how their operations are run, even visit their office if you get a chance. Don’t rely on loyalty or even recommendations. Rely on the facts and your personal experience during a trial run. Among other factors, third party filers also use too many custom tags instead of the assigned GAAP taxonomies, the article states. There are more than 17,000 GAAP taxonomies to choose from, but because financial statements can be extremely large it is sometimes easier for the filer to create its own. This makes company comparisons much more difficult. With smaller companies, about 10% of the tags used are custom tags. Meanwhile, some tags are just completely wrong. Many times these small errors could have been avoided during the proofreading process. The article in investing.com claims that some software systems can detect these small errors, such as incorrect positive/negative signs, required values not getting reported, or a data point getting attributed to the wrong corporate entity. But, even the article admits that for now, there is a large dependence on human interaction to find and rectify the errors. Therefore, your filers’ proofreaders need to be exceptional. Before your next filing, you might want to know how your filing agent handles its daily operations. How familiar are their proofreaders with the XBRL GAAP taxonomies? You might even ask for evidence. Is their proofreading staff from the industry? What qualifications do their proofreaders have? These questions will not only ensure your documents are accurately tagged, but you will be helping the industry to improve on the XBRL tagging process. Finally, the article claims that XBRL tagging is improving, but needs more work. We can agree with this statement, but we also know our agents are highly skilled and strive to be 100% accurate every time, regardless. To learn more about our services and daily operations, speak to one of our agents at 732-780-5036. Also, visit the Edgar Agents site at www.edgaragents.com.