The evidence is very strong that there is a gap between the SEC specified requirement for SEC XBRL financial filings and the true requirement which is necessary for such filings; and this gap is causing confusion.
Further, I have not found one software vendor or one accountant/CPA who can or will state that they are able to meet the true requirement for what an SEC XBRL financial filing needs to be. Every CPA that I talked to about this agrees that there is a gap.
The graphic below explains. (you can see the a larger version of the graphic here).
Here are the highlights:
- The red line shows the bar that an SEC XBRL financial filing must rise to in order for the SEC XBRL financial filing to be submitted to the SEC.
- The thick black box shows the true requirement needed to be specified. For example, to the right of the red line is the idea that all the roll forwards and dimensional aggregations must actually compute properly. No one disputes this, it is a very reasonable requirement; but SEC XBRL submission does not verify this.
- Now keep in mind that some XBRL calculation inconsistencies reported are false errors, therefore some inconsistencies can exist but the SEC XBRL financial filing can be correct. That is why the light orange box is shown outside the thick black box. Yet some software makes users think that all XBRL calculations must be passed for the SEC XBRL filing to be valid.
- The light gray boxes to the right of the red line contain other requirements which are not disputed by the CPAs and accountants which I talk to. So, for an SEC XBRL financial filing to be truly correct, it must meet the true requirement; not just the SEC specified requirement.
- Clearly it would be better if the SEC specified the true requirement, software vendors implmented that same true requirement, and SEC filings then complied with that same true requirement.
- However, having this gap between the SEC specified requirement and the true requirement causes confusion. It also puts CPAs in a precarious position.
On the one hand, the red line is what the SEC requires today. Do you shoot for that level because it sure is easier and the cost of doing so will be less. On the other hand, if you shoot for the true requirement, your costs will be higher than those shooting for the lower bar. Besides, there is no software which makes it easy to know if you are meeting the true requirement.
Eventually this condition, the gap between SEC requirment and true requirement, will be rectified and software will exist and then the world will see the true quality of work.
The worse thing about all this is that because there is no software which can help a business user hit that true requirement, XBRL is rather useless to solve any real business problem for business users. The good news is that the true requirement is knowable and when software does meet this requirement, XBRL will offer a lot to business users trying to make their information actionable.