Impact of the XBRL Limited Liability Clause Expiration


Since October 2014, XBRL exhibits submitted by public companies have carried the same liability provisions as HTML filings under the anti-fraud provisions of the Securities Law. Rule 406T by the SEC requires filers to submit accurate XBRL filings with a “good faith effort” and to be held to the same standards of accuracy and quality in both EDGAR and XBRL filings.

Sections 405 and 406T of Regulation S-T require XBRL exhibits to contain tags that resemble the data within HTML filings. The structure of XBRL must include standardized tags that are listed in the most recent version of the EDGAR Filing Manual and U.S. GAAP taxonomy. Such XBRL tags include taxonomy tags, context dates, units, labels, precisions and segement data. Tags within the footnotes that require segmented tags must correctly tie-in to the un-segmented version of that tag. For instance, should a company disclose that they have debt issued to/from multiple related parties, each related party must have its own segment that represents each individual related party. Extension tags are permissible only in the case that a standardized tag does not exist in the U.S. GAAP taxonomy. In its observation of filings submitted by corporate filers, the SEC has expressed concern about the high amount of extension concepts used. The SEC plans to address this concern in the future as it continues to intensify their review of filings.

Since July 2014, the SEC has issued comment letters regarding calculation relationship discrepancies within XBRL exhibits. In addition to the calculation relationships, the comment letters addressed companies with misrepresentations, incompleteness, and/or omissions within their filings. Companies who receive these comment letters will likely need to amend their filing and may be subject to fines depending on the severity of the issues. External users such as investors and analysts may become skeptical regarding the reliability of an organization's financials if the quality of an XBRL filing is questioned. Furthermore, the ramifications of inaccurate XBRL filings may impact shareholders as well.

Companies that submit inaccurate or incomplete filings may not be in compliance with Sections 405 and 406T of Regulation S-T and could be considered delinquent filers. As a result, under Rule 144 of the Exchange Act, it could be argued that such companies might not meet the current information requirements of Rule 144(c). If this were the case, shareholders would not be able to resell their shares in the open market. Thus, it is important for companies to emphasize quality and accuracy of their XBRL filings.

Colonial has continued to emphasize quality, reliability, and service

Colonial is constantly implementing best practices to your filings from the latest SEC Staff Observations, FASB guidance, and regulations set forth by the SEC, AICPA, and U.S. GAAP. We are confident that you will avoid any unexpected surprises or compromises in accuracy or quality in your XBRL filings with Colonial Stock Transfer.

Published: March 3, 2015

Author: Dan Carter