Merrill Experts: Financial Services: October 2011

Friday, October 28, 2011

This Week in XBRL: XII Releases XBRL Abstract Model

The 23rd XBRL International Conference began on October 25^th, and has obviously been one of the largest talking points in the industry this month. Headed by XBRL International, the conference is used a platform for some of the largest innovations in the eXtensible Business Reporting Language, and this year was no different.

XBRL International (XII) is a group that should be familiar to anyone dealing with XBRL reporting. Founded in 1998, the group was formed to improve and promote XBRL. Now, they are publicly delivering on that promise.

On October 26^th, XII released the first public draft of the XBRL Abstract Model at the conference. According to the press release, published on MarketWire,

The abstract model has been developed by XII's Abstract Modelling Task Force (AMTF) as a means of establishing a common framework for communicating and understanding the XBRL technology. The abstract model provides a conceptual framework for understanding XBRL and gives developers a strong foundation for implementing XBRL solutions.

XII hopes that this model will eventually provide developers with more tools to utilize the language. The bulk of the model is comprised of “use case diagrams, class diagrams, object diagrams, and sequence diagrams,” according to the release.

This first draft is intended to give the public opportunities to comment on the model, and to provide feedback that will bring XII closer to a functional Abstract Model. Merrill Corporation is always supportive of initiatives to broaden the reach of the XBRL reporting language, and we are happy to see XII’s initial success.

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Friday, October 21, 2011

This Week in XBRL: The End of Limited Liability Approaches

Until now, many companies reporting in XBRL fell under the SEC’s limited liability rule. This rule essentially granted a reporting company a certain level of forgiveness for a period of 24 months following their firstXBRL-compliant report. The rule was created as a method for companies to learn from XBRL reporting failures without punishment.

For companies that filed after June 30, 2009, this will be the first reporting period without that safety net.

KPMG has a few more details:

XBRL-tagged financial information submitted after the provisions expire will be considered filed and not furnished and therefore be subject to the same level of liability as other information included in the registration statement or periodic report that includes the XBRL instance document. Companies affected by the expiration should carefully evaluate its impact and discuss this matter with their audit committee, legal counsel, and other relevant parties.

We expect that many more companies will be making an effort to contact outside agencies to ensure the accuracy of their reporting. KPMG also lists several of the largest changes to the 2011 taxonomy, adding a further level of complexity to this quarter’s reporting.

Updates for Recent Accounting Standards. The updated taxonomy includes elements for new accounting guidance recently issued by the FASB. In total, the taxonomy adds elements for 17 recent accounting pronouncements.

New Industry Elements. New specific elements for the airline, entertainment, franchisor, and agriculture industries are included.

Cash Flow and Income Statement. New elements, many of which are frequently used extensions that were identified by the FASB, were incorporated into the taxonomy.

Comprehensive List of Text Blocks. Text blocks are used for tagging a group of information, such as a footnote, in one tag even though additional tags may be necessary for individual facts within the group. New text blocks have been added. The FASB amended the labels of all text blocks to include an indication of their intended use based on the type of tagging with which it corresponds in the SEC rule.

For those companies looking at their first unprotected XBRL filings, we have a few services you may want to consider looking at.

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Thursday, October 13, 2011

Volcker Rule Draws Industry Criticism

Back in March, we wrote a blog about a headlining scandal that threw Goldman Sachs into courts against the then-recently-created Volcker Rule. Since then, not much has been said about the legislation, until this week, as regulators released a proposal that was, “so complex that banks blasted it as unworkable and consumer groups dismissed it as too weak.”

The proposal has received almost universal opposition, due mainly to the unacceptable level of complexity in the document. Reuters interviewed American Bankers Association Chief Executive Frank Keating for his opinion on the proposal:

"Only in today's regulatory climate could such a simple idea become so complex, generating a rule whose preamble alone is 215 pages, with 381 footnotes to boot…How can banks comply with a rule that complicated, and how can regulators effectively administer it in a way that doesn't make it harder for banks to serve their customers and further weaken the broader economy?"

Consumer interest groups like Americans for Financial Reform also commented in the article, suggesting that the rule heavily favors bank flexibility over consumer protection. Reuters quotes them as responding, "Unfortunately, the proposal issued today falls well short of what the Volcker Rule could and should achieve.”

Other opposition states simply that the rule would require too many banks to fracture into smaller businesses in order to remain competitive. Many analysts are predicting that companies and investors will both fight for the rule to be dampened in those areas.

The public has until January 13, 2012 to comment on the proposal, giving companies plenty of time to suggest beneficial changes. We predict a lot of attention being paid to this legislation over the coming months.

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Thursday, October 6, 2011

This Week in XBRL: IMA(R) Pushes for DATA Act

In a continued effort to educate on the development of XBRL technology in industries such as financial services (and beyond), Merrill Corporation will share articles and columns published on the topic.

This week, the Institute of Management Accountants (IMA(R)) has distributed a press release showing their support for the use of XBRL in creating government transparency and efficiency through the Digital Accountability And Transparency Act (DATA Act). IMA(R) believes that XBRL will lend efficiency and accuracy to the government’s financial reporting. Part of this support is based in the Child and Family Services Improvement and Innovation Act, which requires states to report spending for child welfare to the federal level.

This Market Watch article includes part of IMA(R)’s statement, which they attribute to the Hon. Kim Wallin:

By requiring the Secretary of the Department of Health and Human Services to consider XBRL, the federal government is getting the tools it needs to deliver better data -- which will help the Department better administer its child welfare programs and ultimately help states better serve children…We need to know who is and isn't receiving federal aid to more effectively help our children in greatest need. I think it's fitting that the first U.S. law mandating XBRL is helping our government better meet the needs of our most vulnerable children.

We are always excited to see XBRL branch off into larger use, and an application as noble as improving children’s well being is even more cause for celebration. XBRL has proven to be an effective tool in nearly every industry it has been applied to, and we see no reason for it to fall short here.

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