Lisa Thomas receives inaugural TrEAT Award

All year we’ve been collecting nominations for our first-ever TrEAT Award, designed to honor the RoseRyan consultant who best represents our values of trustworthy, excel, advocate and team throughout the year, with clients and with colleagues, in ways big and small.

Lisa Thomas, this year’s TrEAT honoree, embodies so many of these qualities we considered giving her the award in duplicate. Lisa excels at her work and gamely ventures outside her comfort zone to learn new skills and tackle stretch assignments. A team member-and-a-half, she forges the same strong, collegial relationships with clients that she builds inside RoseRyan, where she is a frequent instigator of social activities.

Lisa pitches in for more than the fun stuff. She never shies away from the harder work of culture-building, for example, honest communication about difficult issues. It takes courage to speak up and ask the tough questions, and Lisa has both the moxie and the finesse to do it. Congrats, Lisa, and thank you for living our values every day.

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Enforcement and executive comp top list at SEC conference

The economy must be picking up, judging by the attendance at last week’s 27th Annual Reporting and FASB forum put on by the SEC Institute. It was a packed house. The two-day seminar was not for the claustrophobic because every chair was taken and we were elbow-to-elbow at lunch.

They covered a lot of information during the two days, but as we head into 10-K season what I found most interesting were the current developments at the SEC and recent hot buttons with SEC comment letters.

The SEC continues to consider new ways to disclose executive compensation in proxies, so we need to review the latest rules when preparing them later in the year. They suggested that there is heightened SEC oversight and enforcement, particularly as it pertains to disclosure of revenue recognition, contingencies, income taxes and warrants.

Who knew? Non-GAAP disclosures
It was surprising to me that several speakers suggested that you shouldn’t be afraid to disclose non-GAAP measures in your 10-K. I had always believed that the SEC disapproved of these disclosures, but the speakers said that this wasn’t the case; in fact, the SEC often looks to earnings releases, and if the company had non-GAAP measures in its 8-K, they would expect the same type of disclosure in the 10-K.

I found the MDA discussion interesting because the speaker was good and he had a thoughtful presentation, but I also wonder how many companies will follow the suggestions. The speaker suggested starting with a blank piece of paper every three years to keep the information fresh, and not to be afraid to disclose forward-looking statements rather than just reciting the same old historical information. He suggested that you could discuss the same type of information that is in some of your risk factors and, unlike the risk factors, you can use qualifying language. (Good luck with getting everyone to sign on for more disclosure.)

How dumb can people be?
I don’t plan to ever have to worry about how to stay out of trouble, but the session on enforcement was entertaining. People never cease to amaze me: the regional director of the SEC said that recently someone under investigation for insider trading continued to deny that he knew anyone in the company—even the person with the same last name. It was his brother, and he was convicted.

There were several discussions on the U.S. convergence with IFRS, as there were when I attended the conference two years ago. The timeline is longer, with some speakers suggesting five to six more years. Everyone has finally acknowledged that it is going to be a lot harder than anyone thought. It shouldn’t be surprising; I am still waiting for the United States to adopt the metric system as I was promised when I was in the sixth grade.

Overall, it was an informative two days. Even if you closely follow new accounting literature, you will still hear a few things you can’t get from just reading recent pronouncements.

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RoseRyan guru elected to XBRL US committee

Congratulations to Lucy Lee for her recent election to XBRL US’s Domain Steering Committee. The committee’s primary goal is to oversee the development of taxonomies that meet the business reporting needs of key U.S. markets.

“This committee is at the forefront of driving and shaping XBRL standards, so this is a unique opportunity to gain insight into taxonomy development,” says Lucy. “I’m excited to share the latest developments with our clients and my colleagues. Likewise, I look forward to contributing to the committee by providing it with meaningful input from RoseRyan’s work in the field.”

Lucy, who spearheaded the development of RoseRyan’s XBRL practice, will serve two consecutive one-year terms representing the analyst community. Her committee colleagues include representatives from Big 4 firms and leading software and service providers. Responsibilities of the committee include reviewing and establishing the business requirements for the XBRL specification, participating in the development of global taxonomy architecture best practices and participating in the development of taxonomy development and approval processes.

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Why is a 3-way match important in XBRL?

While speaking at the 2011 Year-End SEC Conference in Phoenix earlier this month, and this week at the same program here in Silicon Valley, an interesting question came up. Despite filers’ efforts to match their HTML financial submission to the rendered version (vendor’s viewer or reviewers’ guide), the SEC and XBRL US continue to report numerous data quality and consistency issues on XBRL submissions.

Where is this disconnect? This two-way comparison is akin to comparing two static spreadsheets without regard for a third element: the underlying raw data and interrelationships of the facts. As a result, XBRL data may be entered incorrectly with the wrong mapping or signage, or unit or calculation errors.

The importance of a three-way match
In accounting, we substantiate a financial obligation by matching three documents: an invoice, a valid purchase order and a receiving document. Similarly, in the world of XBRL, a three-way match of the three key documents—HTML submission, SEC Private Previewer and the metadata, with final verification against the metadata (the underlying raw data in the instance document)—is key to a successful filing. As the SEC says, “the rendered version of the Interactive Data File may be a useful tool to help determine the completeness of your data, but is not the best mechanism to check the accuracy of the tags selected or other underlying details.”

What you see is not always what you get
Often the signs in your HTML and viewer are presented with brackets due to negated labels, but the raw data in the instance document should almost always be tagged as positive numbers. The U.S. GAAP taxonomy is designed to reflect a natural or absolute balance. Think about general ledger systems, which show debits and credits rather than positives and negatives. It’s helpful to think about XBRL in this way. If you see a negative number in the raw data, ask whether it makes sense for the balance to be negative. Always check the definition and determine if this element should be one-way (always positive, like revenue and expense) or two-way (increase/decrease, gain/loss, proceeds/payments, profit/loss and so on).

Three-way match = completeness + accuracy
Whether you use a bolt-on or a built-in solution, the three-way match is critical to the XBRL control process. Work with your service providers or software tool to extract contextual metadata from the instance and other linkbases to perform the following common errors review: (1) negative values, (2) units and (3) negated labels and calculation links. This will allow a complete review of selected elements and determination of whether the data has been entered correctly.

Quality XBRL data is of paramount importance as key stakeholders (such as regulators, data aggregators, analysts, investors, filers and auditors) begin to use and rely upon XBRL data for business decisions. It is ultimately the filer’s responsibility to ensure that the underlying metadata is complete, accurate, and consistently mapped to allow data consumption software to tell the right story.

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RoseRyan flexes muscles at Second Harvest Food Bank

Last week, a dozen RoseRyan consultants and family members sorted 14 crates of food—approximately 11,000 pounds!—at the Second Harvest Food Bank in San Jose.

As we arrived at the warehouse, we were amazed at the rows and rows of pallets with food stacked on shelves, all the way to the ceiling. Once we signed in, our tasks entailed checking expiration dates, putting food items into categories (protein, vegetables, fruit, cereal, etc.), boxing them up, labeling them and stacking them on pallets. As we went through this process, the things we learned: don’t tie the plastic bags you donate the food in, it slows down the process; if the item is past its expiration date, don’t donate it—we ended up throwing lots of food away; and items without an ingredient listing on the package aren’t accepted.

RoseRyan is proud to be a part of this community program and help fight local hunger. The Second Harvest Food Bank is one of the largest food banks in the nation, providing food to an average of a quarter million people a month. Throughout the year, volunteers contribute almost 300,000 hours of service to the food bank, saving more than $5.7 million in labor costs. Food is distributed to low-income families and the homeless from Daly City to Gilroy through shelters, pantries, soup kitchens, children’s programs, senior meal sites and residential programs.

It helps us too. As we are a dispersed workforce and don’t have much opportunity to interact with each other, the Nov. 30 activity also gave us a chance to get know each other better, build a sense of teamwork, and have fun! Some comments from those who attended: “It was one of the most rewarding and enjoyable experiences,” “Thanks for organizing this, I would have never tried it otherwise” and “Thank goodness for kettlebell workouts!”

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