XBRL Now Mandatory at SEC
Ruling requires domestic and foreign issuers of financial statements to submit their primary statements and footnotes in XBRL format
There's nothing like a government mandate to speed up the adoption of a standard. The eXtensible Business Reporting Language (XBRL) is a case in point. The Securities and Exchange Commission (SEC) ruled last month that the XML-based open standard format for business reporting is no longer optional. The ruling requires domestic and foreign issuers of financial statements to submit their primary statements and footnotes in XBRL.
XBRL is an open software specification for modeling the information in business reports. It uses XML-based data tags to describe financial information, and it employs generally accepted financial reporting standards and practices. Essentially, the spec offers a royalty-free, standards-based way for both public and private companies to simplify the preparation, exchange, and analysis of financial statements.
The SEC's mandate calls for a phased adoption of the standard, beginning with the largest 500 U.S. and foreign companies. The SEC defines that group as those companies with a worldwide public float of $5 billion or higher. The first-phase companies are required to begin providing XBRL-based submissions on or after June 15, 2009.
The SEC is effectively requiring that all public companies submit their SEC reports in Interactive Data format, observes Sunir Kapoor, CEO of Ubmatrix, a San Francisco-based provider of XBRL-based information exchange solutions. XBRL makes it much easier to collect, manage, and share financial data and information, he says, basically "bar-coding" the data. He calls the ruling "one of the most important changes in financial reporting since the Securities Act of 1934."
"XBRL is bringing a revolution to the transparency of public financial information," Kapoor said in an e-mail. "Such democratization of information can only lead to a more informed public and investment community. This is good news for investors, for analysts and for the financial stability and transparency on Wall Street."
XBRL is far from new. The official XBRL Web site credits Charles Hoffman, then a CPA with Knight, Vale, and Gregory in Tacoma, Wash., with developing it in 1998. XBRL uses XML syntax and related XML technologies, including XML Schema, XLink, XPath and Namespaces, to define and exchange financial information. The XBRL specification is currently maintained and published by XBRL International, a non-profit consortium of approximately 550 organizations worldwide. The organization is responsible for the technical XBRL specification, and each country-specific jurisdiction works to facilitate the development and adoption of local XBRL taxonomies consistent with standards and practices.
Kapoor also serves on the board of XBRL US, the branch of the consortium in the United States. The U.S. group is currently offering tools, services, and support to help companies create XBRL-formatted financials. These include preparer training sessions, Webinars, online tools and comparative tables, XBRL US GAAP data tags, and an XPRL US GAAP taxonomies preparers' guide.
"Use of such technology not only increases public company transparency, it will also improve the efficiency and reduce the costs of reporting for those companies," said Kapoor. "I think we can expect to see even more adoption of such technologies by U.S. agencies in the next administration as President-elect Obama has been a champion of similar transparency initiatives in the Senate." He pointed to the "Obama-Coburn Transparency Act" and the "Strengthening Transparency and Accountability in Federal Spending Act of 2008" as examples.
More information on XBRL is available on the official Web site .