Liv A. Watson
XBRL: The Future of Financial Reporting Is Here
Here’s how you can prepare your clients to participate in SEC’s interactive data initiative.
June 1, 2006
by Liv A. Watson, VP of Global Strategy
The U.S. Securities and Exchange Commission (SEC) is officially promoting XBRL in financial statements. You can be on the cutting edge and provide your public company clients the services to map them to XBRL Taxonomies solutions for their financial statements. Here’s why you should take advantage of it:
In my last column, I introduced the concept of XBRL Taxonomies, pointing out that now is the time for the accounting profession to add “XBRL Taxonomies” to your professional vocabulary. This was further emphasized by noting how Securities and Exchange Commission (SEC), headed by Chairman Cox, is taking the lead in the United States by utilizing “interactive data” made possible through XBRL taxonomies with the SEC pilot project for financial reporting.
This month we’ll learn why auditors should take the lead and encourage their public company clients to tag their financial statements to XBRL Taxonomies and participate in SEC’s XBRL Voluntary Filing Program.
History of the SEC and “Interactive Data”
On July 22, 2004 the SEC announced that it was going to be assessing the benefits of tagged data in XBRL and its potential for improving the timeliness and accuracy of financial disclosure and analysis of Commission filings.
“Interactive data promises more than simply a revolution in corporate reporting,” said SEC Chairman Christopher Cox last November at the 12th XBRL International Conference in Tokyo. “For the SEC, as well as for financial regulatory agencies around the world, corporate reporting is not an end in itself, but a means to achieving our missions. Those missions include protecting investors, encouraging capital formation and promoting healthy markets.”
In January, Cox announced that the Commission staff would offer expedited reviews of registration statements and annual reports to companies that volunteer for a test group as part of the Commission’s XBRL Interactive Data Initiative. Cox noted that Interactive Data holds the promise of transforming the static, text-only documents companies file with the SEC into dynamic Interactive Intelligent Data. The SEC has a mission to bring its system of corporate disclosure and financial reporting into the 21st century and XBRL is one of the most important open standards that lays the foundation for a successful Interactive Data Ecosystem.
A week later at the XBRL-US Public meeting in San Jose, Calif., Cox coined the phrase interactive data. Chairman Cox said that the real reason behind SEC’s interest in interactive data was “to protect investors” and to ensure that markets function best when “all the information that market participants need is available to them when they want it, and in a form they can use.”
Today, less than two years from the time the SEC was only assessing the benefits of “interactive data”, many U.S. companies are actually filing financial reports with XBRL tagged data. See table for a list of current participants as well as those companies that have committed to participating in XBRL.
The list below contains the current participating companies in alphabetical order:
The information companies furnish to the SEC today is cumbersome to re-purpose and analyze. By providing your clients with financial reporting data in XBRL format, you could make your clients’ SEC filings instantly and automatically searchable for analysts and investors alike. This is because tagging your clients data to XBRL taxonomies not only creates the disclosure documents, but also enables the data within them, to be searchable and retrievable via “interactive data” dramatically improving the usefulness of the entire disclosure exercise.
Still not convinced that the future of XBRL is here?
Every Chinese public company reports their financials in XBRL to the Shanghai and Shenzhen stock exchanges, live projects are starting in Sweden, Denmark, Japan, Belgium, India, the U.K. and Spain to name a few. That raises the question, “Can the U.S. afford to sit back and let all these other countries bring dynamic interactive intelligent XBRL data to the marketplace?” Some studies reveal that capital flows where there is transparency. Providing your clients’ data in XBRL gives birth to a whole new electronic marketplace for financial and business reporting information.
Clearly the way financial and business reporting data is prepared, communicated and analyzed is fundamentally changing. XBRL is not about the technology. It is about communicating your client’s information, accurately, effectively and in real time, to the electronic marketplace.
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Liv Watson is an accountant and Vice President of Global Strategy for Norwalk, Connecticut-based EDGAR Online Inc. (NASDAQ: EDGR )— a provider of global business and financial information. Questions? Contact Liv.