SEC moves toward requiring interactive data filings

by Grant Gross

May 14, 2008 —

The U.S. Securities and Exchange Commission has taken a major step toward requiring
publicly traded companies to submit their reports to the agency in an interactive
data format, with backers saying the change will make financial reports easier
to analyze.

All three SEC members voted to publish a proposal that would require public
companies to file reports in eXtensible Business Reporting Language, or XBRL,
a programming language related to XML that's being developed by a nonprofit
consortium of about 450 companies. Under the proposal, which still needs final
approval from the SEC after a public comment period, the transition from text
and HTML reports to XBRL would take three years, with about 500 of the largest
U.S. and foreign companies required to start filing XBRL reports after Dec.
15.

The smallest public companies and foreign companies not using U.S. generally
accepted accounting principles (GAAP) could wait until the third year to file
reports in XBRL.

SEC Chairman Christopher Cox said the change will make SEC reports easier to
read and analyze. XBRL will benefit investors and public companies, he said.
With XBRL, companies will use XML data tags to describe financial information
in the SEC's online Edgar database.

In many cases, company financial data has to be re-entered by hand before it
can get online at the SEC's Web site, Cox said.

The XBRL proposal will "transform the SEC's business model, making interactive
data the backbone of the SEC system," Cox said during a commission meeting.
"We can make that information easier for investors to get, easier for investors
to use and more efficient and more cost-effective for companies to disclose."

The SEC's move to XBRL, which follows similar efforts in other countries including
Japan and China, has faced some criticism. Some companies have suggested the
cost may not be worth the benefits.

The SEC began an XBRL pilot program in 2005, and 76 companies have signed up
to deliver data using XBRL since then, SEC staffers said. The average cost for
companies to file their first report in XBRL was about US$30,000, but the costs
fell dramatically after the first report, according to an SEC survey.

Commissioner Kathleen Casey expressed concern over the initial compliance costs,
but said the SEC would pay attention to any issues encountered by larger companies
during the first two years of the three-year phase-in. The SEC will "take
stock" of any problems and could make changes to the XBRL requirements
if it sees potential problems for small companies, she said.

Cox suggested that some of the same concerns came up when the SEC began to
move financial reports to its online Edgar database in 1985. Companies complained
about the extra work, but the benefit was better information for investors,
he said.

"Then, as now, the future had its enemies," Cox said.

IDG News Service