Approximately 500 companies will be part of the first wave of companies required to submit their financial results electronically using XBRL, the eXtensible Business Reporting Language, if a staff recommendation set out by the U.S. Securities and Exchange Commission at an open meeting on Wednesday, May 14th is implemented.
Our sister site, AccountingWEB.co.uk, reports that the SEC plan suggests a phased implementation beginning with companies turning over more than $5 billion annually for financial periods beginning on or after December 15th, 2008 and extending in successive years to other U.S. and international filers who use U.S. GAAP a year later. The next year companies reporting under International Financial Reporting Standards would also have to submit their quarterly and annual results to the SEC via XBRL, without the need for a separate reconciliation statement to U.S. GAAP.
For their first year of filing, companies would be allowed to "block" tag their footnotes and get a 30-day grace period for their first filing. The next year, they will be expected to tax detailed footnotes and disclosures separately, the Commission said.
Companies that are not required to provide data electronically in the first two years are being encouraged by the SEC to consider converting early to the new mechanism. Those companies that do not provide the required information with appropriate XBRL tags will be deemed by the Commission not to have provided adequate information. Currently more than 70 companies voluntarily provide their financial information in XBRL format, participating in a pilot program with the SEC.
The SEC proposal was preceded by a report in February from the Commission's advisory committee on improvements to financial reporting, which suggested making electronic filing of XBRL-tagged financial statements mandatory for top 500 public companies. The commission's final decision will follow a 60-day consultation period to allow technical points raised and objections from critics to be resolved.
SEC Chairman Christopher Cox is a long-standing champion of XBRL, and heralded the rule proposal as "a revolution in corporate disclosure".
Cox began the live webcast with a history lesson about the development of SEC's electronic systems, and a long series of thank-yous to SEC staff, XBRL International, and its U.S. subsidiary, as well as volunteer XBRL filers who took part in the Commission's voluntary interactive data filing scheme.
The online EDGAR system is essentially an electronic version of the filing cabinets that were used to store the paper filing forms designed in the 1930s, Cox explained.
Accountants played a key role in creating those forms, and thanks were due again to members of the American Institute of Certified Public Accountants for a decade of work that made the XBRL recommendation possible. "They're helping us get better information from industry in the 21st century - once again we owe a great debt of gratitude to the accounting profession," Cox said.
While EDGAR has made great contributions to furthering electronic filing and delivery, he continued, interactive data - commission-speak for XBRL - is a global language that knows no international boundaries, he added.
Interactive data would revolutionize how the SEC collects data and would change the backbone of the financial reporting system, improving analytic capabilities, and putting information at the fingertips of investors within sections. "Nothing could be closer to SEC's mandate to give investors the information they need," Cox said.
The SEC announcement came just over a week after the international XBRL community gathered for a conference in the Netherlands. Previously, AccountingWEB reported that attendees at the recent XBRL International Conference heard about the electronic financial reporting standard's progress on a number of fronts:
Olivier Servais, XBRL team leader for the International Accounting Standards Committee (IASC) Foundation explained that XBRL played a crucial role in the adoption of IFRS.
The evolution of XBRL into concepts such as "interactive data" in the U.S. and "Standard Business Reporting" in Australia and the Netherlands was a good sign of the standard's maturity, Servais argued in a recent IASCF newsletter. "We are close to the time when we shall no longer talk about XBRL … because XBRL is broadly implemented."