SEC’s EDGAR Database RFP Cites XBRL in the Future
The SEC’s request for proposals (RFP)  for management of EDGAR, posted on January 27, features several portions that imply that the system’s new manager should be prepared to implement XBRL, the business report version of eXtensible Markup Language (XML) which codes individual items within documents so that they can be immediately accessed.
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“EDGAR and the disclosure program will continue to require significant levels of enhancement, continued modernization, and architectural redesign over the coming years, and this contract will provide support for these types of tasks,” says the RFP. The document further says modernization may be needed for reasons that include the “conversion of an increasing amount of filed information to structured, interactive formats, building on the XML- and XBRL-based filing regimes already in place.”
EDGAR is the backbone of the SEC’s financial reporting system. It is the repository for approximately 700,000 filings submitted annually by public companies, corporate securities traders and investment companies. Through the RFP process, the agency expects by mid-summer, to name a new manager for EDGAR after the termination of its eight-year management agreement with Northrop Grumman Corp.
Technically, the RFP cannot specifically mandate that the new manager implement XBRL into EDGAR because the SEC does not require issuers to report in that format. But the agency has been boosting XBRL since shortly after the American Institute of CPAs began pioneering the code’s development in the late 1990s: A consortium of software and financial companies the AICPA brought together has since evolved into a worldwide development effort known as XBRL international
The RFP is the latest fruit of the development efforts and the latest indication of the SEC’s leanings toward the software code.
“The RFP is intentionally open ended about our plans for the future (regarding XBRL),” said Corey Booth, the SEC’s chief information officer. “The SEC is not in a position to say much about its future plans until the five SEC commissioners announce them, but we want the new EDGAR manager to be able over time to move the system to integrated data.”
BY tagging data, XBRL makes it easier for reporting companies because data tagged for one report can be automatically retrieved and inputted into other documents that need it. It also makes it easier for investment analysts and regulators to cull and review the report data they require.
The Sarbanes-Oxley accounting reform law may contribute to the SEC’s fondness of XBRL because the law’s section 408 requires the agency to further increase its frequency of reviewing certain financial reports. Booth said the SEC has been meeting the 408 requirement without XBRL, but noted that the rule is “also about doing the reviews more efficiently and we see XBRL and other tagged data as ways to do it more efficiently in the future.”
The most vivid example of the SEC’s support of XBRL came early last year when it launched a program allowing issuers to voluntarily file their reports in XBRL format. At the start of this year the SEC upped the ante with a new program that offers expedited reviews of registration statements and annual reports to companies who join a program in which they file their reports in XBRL and report their experiences with the technology.
But, public buy-in has been limited. Only nine companies are participating in the voluntary XBRL reporting program begun last year. Booth noted that companies may be dissuaded because “It does take some efforts and decisions by companies to invest the time for XBRL filing. It’s not just a one-click process.”
On the positive side, Booth noted that the new voluntary reporting program, which is open for additional applicants, has attracted companies which are not already involved in the original XBRL voluntary project.