A Closer Look at the SEC’s Voluntary XBRL Filing Program
“It’s no longer a matter of if but when” has become something of a catch-phrase among financial market insiders discussing the future of interactive data and eXtensible Business Reporting Language (XBRL). They point out that Securities and Exchange Commission (SEC) Chairman Christopher Cox is one of XBRL’s most vocal proponents and that the SEC’s voluntary filing program has been embraced by some very large and influential companies, although some significant challenges remain to be overcome before it is widely adopted.
According to the SEC, two dozen companies, including 3M Company, Bristol-Myers Squibb Company, Dow Chemical Company, Ford Motor Company, Microsoft Corporation, PepsiCo, Inc., Pfizer, Inc., Xerox Corporation and others, representing more than $1 trillion of market value, are part of a voluntary pilot program announced in early 2005. The program’s primary purpose was to assess the ability of participants to use XBRL to tag their financial information and the benefits such tagged data offers users of financial information. The real-world benefits of the pilot program have not yet been fully quantified for participants or users, however, the overall impression given by the SECV is that the program is enjoying a level of success.
“At the SEC, we’re excited about the way that interactive data is already providing us with the capability of real-time reporting and real-time analysis. And in the days ahead, across the Commission’s thousands of professional staff in a dozen offices throughout the country, it will free up human capital to perform the subtle analyses and make careful judgments that machines can’t replicate.”
The SEC is actively seeking to expand its pilot program. On September 25, 2006, chairman Cox announced a series of contracts have been signed which “will completely rebuild the SEC’s public disclosure system and make it interactive.” The first obvious manifestation of the interactive disclosure system is the release of the http://220.127.116.11/viewer SEC’s Interactive Financial Report Viewer, allowing public users to view and analyze interactive filings. The availability of this Viewer was announced at the 14th International XBRL Conference in December 2006.
Some market observers consider the SEC one of, if not the, driving forces pushing for XBRL adoption. Based upon his remarks at the Conference in Philadelphia, Chairman Cox does not entirely share this view.
“As the arbiter of the way that every public company in America shares their financial information with the public, the SEC has an important role to play in the technology revolution,” Cox said.
“We need to get out of the way.”
Getting out of the way, however, does not mean abandoning XBRL, leaving it to the mercy of software companies and others. As Cox explains “By contributing resources to the XBRL taxonomy writing effort for US GAAP, we’re not being early adopters – we’re just insuring that government-mandated reporting requirements don’t inhibit companies and investors from using modern tools that the private sector has already adopted, and the entire planet is voluntarily embracing.”
The fact that XBRL is a planetary, or international, effort is also important to the SEC.
“[I]t’s worth noting that the SEC is committed to doing everything in our power to ensure that XBRL remains a truly international, stateless, and open source standard,” Cox states. “All of the XBRL software development that we do, and that we support, will be open source. It will be contributed to the global effort to eliminate friction in the exchange of financial information, so that company data can travel at the speed of light, 24/7, with built-in automated quality control.”
The SEC’s support and inspiration, coupled with broad international support and major implementation such as those currently underway in Spain and the Netherlands, lead many observers to conclude the adoption of XBRL by the American business community is inevitable. “It’s no longer a question of if but when.”