SEC Hails XBRL in Meeting With Microsoft, Oracle and Other Vendors
The Securities & Exchange Commission has expanded its support of XBRL, the software language that allows for instantaneous retrieval of detailed information within business reports, by telling a select group of software developers that it supports the technology’s expanded use in new generations of business software.
SEC Chairman Christopher Cox, on December 19, told representatives of Oracle Corp., Microsoft, and business enterprise systems developers Exact Software NA and Epicor Software Corp, that the “interactive data” capabilities provided by XBRL are vital to bolstering investor confidence. He noted that by enabling his agency to automatically access very specific bits of information and format them to meet individual analysis needs, XBRL will enable his agency to perform steady and in-depth analysis in a “routine and instantaneous way that is impossible with other technologies.
“Individual investors are looking for better tools to help them choose mutual funds and individual stocks. Interactive data can help make those new tools available,” Cox said.
The software companies have all been active in XBRL International. The consortium of more than 300 organizations was originally put together in 1998 in an effort, led by the American Institute of CPAs (AICPA), to develop the code, whose letters stand for eXtensible Business Reporting Language. It is the financial reporting community’s version of an eXtensible Markup Language, or XML, family of software codes.
“This (Cox’s meeting with the software companies) is a very important event. What the SEC is doing is engaging the business community around XBRL and effectively moving the market,” said Louis Matherne, president of XBRL International and director of XBRL at the AICPA.
Cox spoke even more forcefully for XBRL, in early December at the AICPA’s National Conference on Current SEC and PCAOB Developments, when he said that XBRL will shape the future of financial reporting. He said that it will make reporting by companies more effective and efficient, and predicted that XBRL will do more for business reports than bar coding has done for product distribution.
The SEC, in February, began allowing companies to voluntarily file their reports to the agency in XBRL coding. Thus far, only about 20 companies have filed in XBRL, but both Matherne and Cox are among those hopeful that the code will someday become the standard for reporting.
At the SEC-PCAOB developments conference, Cox noted that expanded use of XBRL could reduce the required efforts for compliance. “Interactive data will give SEC analysts better tools to detect fraud. It can make it easier, less expensive, and less time consuming for companies — and their accountants — to comply with SEC reporting requirements,” he said, adding that it could “automate” a lion’s share of the work required by section 404 of the Sarbanes-Oxley Act.
Although Cox did not say this, it’s obvious that reducing the compliance workload could make XBRL-enabled reporting systems the darling of public companies. Meeting those compliance standards, particularly the 404 section of Sarbanes-Oxley Act, has been among the most expensive and time-consuming issues that businesses now face.