It’s only an early step in the legislative process, but it’s looking good that “small” public companies won’t have to file financial statements in the XBRL format for at least a five-year period.
The bipartisan Small Company Disclosure Simplification Act passed the House Financial Services Committee by a 51-5 vote on Friday, Accounting Today reported. The bill’s co-sponsor, Republican Rep. Robert Hurt of Virginia, said it “offers a practical step forward to ensure that our regulatory structure is not disproportionately burdening smaller companies and dis-incentivizing innovate start-ups from accessing the public markets.”
At issue is the cost of implementing XBRL, which is actually fairly modest for even very small public companies. XBRL US, the national consortium whose mission is to support the implementation of the reporting language, puts it at $2,000 to $25,000 per year — and declining as companies get more familiar with the process. Small public companies have been filing in XBRL for at two years, the consortium also noted.
But how small is small? The bill’s creative definition of the term would exempt companies with less than $250 million in revenue from the reporting requirement. Sixty percent of U.S. public companies fall below that size threshold, XBRL US says.
The exemption would remain in effect for the later of five years or the Securities and Exchange Commission’s completion of an analysis concluding that the benefits to issuers outweigh the risks.