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New XBRL Version May Answer SEC’s Prayers

With companies' lackluster use of XBRL and the SEC taking heat about its own low usage, a new Inline version could make it easier for filers as well as regulators.

Corporations have expressed their disdain for tagging financial data through eXtensible Business Reporting Language (XBRL) and the Securities and Exchange Commission itself has been criticized for not using it enough internally. But a new version of XBRL could make the data-formatting language more popular.

Inline XBRL (iXBRL), which offers easier formatting than XBRL and can be viewed on Internet browsers instead of software, is being touted as an answer to much of the discord that has surfaced since CFOs and their staffs were required to use the language following an SEC mandate in 2009. The new Inline version eliminates the need to create separate XBRL and HTML attachments when filing their financial documents — which bogs down current filers — and allows filers to embed the XBRL tags in the financial documents.    

The SEC, for its part, is considering Inline XBRL and working closely with its staff to evaluate a possible implementation, Virginia Meany, assistant director of the Office of Risk Assessment and Interactive Data in the SEC’s Division of Economic and Risk Analysis, told CFO. “We believe that the use of Inline XBRL creates a good opportunity to improve both efficiency and quality,” she says.

That would eliminate the “double jeopardy” that Rob Blake, product director at Trintech, a provider of software solutions, and one who assisted with the early creation of XBRL, says comes about when having to use both XBRL and HTML when filing financial statements.

As Meany notes, Inline XBRL, which is already being used in the United Kingdom for corporate- reporting purposes, has “potential benefits to all stakeholders, including preparers, investors and regulators.”  

The SEC’s backing of the easier formatting language may not be enough, however, to soothe all of its critics. One of the more vocal ones, Rep Darrell Issa (R-Calif), chairman of the House Oversight Committee, sent a comment letter last week to SEC Chair Mary Jo White asking for an explanation from the Commission on why it hasn’t embraced XBRL more internally and used the data it collects from companies that way.  

While Issa did not specifically address Inline XBRL in his comment letter, he believes by not using XBRL the SEC is not only wasting time and money, it is thwarting the enforcement of its original mandate to require the use of XBRL.

In his letter, he said the SEC “does not fully utilize the structured financial data it already collects, continues to buy-back from commercial databases the same data it collects from filers and has failed to address concerns about the quality of structured-data filings.” In contrast to XBRL, an automated language in which users employ interactive data tags to assign a unique identifier to each piece of financial data, Issa complains that SEC staff members continue to monitor the information manually.

So what’s the harm? The agency, according to Issa, continues to ask for more resources to pay for increased staff to check corporate data instead of integrating the XBRL data from the corporate filers.

The quality of the data itself, however, could be one reason for the perceived slowdown in the project. According to Issa, more than 1.4 million errors have been identified as stemming from corporate filers using XBRL. 

Improvements to XBRL can only come, he writes, as “the SEC integrates structured data into its existing review processes, enforces the quality of data submitted under the Interactive Data Rule, and articulates a vision for the transformation of its whole disclosure system from inaccessible documents into structured data.”

That may be a tall order. To date, the SEC has not created any penalties for corporations that file inaccurate data. As long as a company makes a “good faith effort” in filing with XBRL and makes an amendment if there is a mistake, it typically has been accepted by the SEC.

The commission also provides leeway for companies that make such errors in what it calls its limited liability period. That is a 24-month window for companies to adjust to XBRL and not have their filings actually count as “filed.” Though the limited liability window has closed for large accelerated filers, all companies (with the exception of foreign companies) will now face expiration of this liability on October 31, 2014.

But the SEC may have to punish corporations for inaccuracies going forward if they want CFOs and their staffs to provide fully accurate data, according to Blake. The SEC’s strictures should put “some teeth around really bad XBRL submissions,” he says.

Though Inline XBRL, he says, is not a solution to all of the problems, it can help. “It’s not more painful for companies. I think it will be something they are more receptive to.”  For one thing, in the new version, data changes would be made by corporations in one combined file instead of two separate ones.   

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