Securities and Exchange Commission Chairman Christopher Cox is expected Wednesday to announce a long-awaited plan to mandate companies to file their financial statements in an interactive data-tagging format.
Also known as XBRL, for extensible business reporting language, the data-tagging technology could be a boon to information-hungry investors and analysts who would be able to more easily search and compare companies’ financial statements, proponents say. However, it could also cause headaches for CFOs, depending on how long the SEC gives them to turn their traditional, static financial statements into interactive, searchable documents.
The SEC has hinted at its plans, noting on Wednesday’s agenda that it will consider whether to propose an interactive data amendment to determine how any mandate might be phased in. Cox’s enthusiasm has been clear from the start, as he has relentlessly pushed XBRL as the keystone to his agenda for greater transparency.
“This will probably be one of the most important changes since the Securities Act of 1933 and when Edgar put filings online in 1996,” says Sunir Kapoor, a board member of XBRL US and CEO of UBmatrix, a provider of XBRL products.
Kapoor said he expects Cox to announce that the agency will take six months to get its interactive data team ready and that big companies will be required to file in XBRL format sometime next year. The SEC’s Committee on Improvements to Financial Reporting (CIFR), an advisory board, recently recommended that the commission mandate XBRL’s use and suggested the agency require all publicly traded companies to data-tag their financial documents using a phased-in schedule based on company size.
Prospects of a new mandate have drawn the ire of some critics who worry about the costs and wonder about the benefits of XBRL. Wednesday’s announcement could dash any last hopes for a future of static financial statements.
“The train has left the station,” Kapoor says. “The only question is really the scope and the timing.”