It seems new rules from the Securities and Exchange Commission (SEC) will require large publicly held companies to adopt the Extensible Business Reporting Language (XBRL) by December 15th, 2008, for all the financial documents they file with the agency.
Being the financial reporting version of XML, XBRL allows for standardized accounting data to be tagged and retrieved more easily as documents can be mined for data without calling up entirely.
So the SEC is basically requiring big changes from large publicly held companies because their PCs aren’t fast enough to process large documents, errr… while that may hold true, the main reason has to do with the structured way in which the XBRL data is stored.
SEC 10-K annual reports and other documents that use XBRL can be read by software, screened for specific data and then, reorganized into new reports. For investigators and investors looking to quickly search for less common financial data such as “assets held for sale”, the XBRL tagging does wonders.
The new SEC requirement affects “large accelerated filers” which likely includes the majority of the Fortune 500 — 75 companies, including Ford, GE, IBM, Pepsi, United Technologies and Xerox already use XBRL.
Once XBRL has become a standard way of making SEC reports, the mandate is expected to be phased in for smaller publicly held companies. Furthermore, the FDIC and the central banks of the European Union have already adopted XBRL in their reporting.
While the XBRL requirement might seem somewhat steep for large companies, it’s probably a good thing since it’ll be easier for investors, including large retirement fund analysts, to finally be able to quickly compare several companies using very specific variables.
For the financial publications’ readers, this means that the financial reports, in the years to come, might yield significantly more comprehensible information that’ll likely be useful when trying to understand what’s happening in a company where an investment is being considered.
Tags: xbrl, xml, sec, fdic, european banks, financial reports, reporting, standards, compliance, mandate