SEC Requires XBRL Financial Reporting By Large Public Firms
The mandate is expected to be phased in for additional publicly held companies once XBRL has become a standard way of making SEC reports.
The SEC on Wednesday issued rules requiring large publicly held companies to adopt XBRL, the financial reporting version of XML, by Dec. 15 to meet financial reporting requirements.
XBRL is eXtensible Business Reporting Language, a set of extensions to XML that allows standardized accounting data to be tagged and retrieved easily across documents. Creating documents in XBRL allows them to be filed over the Web, exchanged with business partners, and searched for data without calling up the whole document.
"XBRL is the common language of financial information exchange, much as English has become the worldwide language of business," said Sunir Kapoor, a member of the board of directors of XBRL US, a standards group overseeing U.S. contributions to XBRL development, in a statement. XBRL is developing the definitions for tags used to identify terms used in applying U.S. generally accepted accounting principles.
Kapoor is also CEO of UBmatrix, a Redwood City, Calif., firm that is a supplier of XBRL translation software.
The SEC in a public meeting today adopted a mandate as of Dec. 15 to require XBRL for the reports of "large accelerated filers," which would include most of the largest publicly held companies. Seventy-five companies already do so, including IBM, General Electric, United Technologies, Ford Motor Co., Pepsi, and Xerox.
The mandate is expected to be phased in for additional publicly held companies once XBRL has become a standard way of making SEC reports. The SEC is following in the footsteps of the FDIC, which has already adopted XBRL, as well as the central banks of the European Union.
SEC 10Ks and other reports that are filed using XBRL can be read by computer software, screened for certain data such as "net profit," and reorganized in new reports. Finding less common financial data, such as "assets held for sale," or "construction in progress," is possible quickly when they've been tagged by XBRL, as well as the more commonly used terms. XBRL can also be used to translate the terms used in one country's accounting system into those used by another's.
XBRL tags also contain information about the data, as well as the data itself. It will tell a search program that one particular reference to "net profit" is in dollars, while another is a percentage.
XBRL will have the effect of internationalizing financial reporting. XBRL "will represent a quantum leap over existing disclosure technologies," said SEC Chairman Christopher Cox in a statement announcing the mandate. It will help investors in comparing information on companies around the world, making it easier to consider global investment options, he said.
"It would transform financial disclosure from a 1930s form-based system to a truly 21st century model that taps the power of technology for the benefit of investors," Cox said.
More information on XBRL is available at www.xbrl.org. An announcement of the SEC's move can be found at http://www.sec.gov/news/press/2008/2008-85.htm.