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It's Official: SEC to Propose XBRL-Based Financial Reporting

Voluntary program destined to be mandatory for all public companies within two years, speeding competitive analysis and easing regulatory oversight.
It's unanimous and not unexpected. The Securities and Exchange Commission today announced that it has voted to propose a rule requiring all U.S. companies to report their financial results using eXtensible Business Reporting Language (XBRL). The XML-based reporting language, which has been used in the US since 2005 as part of a voluntary program, is expected to speed investment as well as regulatory analyses.

"This is all about bringing investors better, faster, more meaningful information about the companies they own," stated SEC Chairman Christopher Cox. "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."

XBRL provides a computer-readable way to tag more than 2,000 financial data points, such as cost, assets, net profit and other values. Because it's standardized, XBRL enables fast, automated analysis not only by regulators, but also by companies examining competitors and entire industry sectors. The SEC's move from a voluntary program to standardization on XBRL has long been viewed as inevitable.

The SEC's proposed ruling would require the 500 largest companies using U.S. Generally Accepted Accounting Principles (GAAP) would start reporting in XBRL for fiscal periods ending in late 2008. If the rule is adopted, the first interactive data provided under the new rules would be made public in early 2009, and and the remaining companies using U.S. GAAP would provide this disclosure over the following two years.

XBRL has enjoyed broad support among ERP, business intelligence and performance management vendors, many of which have been active in XBRL International, a group that is promoting adoption of the standard worldwide. Business Objects, an SAP company (and its acquired performance management unit, Cartesis), has delivered XBRL publishing capabilities tightly integrated with financial reporting and consolidation applications.

"XBRL is a good thing for the market – for companies, regulators and investors alike," stated Scott Behles, a Global Communications Director at SAP. "Companies that build XBRL into the core of the reporting processes will be better able to preserve the trust they have worked so hard to achieve over the last few years and be able to provide a complete audit trail over the financial reporting supply chain from source to digital disclosure."

XBRL is already mandated by the FDIC and in various stages of adoption among financial regulators in the European Union, United Kingdom, The Netherlands, Spain, Japan and Korea.