SEC Commissioners will meet on Monday to consider implementation of a plan to require companies to file financial statement information in an interactive format known as XBRL (extensible business reporting language).
XBRL or data tagging is the process of identifying accounting principals with unique data tags that allow financial statements to be easily downloaded into various applications for quick comparisons over time and across industries. Currently more than 70 companies voluntarily disclose financial information using XBRL in an SEC pilot program, and at least 20 mutual funds voluntarily submit risk/return summaries from their prospectuses in XBRL.
Mandatory XBRL reporting is predicted to take several years to implement while the SEC deals with the following questions/concerns:
- XBRL is predicted to increase transparency and usability of financial information, but what will it cost companies to comply?
- What liability should result if financial information is improperly “tagged” and therefore mistakenly misleading? Should XBRL documents be considered “furnished” rather than “filed” during a phase-in period?
- How much time will auditing and finance professionals need to learn the new system? The SEC’s Advisory Committee on Improvements to Financial Reporting has suggested the SEC wait three years.