Earlier this week US SEC Commissioner Michael S. Piwowar addressed The 34th Annual Current Financial Reporting Issues Conference in New York, New York, on November 16, 2015.
The Republican US SEC Commissioner Mike Piwowar had several remarks regarding Interactive Data /XBRL for public company financial disclosure including the future deployment of inline –XBRL to further enhance the use of XBRL by investors around the world.
As the former Chief Economist of the US Senate Banking Committee – US SEC Commissioner Piwowar has been very skeptical about the use of XBRL for public company disclosure and the cost to public companies for compliance but his remarks this week are very balanced and objective regarding the use and rewards of XBRL by the US SEC and public companies and pleased that he wants to take XBRL to the next level using in-line XBRL.
Both US SEC Chairs Arthur Levitt (Democrat) and Christopher Cox (Republican) supported the build out and use of XBRL for capital markets transparency/accountability. They saw the need to move from PDFs (which required human detailed review that only allowed the US SEC to review a public company once every five years) to using XBRL (a machine-readable format for instant diagnostics to detect fraud or financial issues to protect investors and the millions of workers using 401(k) accounts for retirement). Very pleased to see US SEC Commissioner Mike Piwowar directly address the use and benefits of XBRL for regulatory disclosure to the public and to help companies attract capital from Wall Street by using this machine-readable format.
His remarks included the following statements from his speech:
“I have personally observed software demonstrations that run interactive data filed with the Commission through a series of filters selected by the user. The resulting analysis – the identification of companies that might be worth further investigation by an investment analyst or portfolio manager – is based on a review of all issuers through automated tools. Hence, whereas it might not have been previously feasible for a single analyst to sift through the financial results of thousands of issuers that file with the Commission, interactive data now makes that possible.
Moreover, the Commission has taken efforts to make the data obtained through interactive data filings freely available for use by investors, academics, and the public. At the end of last year, the Commission announced a program to provide such information into structured data sets and to post the data sets for bulk download on the SEC website.[11] Each data set includes all relevant filings submitted for a particular quarter or year and includes the data as reported by filers – no changes are made to the information. To date, the Commission has been posting data sets on a quarterly basis starting from 2009 through the current third quarter of 2015.[12] I look forward to receiving feedback from users of the bulk data sets, including suggestions to improve this new program.
One significant concern has been the quality and accuracy of the information contained in interactive data filings with the Commission. A bi-partisan letter signed by the Chairman and Ranking Member of the Securities, Insurance, and Investment Subcommittee of the U.S. Senate Committee on Banking, Housing, and Urban Affairs – Senator Mike Crapo (R-ID) and Senator Mark Warner (D-VA) – expressed such concern.[13] Given that these financial disclosures are picked up and disseminated through various information channels, I share concerns that potentially materially inaccurate information is possibly being conveyed to the markets and could be affecting the prices of securities.
One suggestion to address problems with the accuracy of interactive data filings is to move away from the current model of filing the interactive data as a separate exhibit and move to in-line XBRL. In that respect, there would be a single electronic document in which the XBRL data and tags would be embedded. In-line XBRL has the potential to improve the accuracy of structured data, ease burdens on issuers, and facilitate easier review. Currently, the Commission’s EDGAR system is not capable of accepting filings with in-line XBRL. The Commission should move promptly to modify EDGAR to permit in-line XBRL and commence a voluntary pilot program to obtain more information about the costs and benefits of an in-line XBRL system.”
Stay tuned for more details about the build out of XBRL across the capital markets and by the government for more transparent reporting and accountability.
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