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Tech TALK Blog: US SEC Announces That Public Companies Can Voluntarily Use the Inline XBRL Global Data Format for Financial Statement Submissions to the US EDGAR System to Better Protect Investors

By David Colgren posted 06-15-2016 09:21 AM


Late last week the US SEC announced that public companies in the United States can voluntarily begin to use the iXBRL data format for submission of financial statements to the US EDGAR System.

US SEC has mandated that all public companies (estimated to be 14,500) tag their financial statements – a core document used by the capital markets to drive global economies – with XBRL (Extensible Business Reporting Language) to make business data disclosed to both regulators and the public more transparent and accessible by using a uniform global data format. This format allows conversion of both languages and currencies for easy analysis by stakeholders around the world. Using XBRL also allows smaller public companies the ability to be watched and analyzed by more investment advisors since the data presented will be in a machine-readable format for easy consumption and analysis and puts these companies on equal footing with larger public companies with dedicated investment advocates.

The IMA has championed the use of XBRL for better analysis of business and financial reporting for many years – including the use of XBRL for governmental financial reporting to begin better transparency to how taxpayer funds are being spent and used to assist the public. 

Currently, all US public companies have to prepare reports in two separate formats for their filings with the SEC's US EDGAR online filing system: HTML and XBRL.

The US SEC announced last week that public companies can begin to voluntary use the advanced Inline XBRL data format for  (iXBRL) submission of their financial reports to the US SEC EDGAR System.

For many public companies – moving to ‘Inline XBRL’ data format will offer the most cost-effective, flexible and efficient means of adopting XBRL.

The US SEC stated in its press release:

“According to the Commission’s order, the format could decrease filing preparation costs, improve the quality of structured data, and, by improving data quality, increase the use of XBRL data by investors and other market participants.” 

Public companies and securities regulators (including the EU “Super Regulator” -- ESMA are also considering the use of iXBRL to improve the efficiency and analysis of extremely complex financial reporting to protect both investors and workers using 401(k) type investments to protect their assets.

Inline XBRL is already in use in a number of projects. These include the filing of accounts and tax returns by some 1.9 million companies each year in the UK, the largest XBRL program in the world in terms of numbers of reports.

The main objective of Inline XBRL ("iXBRL") is to allow XBRL-based data to be displayed in situations where the producer wants to preserve a specific visual presentation of the information, and the consumer wants to be able to validate the input data.

The primary use cases which drove the specification of iXBRL were: 

  • Preparation of company financials for filing with securities regulator
  • Companies regulators want to collect extensible business reports in a machine-readable format for instant analysis and consumption to protect investors and effectively manage capital investments to drive economic growth and jobs
  • Company needs to view data prepared for internal consolidation
  • Most importantly – investors can see the iXBRL format as much the same way they review a PDF – it looks like a traditional balance sheet with the iXBRL data tags “behind” the PDF-like presentation for easy review.

Ultimately, iXBRL simplifies reporting by companies by only submitting one data format to the US SEC.  It will allow financial reporting data analytic professionals to review and approve iXBRL information more efficiently and will also pave the way towards eliminating the additional risk companies currently face submitting separate XBRL and HTML versions of the same financial document.

As previously reported – the US SEC is actively using XBRL data submitted for more effective oversight of the capital markets – promoting economic prosperity and job creation by providing assurances to investors that what is presented to the capital markets – “adds up” and to prevent future “Enrons” by making financial statements immediately available for analysis instead of five years after the fact before the Enron crisis.

Corporate Issuer Risk Assessment tool (“CIRA”), which through “Big Data” technology, allows the SEC to review more than 100 different accounting methods and metrics to examine whether “things look funny” or not, “at the click of a mouse.”

In the past 18 months, the SEC has proposed or adopted 10 new rules on structured disclosure (like iXBRL) that will allow CIRA to be moved across other asset classes that the US SEC oversees and regulates for better transparency and accountability.

In 2005, then Chairman of the US SEC Christopher Cox – saw the need to move paper reporting to a digital format (XBRL) for more effective analysis and regulatory oversight and discussed the benefits of this regulatory data reporting format.    

How does XBRL or iXBRL help management accountants?

Management accountants spend a lot of their time taking information/data from existing financial systems and “cutting and pasting” their results into spreadsheets to create usable reports, inaccuracy and inefficiency can result in this manual re-entry process. This is a “hand-tinkered” process that management accountants perform over and over again. With XBRL this process can be automated – especially if this tagged data is moved into the Cloud for easy retrieval. With XBRL, management accountants can move from “hand-tinkered data entry” process to more effective data analytics by using a machine-readable format like XBRL.

XBRL-tagged data can take Cloud data and move this information into effective digital dashboards, balanced scorecards, allowing management accountants to monitoring key performance indicators, and other forms of business intelligence to assist their own organizations more effectively.  Imagine the opportunity of linking XBRL tagged data with other structured data sources such as social media information in the Cloud to better understand organizational or executive relationships. 

Stay tuned as we hear more about iXBRL and its benefits to both investors reading financial statements and regulators overseeing extremely complex financial/business data of public companies. 

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