The Securities and Exchange Commission voted May 14 to formally propose requiring U.S. public companies to file their financial reports using Extensible Business Reporting Language. XBRL tags uniquely identify individual items in a company's financial statement.
Formatting financial documents with XBRL allow the data to be easily searched on the Internet, downloaded into spreadsheets, reorganized in databases and put to any number of other comparative and analytical uses. An international nonprofit consortium of approximately 450 major companies, organizations and government agencies is developing the open-source, royalty-free language.
"This is all about bringing investors better, faster, more meaningful information about the companies they own," SEC Chairman Christopher Cox said in a statement. "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."
If, as expected, the rules are adopted within the few months, approximately 500 of the country's largest companies would be required to submit their SEC filings in XBRL format by late 2008. Other companies would be phased in over the next two years. Companies would also be required to post the information on their Web sites.
The required tagged disclosures would include primary financial statements, notes and financial statement schedules. Initially, companies would tag notes and schedules as blocks of text, and a year later, they would provide tags for the details within the notes and schedules.
"Interactive data represents the logical next step in the evolution of company disclosure, just as HTML and Internet access were the next logical step a decade ago," SEC CIO Corey Booth said. "And like a decade ago, this move will usher in a quantum leap in helping companies explain their business to investors."
The SEC launched an interactive data pilot program in 2005 covering financial statements of corporate filers. In addition, it began an interactive data filing program for mutual fund risk return information in 2007. Also in 2007, the SEC created an online database tagging executive compensation data for 500 large companies.
"Accounting is the business language of the world, and interactive data will become an easy and reliable technology to improve that language worldwide, just like many other tools available on the Internet," SEC Chief Accountant Conrad Hewitt said. "Over the long term, preparers are expected to benefit through better internal management information and applications, and investors will benefit with improved analytical methods to analyze financial information."