The SEC wants you to embrace XBRL

Bryant University accounting professor Saeed Roohani and his colleagues believe they are at the forefront of a revolution that will alter the way Wall Street does business. Their problem: getting everyone else to believe it, too.
But they are confident that it is about to happen.
Roohani has been one of the pioneers in the push for public companies to employ what’s been dubbed “interactive data” in submitting their financial statements – using a computer language called XBRL.
Supporters of XBRL – extensible business reporting language – say it will forever change how Wall Street looks at public companies, allowing executives, analysts, regulators and investors to quickly delve into financial statements and make instant spreadsheet comparisons instead of having to pore over lengthy reports and prospectuses.
Interactive data has been in the works for several years. In fact, Roohani has assembled an annual conference at Bryant in which experts have quietly met to discuss the intricacies of XBRL.
But at this year’s conference, Oct. 18 and 19, attendees were buoyed by the news last month that the U.S. Securities and Exchange Commission has finalized 60 computer-coded data tags that will make it easier for companies to XBRL.
“I think we’re finally at the tipping point,” Mark Bolgiano, president and CEO of XBRL US, told the 30 or so accountants and computer experts at the conference. “Now we’re taking it to the next level.”
The SEC currently allows companies to file in the XBRL format voluntarily, but Bolgiano predicted that Christopher Cox, the SEC chairman, will make it mandatory in the next year.
Every fact and figure in a financial disclosure has a tag, what Roohani likened to a bar code. An endless amount of data can be embedded in the bar code on a product, from precise manufacturing information to sales figures. Likewise, an XBRL tag shows what a figure represents and how it relates to other items.
“What the bar code has done for the manufactured goods, XBRL is going to do for financial ‘goods,’ ” Roohani said.
The tags will eventually also make it possible for data to be manipulated without the information having to be keyed in again and again as it is moved from one software application to another.
Pioneers in the use of XBRL include software giant Microsoft and Big Four accounting firm PriceWaterhouseCoopers. The SEC, too, has thrown its support behind the move to interactive data, saying it may eventually save companies in filing preparation costs, in addition to the re-typing savings. The experts also say it could cut down on filing errors.
So far, 57 U.S. companies have voluntarily filed SEC documents with XBRL, out of thousands of publicly traded businesses. Many have hesitated because of concerns over the lack of widespread acceptance and because of worries that the move will lead to extra costs.
Nevertheless, the SEC has pushed forward, awarding a $5.5 million contract last year to XBRL US Inc., part of a nonprofit international consortium working to build the XBRL language and promote its adoption. Experts at XBRL US have been working to develop so-called “taxonomies,” or standard classifications, that comply with the U.S. generally accepted accounting principles.
Roohani has been involved in the development of interactive data since inviting Eric Cohen, a XBRL expert from PriceWaterhouseCoopers, to speak to his accounting students about eight years ago. “I then realized the potential of what we had,” Roohani said.
At the conference earlier this month, the experts noted that numerous countries have implemented XBRL in their financial reporting systems, or are close to it, including Japan, Australia and the Netherlands. “We’re seeing government after government turning to XBRL,” Cohen said. “XBRL is indeed a hot item.”
Not to everyone.
Eileen Taylor, a professor at North Carolina State University, told conference attendees that in a recent conversation with several high-level accountants, few knew about XBRL.
“You’ve got a huge job of creating awareness,” she told Bolgiano. “People are going to be saying, ‘Where did this come from?’ ”
Aside from public filings, XBRL will have many other applications, Roohani said. It is already being used successfully by the Federal Deposit Insurance Corporation with data that it collects from financial institutions nationwide.
And, Roohani said, Bank of America reaped benefits when it started using XBRL in its commercial loan processing. At the time, the bank had to re-key information when delivering it about potential borrowers to Moody’s Risk Management Services, which conducted credit risk analysis. Processing took as long as a month.
But when both Bank of America and Moody’s launched pilot programs using financial information coded in XBRL, the waiting time dropped off. “As soon as the bank takes the application, the loan gets analyzed and Moody’s is able to respond almost immediately,” Roohani said.
The SEC campaign to implement XBRL is attracting the most attention now. The agency is slated to make the computer-coded tags and taxonomy available for review to CFOs and analysts on Nov. 12, then to general public on Dec. 5. •

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