XBRL

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© Michael Sutton-Long

In recent weeks, the SEC has given public companies some new menu items, including the following:

  • On June 1, the SEC adopted an “interim final rule” that permits companies to include a summary of business and financial information in Annual Reports on Form 10-K.  The rule implements a provision of the Fixing America’s Surface Transportation Act, or FAST Act, in keeping with the new trend to give statutes names that someone thinks make nifty acronyms. (Of course, the connection between this rule and surface transportation remains a mystery.)
  • On June 13, the SEC issued an order permitting companies to file financial statement data in a format known as “Inline XBRL” rather than filing such data in exhibits to a filing.

Here is a quick review of these new menu items.

The new, improved 10-K summary – The rule permitting a 10-K summary is interesting in several respects.  First, companies have long been able to provide summaries; in other words, there doesn’t seem to have been any reason for the “new” rule.  Second, as noted, it permits but does not require the use of summaries; thus, companies that have not provided summaries in the past and don’t want to now don’t have to.
Continue Reading The SEC’s summer menu

Will the SEC be eliminating the XBRL requirement?It has been four years since XBRL became a four letter word to issuers and nearly eight years since the SEC introduced the concept to issuers, yet XBRL hasn’t fulfilled the SEC’s prediction of XBRL increasing the “speed, accuracy and usability of financial disclosure.”  Largely, the reason for the failed prediction is that many potential users haven’t yet discovered the “usefulness” of XBRL.  Eight years, however, seems like plenty of time for the usefulness of XBRL to catch on.  Given that investors and analysts aren’t using the XBRL data, isn’t it time for the SEC to waive the white flag and eliminate the XBRL filing requirement?

XBRL, of course, was the SEC’s way of racing into the 21st Century.  With high hopes in 2004, then-SEC Chair William Donaldson initiated a study to see how interactive data could benefit the Commission and investors.  In the final rule release, the Commission noted potential benefits such as more financial information being available to investors; less costly and more timely financial information; fewer errors; and increased comparability and interpretation of financial data.  While these benefits have been largely unrealized, the expected costs incurred by issuers have been realized.  Given the ability to look at the XBRL mandate now with real cost and benefit data, it seems that the Commission should re-evaluate the original mandate.

In the meantime, XBRL may be remembered by us in the same vein as Betamax and the Laserdisc – great technology that just never caught on.  Of course, the only difference between failed
Continue Reading Time to throw XBRL in the trash bin?