The SEC would like to improve the way it and investors get financial
information from corporations and has proposed a rule change that would require
companies to provide that information using a form of interactive data. The
format is called XBRL, which stands for eXtensible Business Reporting Language.
XBRL provides for the tagging of data -- for example, net income or retained
earnings -- that can then be used by accounting and other financial programs in
a manner much more efficient than formats commonly used today such as text
and HTML. This newer format is expected to greatly simplify the work
and reduce the costs of importing, analyzing and comparing data from financial
statements and other corporate documents. XBRL has been compared to the bar
codes used on grocery items.
Over the past three years, certain companies voluntarily
provided their financial information to the SEC in XBRL format and the Commission
apparently found the results of the trial favorable. Last
month, in fact, the SEC launched a website that provides mutual fund comparisons using
interactive data.
While the final rule has yet to be submitted, you can read more about the proposed change here. The proposal would have the largest U.S. companies that use GAAP providing data in XBRL beginning with fiscal periods ending 2008. Smaller companies using GAAP, and companies adhering to IFRS would be phased in over the following four years.
In
announcing the proposed rule, the SEC’s chief accountant, Conrad Hewitt, predicted
that “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."
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