After several years of “will they?”/”won’t they?”, consultations and voluntary filing schemes, the SEC (Securities and Exchange Commission) in the United States has at last pressed the green light on ‘interactive reporting’ using the XBRL standard. Around 500 of the largest companies who file using U.S. GAAP with a public float above $5 billion will be required to provide interactive data reports starting with their first quarterly report for fiscal periods ending on or after June 15 this year. Other companies will be phased in over the next two years. Gary Simon, FSN’s managing editor looks at how the software vendors are gearing up to meet the challenge.
The SEC’s decision at the end of December to mandate SEC filings was reasonably well sign-posted and expected by XBRL watchers. Nevertheless there remained doubts about the scope of XBRL, for example, how fast new rules would be ushered in and the audit implications. John Turner, Chair of the XBRL Standards Board, and CEO of CoreFiling, a provider of XBRL services told FSN, the SEC's decision to require registrants (ie: companies with listed securities) to start filing their financial statements in XBRL format is pretty similar to the proposed rule announced in the middle of last year but noted a slip in the timescales that was widely expected. “It will start for company filings (quarterly or annual) as from 15 June 2009, ie: 2009-Q2 10Qs instead of the larger and harder 2008-Q4 10Ks as originally anticipated. They've also pushed back the timing for the roughly 8,000 mutual fund risk/return summaries to 1 January 2011, instead of the middle of 2009.”
The rump of US domestic and foreign large accelerated filers using U.S GAAP will have to comply for periods ending on or after June 15th 2010. Companies reporting in IFRS issued by the International Accounting Standards Board will be required to provide their interactive data reports starting with fiscal years ending on or after June 15, 2011, although companies will be able to adopt interactive data earlier than their required start date if they wish. So, by December 2011 all U.S. public companies will have filed interactive data financial information for use by investors. Turner noted, “Now the hard work begins.”
David M. Blaszkowsky, Director of the SEC's Office of Interactive Disclosure, added, "The availability of financial reports in the form of interactive data will transform how investors evaluate companies and securities and, more broadly, transform the relationship between the filer and the investor. Markets depend on and improve with better information, and even more so in difficult times. This action by the Commission is timely and welcome for investors in the U.S. and all over the world."
SEC Chief Accountant Conrad Hewitt added, "Accounting is the business language of the world. Interactive data has the potential to greatly enhance that language, making it easier, more informative and more readily available. Traditional financial statements that we have today will become more transparent and understandable as interactive searchable documents."
Although XBRL reporting has been mandated in several geographies around the world, U.S. adoption of XBRL is widely seen as a pivotal moment in financial reporting and legitamises the approach to the production of interactive data that has been years in gestation. As a result software vendors are rushing to provide the tools that large corporate will need to implement XBRL based reporting.
SAP last week announced the launch of SAP BusinessObjects XBRL Publishing Application by UBmatrix. The company says that the new application is the first in a series of co-innovations featuring embedded UBmatrix technology in SAP BusinessObjects applications, the result of a new partnership between UBmatrix and SAP. UBmatrix is a longstanding developer of XBRL technologies and SAP’s association with the company places it a strong position in this rapidly developing market. SAP itself is no stranger to the intricacies of XBRL through its nested acquisition of Cartesis which was acquired by Business Objects before it became a SAP company.
With SAP BusinessObjects XBRL Publishing, users are free from the burdens of dealing with complex XBRL syntax, claims the company. The application allows users to automatically tag and transform data into ‘XBRL instance documents’ - essentially collections of code on which all reports of financial and business information are based, and are electronically filed with regulatory agencies that interpret the information. The product also provides integration with Microsoft Office enabling business users to incorporate supplemental information from Microsoft Word documents, like the notes and disclosures to the financial statements which are required by the SEC.
Clarity Systems, a keen competitor in the financial reporting and XBRL space also welcomed the SEC’s confirmation of the XBRL implementation dates.
"Clarity has been working with its customers to prepare them for this eventuality by ensuring that Clarity FSR is in complete alignment with the SEC's XBRL mandate", said Mark Nashman, CTO and President, Clarity Systems. "Strategically, companies that choose Clarity FSR not only address their XBRL tagging requirements but also improve the controls and reduce the risk and costs associated with their current external reporting process," said Nashman.
Trintech, noted for its deep specialisation around the so called, “Last Mile” of finance last week announced Trintech's Unity 10.2 application which includes level IV XBRL capabilities in accordance with the most recent SEC mandates for financial reporting.
IBM has struck out in a completely different direction with the announcement that the IBM Data Governance Council is exploring the use of XBRL to provide a non-proprietary way of reporting risk .
"Creating a risk taxonomy using XBRL will provide a vocabulary and a common language allowing everyone to understand what risk means, and that's the first step in making it easier to calculate and report," said Steve Adler, chairman of the IBM Data Governance Council. "When we have semantic clarity around the way organizations describe risk, incidents, events, losses, claims, exposures, forecasts and reserves, it gets easier to aggregate loss information, analyze it with standard actuarial methods, compare past exposures to present conditions and opportunities, and forecast potential outcomes."
According to the Council, an XBRL Taxonomy of Risk could serve as a fundamental building block to enable interoperability and standard practices in measuring risk worldwide. Such standards could potentially enable Central Banks to manage vast databases of loss history and trend analyses that could better inform policymakers and member banks helping to minimize risk and produce better returns.
The IBM approach is interesting because it demonstrates the how the adoption of XBRL might lead to a wider variety of applications for digital reporting – in this case risk based reporting but also potentially environmental reporting. However, the SEC announcement heralds a new era for financial reporting based on XBRL and offers the market the certainty it needed. At last all parties involved know that XBRL is here to stay.
