XBRL—More important than ever to the SEC’s mission
In January 2015, the House of Representatives passed H.R. 37, “Promoting Job Creation and Reducing Small Business Burdens Act.” If passed by the Senate, Title VII of the Act would exempt more than 60 percent of U.S. public companies from the requirement to use XBRL for financial statements and other reports to be filed with the U.S. Securities and Exchange Commission (SEC). This exemption applies to those companies with annual gross revenues of less than $250 million.
This move would be in stark contrast to recent efforts, such as the Digital Accountability and Transparency Act of 2014 (DATA Act), to expand the use of machine-readable data to enhance transparency and accountability, thereby improving the public’s understanding and oversight of federal government spending.
Over the past several months, the SEC has become increasingly vocal in its opposition to any curtailment of its XBRL requirement. Mary Jo White, Chair of the SEC, expressed her concerns in her written response to Questions for the Record from Representative Keith Ellison from a Congressional hearing last April, stating:
The Commission is committed to using developments in technology and electronic data communications to facilitate greater transparency in the form of easier access to, and analysis of, information. I believe that requiring financial statement information in structured data format enables investors and others to search and analyze the financial information dynamically and facilitates comparison of financial and business performance across companies, reporting periods and industries.
Then, at the “SEC Speaks” conference last week, the SEC’s Investor Advocate Rick Fleming spoke out against Title VII of H.R. 37. “If passed by the Senate and signed into law, I believe this bill would seriously impede the ability of the SEC to bring disclosure into the 21st Century,” said Fleming. “If Congressional action is needed, it should be used to press the SEC to move forward in its efforts to make disclosure more accessible and useful for investors.” Fleming’s full speech can be read here.
In addition to comments by Chair White and Fleming, recent statements by SEC Commissioners Gallagher, Stein, and Aguilar clearly indicate that the SEC intends to increase its use of XBRL data to analyze financial reporting and to strengthen its efforts to motivate filers to submit XBRL data that is free of the translation errors that have hindered widespread use of XBRL. Fleming summed it up best when he said, “We should not expect the next generation of American investors to scroll through hundreds pages of disclosure to find the information they need to make investment decisions.”
So what does this mean for filers? It means they need help from technological advances that have been developed to ensure that XBRL data is error free.
At Workiva, we are committed to helping our customers detect tagging or modeling errors that can limit the usability of their data. With our Wdesk platform, we provide state-of-the-art functionality backed by dedicated XBRL and financial reporting experts who help our customers embrace the next era of financial reporting and data transparency.
About the Author
Mike Starr is Vice President of Governmental and Regulatory Affairs. He previously served as the SEC Chief Accountant’s advisor with a focus on investors’ financial information needs and the role of structured data in meeting those needs. Prior to his work with the SEC, Mike served as Chief Operating Officer for Grant Thornton International Ltd., where he oversaw global strategy and public policy. He earned a Bachelor of Science in accounting from Oklahoma State University (OSU), and in 2010 was recognized as an OSU distinguished accounting alumnus and inducted into the School of Accounting Hall of Fame.