SEC's iXBRL requirements met with optimism -- and trepidation
New U.S. Securities and Exchange Commission requirements mandate large, accelerated filers combine already required XBRL data and financial reports into a single file, a move the SEC maintains will improve data quality, efficiency and accessibility.
EXtensible Business Reporting Language, a framework for the global exchange of business information, has been in use in the U.S. since 2011.
Other XBRL-enabled global capital markets beyond the SEC include the Financial Services Agency in Japan and the Accounting and Corporate Regulatory Authority in Singapore, as well public and some private companies in the U.K. and South Africa. The European Single Electronic Format, which goes into effect on Jan. 1, 2020, is an electronic reporting format mandating issuers in EU-regulated markets prepare annual financial reports in Inline XBRL (iXBRL).
The SEC's iXBRL requirements, which went into effect in June 2019 for large, accelerated filers and will be phased in for other accelerated filing businesses and smaller companies over the next two years, necessitate companies submit financial statement data and funds' risk and return summary information in a single iXBRL file, making it both human- and machine-readable.
Proponents say the new requirements will improve efficiency and accuracy, as well as eventually lower costs, while opponents question those benefits and their ability to improve data quality.
From XBRL to Inline XBRL
The new SEC iXBRL requirements are good news for CFOs and CIOs, said Anna Kwok, vice president of professional services at Workiva.
"XBRL was arguably the biggest thing to come along to enable machine-readable financial data, and Inline XBRL is how we advance toward the common goal of providing better data," Kwok said.
Inline XBRL improves upon traditional XBRL by placing previously unavailable context at a viewer's fingertips. For example, when a user conducts a keyword search in XBRL for a particular disclosure item, the completeness of the results is limited by label consistency. IXBRL makes it easier to enhance the search from within the financial report via XBRL attributes, such as codification references, to get a better understanding of interrelated disclosures. This is crucial in financial and XBRL review.
IXBRL also provides a more explicit link from digital data back to its original source, making it easier to integrate time series and company comparable data within Inline XBRL data without having to access that information separately.
Moving to iXBRL should be an easy switch for companies using the same tagging environment to prepare financial filings as XBRL files. However, companies using a separate tagging document from the primary document may require more work to create a process for moving to iXBRL. Most major financial reporting vendors are launching these capabilities in their products.
"The biggest transition for most people may be getting over the initial learning curve on viewing Inline XBRL information and using other Inline features to benefit the reporting and review process," Kwok said.
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