The Securities and Exchange Commission announced Wednesday that 17 companies will file their financial statements in XBRL format in exchange for the commission’s guarantee of speedier reviews of the companies’ registration statements and annual reports. The deal is part of a pilot program meant to allow the SEC to test Internet-based reporting.
The number of companies represents an improvement over last year’s program, when only nine signed on. But despite a major push by SEC chairman Christopher Cox, XBRL has yet to really take off. The SEC had to extend the deadline for participation last month just to attract the current crop of companies.
XBRL, sometimes described as bar-coding for financial statements, stands for eXtensible Business Reporting Language. It’s essentially a way of identifying — or tagging — each piece of data in a financial statement. That, in turn, promises to make it much easier to automate the analysis and comparison of financial data from different companies.
But XBRL has been slow to develop. An August 2000 cover story in The Journal of Accountancy predicted the standard would “revolutionize how business information is reported, used, and calculated.” Nearly six years later, the revolution appears to be only in its earliest stages. Indeed, when the SEC solicited comments on the idea of a pilot program two years ago, respondents fretted about everything from correcting errors to limiting liability to how auditors and company officers would attest to XBRL documents under Sarbanes-Oxley rules.
XBRL was mentioned frequently during a congressional hearing held Wednesday by a House Financial Services subcommittee on improving the accuracy and transparency of financial reporting. In his opening comments, Rep. Michael Oxley (R-Ohio), chairman of the full committee, encouraged witnesses to discuss how “they believe XBRL will revolutionize the reporting and analysis of financial information.” All of the witnesses expressed support for XBRL; however, as CFO.com reported Thursday, several were careful to note that it is not a panacea. While XBRL makes it easier to report numbers, noted Colleen Cunningham, president of Financial Executives International, it does nothing to help companies arrive at those numbers, nor to help investors understand how those companies did so.
Nonetheless, the hearings — and the SEC pilot program — clearly represent a big push for XBRL. The companies participating in the SEC’s 2006 pilot program are: