It’s only an early step in the legislative process, but it’s looking good that “small” public companies won’t have to file financial statements in the XBRL format for at least a five-year period.

The bipartisan Small Company Disclosure Simplification Act passed the House Financial Services Committee by a 51-5 vote on Friday, Accounting Today reported. The bill’s co-sponsor, Republican Rep. Robert Hurt of Virginia, said it “offers a practical step forward to ensure that our regulatory structure is not disproportionately burdening smaller companies and dis-incentivizing innovate start-ups from accessing the public markets.”

Opinion_Bug7At issue is the cost of implementing XBRL, which is actually fairly modest for even very small public companies. XBRL US, the national consortium whose mission is to support the implementation of the reporting language, puts it at $2,000 to $25,000 per year — and declining as companies get more familiar with the process. Small public companies have been filing in XBRL for at two years, the consortium also noted.

But how small is small? The bill’s creative definition of the term would exempt companies with less than $250 million in revenue from the reporting requirement. Sixty percent of U.S. public companies fall below that size threshold, XBRL US says.

The exemption would remain in effect for the later of five years or the Securities and Exchange Commission’s completion of an analysis concluding that the benefits to issuers outweigh the risks.

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3 responses to “‘Small’ Companies May Be Free of XBRL”

  1. At our CPA practice (primarily engaged in tax/valuation), we are fascinated with XBRL. I personally attended a lecture in NYC on 2/29/12 (we are based in LA, CA), and the annual conference in Las Vegas last summer. We sense that XBRL is the next big thing in technology. The sentiment in our firm is that of child ready to jump onto a fast moving ferris wheel, but doesn’t quite know how/where. Could anyone suggest a niche we might be able to fill in this rapidly evolving phenomenon? We are eager to attain the relevant certifications toward that end.

    Much appreciated!

  2. A cost of “$2,000 to $25,000” certainly gives a lot of scope – its a shame that XBRL US couldn’t provide rather more useful predictions in order to help make the transition to XBRL formatting as simple as possible.

  3. Viewing XBRL solely as an SEC Compliance requirement may be overly narrow, particularly given the accelerating global adoption in markets around the world for companies both large and small. It may be more useful to view it as a information supply chain standardization consideration and thereby recognition earlier application driving process cost/time enhancements – similar to the UPC/Bar Code in the retail grocery store supply chain. Further, as outlined in this NYTimes article – XBRL is enabling a reduction in compliance burden in other countries pursuing the Standard Business Reporting or SBR compliance approach: http://www.nytimes.com/2013/11/20/opinion/freeing-europes-small-businesses.html?_r=2&
    New York Times  ‘Freeing Europe’s Small Business”: “For instance, Standard Business Reporting, or SBR, a common, simple, digital language for business-to-government reporting, has worked well in the Netherlands since 2008. It allows a Dutch firm to submit its financial accounts to tax authorities, business registers and banks as an input to credit applications. If adopted elsewhere, SBR could significantly reduce information costs. ”

    Further, the CFA Institute paper- “Financial Reporting Disclosures: Investor Perspectives on Transparency, Trust and Volume” http://www.cfainstitute.org/…/investor-perspectives-on-disclosures.pdf includes a “Technology”  Recommendation
    “Standard setters and regulators need to look more to the use of technology to facilitate the capture, management, analysis, presentation, and delivery of information to investors. Disclosures broadly, and the disclosure framework specifically, should be developed in the context of advances in technology and connectivity, and they should be responsive to the ever-increasing demand for data. Increased use of technology holds the promise of better (improved quantity and quality of), faster (improved timeliness of), and cheaper (improved access to) information for the user. The SEC should move forward with its 21st Century Disclosure Project. ” Considering this investor/analyst community call for more / better access to data seems like another useful consideration for small company financial executives..

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