The Securities and Exchange Commission announced Tuesday that it has completed the development of data tags for the entire system of U.S. generally accepted accounting principles, an important step towards putting in place its agenda for interactive data, or XBRL.
The development of data tags for GAAP has been a slow-moving process because of the complexity of American financial reporting standards. In July the SEC launched a preliminary, or “alpha,” version of the taxonomy— the data-labeling information needed to run XBRL (extensible business-reporting language). Christopher Cox, the SEC chairman, touted the latest development as a move from “paper cuts to the cutting edge.”
Seven different SEC offices will now be working on a recommendation as to when the use of XBRL will be mandated, according to Cox. The recommendation is expected to be made by next spring and a decision could come by next fall, he said.
The GAAP taxonomy, which fits on a tiny memory chip, is expected to enable companies to file their financial reports with an automated system. The process of creating data tags for GAAP has been a complicated one because the taxonomy is comprised of 12,000 different elements.
Working with U.S. companies that have volunteered to take part in the pilot program, the SEC has reverse-engineered financial statements so that companies will be able to report anything with the interactive data software. Cox said the new taxonomy will be posted on the SEC website in its final form by December 5.
XBRL is intended to save investors and analysts time when comparing companies across industries and could eventually simplify and accelerate the financial reporting process. Critics have argued that overhauling how they report data will be costly and time consuming.
The SEC’s pilot program is growing. Last week the commission announced that the combined market capitalization of companies submitting interactive data financials to the SEC has surpassed $2 trillion. More than 40 companies are taking part in the program. Earlier this month NYSE Euronext said it will join that group of companies, a move which Cox called a “milestone in the evolution” of interactive financial filing.