New SEC Tool Helps Investors Analyze Financials

The program provides a graphical assessment of the performance of companies that filed in the XBRL format.
Alan RappeportFebruary 15, 2008

On Friday the Securities and Exchange Commission unveiled a tool on its Website designed to help investors quickly and easily analyze the financial results of public companies that reported information using eXtensible business reporting language, or XBRL.

Dubbed “Financial Explorer,” it takes information from financial statements and generates ratios, graphs, and charts to give a graphical picture of a company’s performance. It is the latest addition to the collection of software the SEC has been rolling out with an eye to possibly making the use of XBRL mandatory, which could happen by the end of 2008.

“With Financial Explorer or another XBRL viewer, investors will be able to quickly make sense of financial statements,” says SEC chairman Christopher Cox. “In the near future, potentially millions of people will be able to analyze and compare financial statements and make better-informed investment decisions.”

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During the past year, the SEC unveiled an executive-compensation viewer and an interactive financial-report viewer. The former makes it possible to compare salaries of top executives in America’s 500 biggest corporations; the latter allows investors to compare financial disclosures by companies participating in the SEC’s voluntary XBRL pilot program. Thus far 74 firms have made 307 filings, according to the SEC.

Financial Explorer, which is now available for testing on the SEC Website , comes with the slogan “Discover the Power of Interactive Data.” The commission’s most important XBRL accomplishment to date came last year when it completed the development of data tags — strings of computer code assigned to every line item in a financial statement prepared using XBRL — for the entire system of U.S. generally accepted accounting principles. Since then, it’s been contemplating whether XBRL should be mandated. In its announcement Friday, the SEC reminded companies that they can continue to file XBRL data voluntarily “pending anticipated Commission rulemaking.”

New rules could include a decision to require companies to file their financial reports in XBRL format, which has been widely anticipated and would likely generate mixed reactions. Although most executives and investors agree that financial reports would become more user-friendly, detractors argue that XBRL may not be the solution. Some practitioners have derided it as a “consulting product” in search of a market, while others have expressed concerns about the additional costs and fees that will come with adopting and auditing XBRL.