The House Financial Services Committee has overwhelmingly approved bipartisan legislation that would remove a requirement for smaller public companies with less than $250 million in annual revenue from filing their financial statements in Extensible Business Reporting Language, or XBRL, format for five years.

The committee passed H.R. 4164, the Small Company Disclosure Simplification Act, by a 51-5 vote on Friday. The bill, introduced last week by Rep. Robert Hurt, R-Va., and Terri Sewell, D-Ala., aims to remove a disincentive for companies to access capital in the public markets.

“With millions of Americans still out of work, our top focus in Congress should be enacting polices to help spur job creation throughout the country,” Hurt said in a statement. “We must refine costly regulations—especially those disproportionately affecting smaller public companies and those who are considering accessing capital in the public markets.”

He contended that the requirement for public companies to file their financial statements using XBRL was an example of a regulation where the costs currently outweigh potential benefits for small, innovative companies.

“The Small Company Disclosure Simplification Act provides a much-needed exemption from these burdensome regulations for smaller public companies and requires the SEC to perform a cost benefit analysis on the rule’s impact on these companies,” said Hurt. “Our bill offers a practical step forward to ensure that our regulatory structure is not disproportionately burdening smaller companies and dis-incentivizing innovative start-ups from accessing the public markets. Instead, these companies can focus on utilizing capital for innovative research, expansion, and job creation.”

The Securities and Exchange Commission has pushed in recent years for public companies to file their financial statements using XBRL, which allows data to be tagged in an interactive format. The technology has long held promise of providing an easier way for investors and analysts to compare financial data across companies and industries. However, problems with implementing the tags properly have held back many investors from being able to fully take advantage of the technology.

Hurt’s office pointed out that in order to comply with XBRL regulations, small companies must expend tens of thousands of dollars on average. However, evidence suggests that less than 10 percent of investors actually use XBRL.

In line with the JOBS Act, the Small Company Disclosure Simplification Act removes duplicative regulations for small companies from submitting interactive data filings with XBRL. Public companies are still required to file other mandatory information with the SEC, however.

The bill would exempt small businesses with annual gross revenues of less than $250 million from the requirement to use XBRL for financial statements and other periodic reports filed with the SEC under the securities laws. However, they could elect to use XBRL for their reporting if they want. They would be exempted for the later of either five years after enactment of the law, or a determination by the SEC after conducting an analysis that the benefits to issuers outweigh the costs.

XBRL US, the national consortium for XBRL business information reporting, said Thursday that it strongly disagreed with H.R. 4164. The organization pointed out that the legislation’s definition of a small company as any entity with under $250 million in revenue would encompass approximately 60 percent of all public companies. 

Large companies would still have the XBRL filing requirement, while small companies would have the ability to opt in to XBRL filing if they so choose.  XBRL US cited several reasons for opposing the legislation, noting that it could result in small companies losing equal access to the capital markets because their corporate data would be less accessible and less transparent than large company data. 

“Data aggregators and investors will have no incentive to collect and rekey small company data which will be significantly more expensive to use,” said the group.

XBRL US also pointed out that small public companies have been filing in XBRL format for at least two years, which means they are “well up the learning curve.” Removing the XBRL requirement could mean they would lose valuable knowledge that they would then need to relearn when the exemption was lifted.

The organization also contended that investors would be harmed because they would lose access to small company data that they have been able to use for the past several years since the XBRL requirement was put in place by the SEC. 

XBRL US also contended that the technology was not as costly as claimed by the lawmakers behind it. “The primary reason for this legislation is to reduce the burden on small companies, but the cost of XBRL filing ranges from as low as $2,000 per year to $25,000 per year, but even these costs are already beginning to decline as many companies transition to financial management programs that incorporate the XBRL process,” said the group.

Finally, the group pointed out that although the bill would allow small issuers to opt-in to use XBRL if they wished, it is unlikely that any small companies would comply.