An industry group is urging the House to postpone a vote on legislation that would scale back Securities and Exchange Commission requirements for companies to file their financial statements using Extensible Business Reporting Language, or XBRL, technology.
The group, known as the Data Transparency Coalition, is pushing for the House to delay a vote on the bill, H.R. 5405, the Promoting Job Creation and Reducing Small Business Burdens Act, which is scheduled for this evening. The group argues that certain provisions in the bill would be detrimental to the push for more accountability and transparency in financial reporting.
“We strongly urge the House to take a closer look at H.R. 5405 before voting on it,” DTC executive director Hudson Hollister said in a statement. “Each and every provision should be examined because, as they say, the devil is in the details. We believe the bill is well intentioned but there are several provisions that will set back financial transparency and corporate accountability, including the exempting of nearly 60 percent of public companies from filing data-based reports with the Securities and Exchange Commission.”
Hollister noted that the SEC has recently begun enforcing the accuracy of the XBRL data format for corporate financial information, yet the exemptions in H.R. 5405 would dramatically restrict the availability of this searchable corporate financial data to investors—and to the tech companies building investment tools.
By encouraging, instead of discouraging, the move toward data-based financial reporting, the House would achieve its goal of reducing the burden on all businesses. More paper-based forms and longer response time will be a result of the passage of H.R.5405 - exactly the opposite of the bill’s intention.”
The Data Transparency Coalition, and its members, which include PricewaterhouseCoopers and technology companies such as RR Donnelley and Workiva, have been advocating for the further adoption of structured data throughout the SEC’s disclosure system.
Accurate structured data, using XBRL and other standards, holds the promise of helping investors make better decisions, allow the agency to use analytics to find accounting fraud, and provide an opportunity for public companies to automate compliance tasks.
Hollister noted in a blog post that the XBRL exemption proposal originally came from legislation introduced by Rep. Robert Hurt, R-Va. That bill, known as H.R. 4164, the Small Company Disclosure Simplification Act, was approved by the House Financial Services Committee in March (see House Panel Approves Bill Exempting Small Companies from XBRL Requirement). It would remove a requirement for smaller public companies with less than $250 million in annual revenue from filing their financial statements in XBRL format for five years, which includes the majority of public companies. That bill was then combined with nine others that have already been approved as standalone bills into H.R. 5405, which was introduced last Monday by Rep. Michael Fitzpatrick, R-Pa.
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