SEC proposes switch to Inline XBRL
The Securities and Exchange Commission has proposed a rule to require companies and mutual funds to use Inline XBRL, a version of Extensible Business Reporting Language, in their operating company financial statement information and mutual fund risk/return summaries.
The SEC adopted rules in 2009 requiring companies to file their financial statements and periodic reports in XBRL format. Later that year, the SEC also required mutual funds to provide the risk/return summary information from their prospectuses in XBRL format. The XBRL requirements currently apply to operating companies that prepare their financial statements in accordance with U.S. GAAP or International Financial Reporting Standards, as well as to mutual funds. Filers subject to these XBRL requirements have to submit an Interactive Data File, including information tagged in XBRL, as an exhibit to the Related Official Filing, which is filed in the traditional HyperText Markup Language (HTML) or, less commonly, American Standard Code for Information Interchange (ASCII) format.
The XBRL requirements were supposed to make financial information and mutual fund risk/return summaries easier for investors to analyze and to help automate regulatory filings and business information processing. However, since that time, the SEC said it has heard from commenters who expressed concerns about the quality and cost of creating XBRL data, and how extensively it is actually being used, though other commenters have recognized the benefits of XBRL data. In addition, the SEC’s staff has identified several data quality issues associated with the XBRL data filed by companies in their financial statements.
The new proposed rules aim to address some of these concerns by improving the quality and usefulness of XBRL data and, over time, decreasing filing costs by decreasing the costs of XBRL preparation. The proposed amendments would require financial statement information and mutual fund risk/return summary information to be provided in the Inline XBRL format. “Inline XBRL allows filers to embed XBRL data directly into an HTML document, eliminating the need to tag a copy of the information in a separate XBRL exhibit,” the SEC explained. “Inline XBRL would be both human- readable and machine-readable for purposes of validation, aggregation and analysis. The proposed amendments also would eliminate the requirement for filers to post Interactive Data Files on their websites.”
A group representing Chartered Financial Analysts is generally in favor of XBRL advances. “The CFA Institute has supported XBRL and the structuring of data since the beginning of time because it just makes information more available,” said Sandy Peters, head of the Financial Reporting Policy Group for CFA Institute. “There’s all this dialogue about disclosure overload, and how many pages are in documents and the like, but people don’t necessarily print these things out. They’re going to data providers and getting data they want extracted from financial statements, many times not using XBRL, but sometimes using XBRL with the data providers.”
But the CFA Institute is still taking a wait and see attitude toward Inline XBRL. “We went from paper to EDGAR to XBRL to possibly Inline XBRL, and this may take it a little bit further,” said Peters.