[IMGCAP(1)]For years, the conversation around XBRL and data-based reporting was theoretical. Though the SEC began requiring companies to report financial statements as data in XBRL format in 2009 (in addition to document versions), there’s been no dramatic evolution in how we think about financial reporting and analysis.

Of course, this isn’t true for every company. Those that invested in comprehensive processes for taking full advantage of structured data have seen their efforts pay off, with internal management reaping the benefits of more streamlined processes, and data aggregators, analysts and investors beginning to realize the benefits of more timely data for incisive analysis.

At the same time, companies lacking the experience or will to make an investment in structured data skate by without truly committing to the format, submitting XBRL data to the SEC that fulfills the bare-minimum structural requirements and often contains so many errors and inconsistencies as to render it largely useless in terms of analysis.

But the days of taking structured data requirements lightly are now history.

Two weeks ago, policymakers, regulators, financial experts, and tech leaders gathered in Washington, D.C., at the Data Coalition’s Financial Data Summit, and one thing was clear: technological and implementation hurdles will no longer be a valid excuse for low-quality structured data filings.

We’re now in a mature market. After evaluating three main topics discussed at the summit, it’s time to dispel the myth that no one is looking at your structured data.

Real-Time Analysis: After seven years of collecting financial results in a structured data format, the SEC now has a critical mass of data—over 120 million data elements—in place. With this foundation, the agency has begun to significantly expand its use of structured data in everyday analysis, in both the Corporation Finance and Enforcement divisions, replacing manual processes with automated analysis in real time.

However, this newly increased use of structured data is only as effective and reliable as the data companies provide. So as regulators identify errors and other issues that slow down their work, we expect them to ramp up efforts to require that companies fix these errors to streamline the process and enable deeper, more dependable automated analysis. For example, at the Financial Data Summit, the SEC unveiled a new staff observation advising filers to carefully evaluate, and where possible eliminate, their use of custom axis tags, which make it more difficult for investors and others to compare data.

Shareholder Demand: It’s no secret that financial services professionals are constantly looking for tools and information that can help them provide deeper and more meaningful analysis to their customers.

Tom Lind, the global head of financial regulatory solutions at Thomson Reuters, spoke on a panel with representatives from the SEC and FDIC. He was unequivocal about the financial community’s existing use of structured data and the high demand for more and better data moving forward.
According to Lind, investors are already using structured data today and want more. The potential for automating analysis is huge—and the only reason this isn’t happening more widely is due to the errors and inconsistencies that are pervasive in the data.

And it’s not just Thomson Reuters. Bloomberg and S&P Capital IQ have representatives on the XBRL US Data Quality Committee, which was formed by market leaders, such as Merrill, Vintage (a division of PR Newswire) and Workiva in conjunction with XBRL US. The Data Quality Committee provides freely available guidance and open source validation rules to prevent or detect errors or inconsistencies that have hindered the use of XBRL data filed with the SEC. With this level of interest from the financial and investing community, pressure is rising on companies to produce usable data, so that investors can more readily analyze company financial results.

Cost/Benefit Analysis: There are companies and policymakers who believe that structured data requirements place an undue burden on public companies, particularly smaller companies.

In separate sessions at the Financial Data Summit, Dick Berner, director of the Office of Financial Research at the Treasury Department, and Justin Stekervetz, associate director of strategy and standards in the Office of Financial Research, both made it clear that an advancement of this magnitude—modernizing the way companies report their financial results—requires a certain investment.

However, recent analysis proves that anecdotal costs for reporting high-quality structured data are outdated and overstated, and over time, benefits far outweigh the costs of the investment.

According to a study by Forrester Consulting, putting a well-thought-out process in place to both report and use structured data can provide a quick return on the investment. Public companies of all sizes have begun to realize this benefit.

Following the Financial Data Summit, companies should understand that, far from being overlooked, structured data is now an important analytical tool for the SEC. As a result, the SEC is particularly concerned about quality—not as a “gotcha” tactic to make life harder for public companies—but in order to make its efforts at regulating capital markets and protecting investors more effective and efficient.

It’s fair to assume that the government’s use of structured data will only increase. Government agency representatives at the Summit discussed in great detail the Financial Data Act, which would require all federal financial agencies to adopt a non-proprietary data standard on all of the information they collect. They all had an obvious desire to increase the use of structured data.

There’s no need to see this as a burden. In fact the increased interest in structured data from the government and investors highlights the increased payoff for doing it right. Software applications to create and consume XBRL data have matured over the past few years, and companies like Workiva (whose customers accounted for 50 percent of the XBRL facts filed in 10-Q and 10-K reports with the SEC in Q1 of 2016) are making the process seamless. As we transition into the modern world of financial reporting where automation and transparency are the norm, it’s critical that your company isn’t left behind.

Mike Starr is vice president of governmental and regulatory affairs at Workiva Inc.

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