SEC Chairman Christopher Cox is making a serious push to get more public companies and their accountants to start using Extensible Business Reporting Language, or XBRL, to publish their financial statements, and the day may soon be at hand when it's going to be required.
Cox hosted a press conference touting the fact that XBRL US, with the help of the AICPA, the Financial Accounting Standards Board, the Financial Accounting Foundation, the six largest accounting firms, and other organizations, has translated all of the generally accepted accounting principles into XBRL data tags. In December, those tags will be available for download from the Internet and on secure digital thumb drives.
"Very soon we'll be able to move from paper cuts to the cutting edge," said Cox. Before long, XBRL may go from being a purely voluntary program to becoming mandatory. That hasn't happened yet. Cox plans to consult with the top accounting firms and with the various offices at the SEC this spring to get their opinion on when XBRL should become mandatory.
XBRL does offer many advantages, especially for investors and analysts who want to compare financial statements across companies and do cross-industry comparisons--even across the entire S&P 500. They'll be able to import the statements into software like Microsoft Excel without having to retype information and make mistakes. It also promises to speed up the closing of books for accountants. Cox noted that data from the companies testing XBRL in the voluntary program showed they were experiencing enormous efficiencies.
XBRL may well prove to be a boon for the accounting software industry as more developers upgrade their programs for the technology. Microsoft was one of the early companies to get behind the technology. Michael Ohata, chairman of the XBRL International Steering Committee, is also a senior director at Microsoft Finance. As XBRL becomes mandatory, the competition is likely to be forced into supporting XBRL to make financial information flow from one application to another, and so their clients can meet SEC reporting requirements.
It's encouraging that GAAP has finally come to XBRL. But it's likely that companies are still going to face a battle in getting their financial statements to work with the technology. Relatively few companies joined the voluntary program the SEC introduced two years ago and it's going to take some prodding and a lot of handholding to get them to convert their financial systems to XBRL. Accountants are going to be kept very busy working out kinks in the new system.
