A majority of public companies may be able to avoid the need to file their financial reports using Extensible Business Reporting Language, or XBRL, technology if a congressional bill gets signed into law.

Last Friday, the House Financial Services Committee overwhelmingly approved a measure by a 51-5 margin that would exempt companies with annual revenues of less than $250 million from the Securities and Exchange Commission’s mandate to file their financials using the interactive data-tagging format for five years or more (see House Panel Approves Bill Exempting Small Companies from XBRL Requirement).

Under the bill, the SEC would also need to carry out a cost-benefit analysis and determine whether the benefits of using XBRL outweigh the costs. The XBRL mandate would be delayed until the later of either five years after enactment of the law, or a determination by the SEC that the benefits exceed the costs.
The SEC has been requiring the largest public companies to file their financials in XBRL since 2009 and gradually phased in smaller companies over the next two years. The technology has attracted its share of critics who claim it is expensive and the usefulness of the technology is often hampered by inaccurate data and tagging.

Matt Rizai, CEO of WebFilings, a company whose technology is used by about 60 percent of Fortune 500 companies for their SEC and corporate social responsibility filings, defended XBRL technology in a recent interview.

“I think the debate out there goes to the long-term use of XBRL,” he told me in late February. “I think when it was first mandated, everyone was trying to figure out how every company in similar industries would tag financial data the same way and whether that would have a benefit or not. But as time went on, I think more and more people understand the benefits of this uniformity. The data, if it’s farmed and harnessed correctly, can allow the analysts and others to look at it.

“If you look back to the days when Edgarization was mandated, you had a similar kind of debate in the marketplace saying, ‘Why would you want to have everyone do Edgarization for the SEC?’ Over time that also proved to be very beneficial and everyone kind of got to be used to it. I think that some of that debate has gone away and it’s a lot less than it used to be,” he added. “Just like Edgarization today is very much accepted, I believe that XBRL also is becoming more and more accepted. I think the long-term benefits XBRL was designed for are really showing up and will show up in the future. It’s a good way for data quality to increase and become more and more uniform so that when people from outside want to analyze data and they put their tools together, it’s a lot easier for them to understand and compare different companies and their financial data.”