XBRL News

WASHINGTON, Feb 15 (Reuters) - The U.S. Securities and Exchange Commission unveiled a Web site on Friday that lets investors launch charts and graphs to probe the financial data of a select group of companies that have signed on to the agency's interactive data push. The SEC's new Financial Explorer site, reached via http://www.sec.gov/xbrl , is a tool that lets users manipulate raw data derived from XBRL, or extensible business reporting language. The agency is pushing companies to start filing their financial data in XBRL, which means that electronic tags much like bar codes would be attached to each piece of financial data. More than 70 companies have signed on to the SEC's XBRL pilot program, and the agency is expected to propose as soon as April that companies be required to file financial results in XBRL. The Financial Explorer site uses interactive charts and diagrams, including "atomic models", to represent data such as current assets, long-term investments and goodwill. Users can also compare earnings, earnings, expenses, cash flows, assets, and liabilities for companies in the same industry. "XBRL is fast becoming the universal language for the exchange of business information and it is the future of financial reporting," said SEC Chairman Christopher Cox in a statement. "With Financial Explorer or another XBRL viewer, investors will be able to quickly make sense of financial statements." The site is currently limited to the 74 companies that are involved in the agency's pilot program, which include General Electric Co , Microsoft Corp and United Technologies Corp . Members of an SEC advisory committee, created to improve financial reporting, have voiced concerns about the financial cost for companies to implement XBRL and the liability that could be attached to faulty implementation. The committee issued an interim report earlier this week that recommended the SEC go forth with a plan to require companies to file in XBRL, but urged a phased-in approach. The agency has already launched other online viewers that let investors manipulate data instead of having to copy and paste into a spreadsheet. The Executive Compensation viewer lets users compare pay data from 500 of the largest U.S. companies and the Interactive Financial Report viewer allows for the comparison of key disclosures from the companies in the XBRL pilot program. The Financial Explorer site is open source, meaning technology and financial experts can update and improve the viewer tool.

The SEC said it sees the potential for investors and analysts to develop hundreds of Web-based applications that would further push along the development of XBRL. (Reporting by Karey Wutkowski; Editing by Tim Dobbyn)

By Jennifer Hughes

"Are you ready for inter-active data?" asks the website of the US Securities and Exchange Commission. Companies do not have to be ready just yet, but anyone who has dealings with the regulator may soon have little choice.  The SEC, one of the world's most powerful financial watchdogs, is one of the leading cheerleaders for XBRL - eXtensible Business Reporting Language - an interactive medium that promises to end the misery of trawling through pages of text by replacing the large blocks with easily search-able "tags."  Anyone who has spent time going through financial statements knows the drill: hours of mouse-clicking, copying and pasting and double-checking the numbers. Essentially, even searchable PDF files and internet pages that are available today are only "electronic paper". XBRL, on the other hand, is a machine-readable language that tags each piece of data rather than treating it as a block of text.  While this will not necessarily make companies' financials more readable, nor more easily comparable, it should make searching for information easier. Each piece of data will now be independent of the rest, and users will be able to order it how they want.  Once the software is in place, companies should be able to provide information more quickly - and in different formats and languages.  Japan, for example, is perhaps the leading XBRL exponent and from April this year, will require all publicly--traded companies - more than 8,000 - to file in this form. Part of the aim is to improve the attractiveness of Japan's markets to overseas investors, by making it easy for companies to provide English versions of their statements.   Regulators across Europe are also refining their attitudes to XBRL. Some smaller countries require it for all corporate filing, while others have so far focused on banking regulation or other specific corners.  The pace of adoption is picking up. The SEC recently published a greatly expanded taxonomy - in effect, the code upon which the language is based - with a far greater range of individual tags. And the International Accounting Standards Board aims to have a full taxonomy of its 2008 international financial reporting standards ready next month.   "XBRL has the potential to be really important if it is adopted uniformly by regulators and companies. It is really part of the whole convergence project, along with accounting standards, where we're moving towards a single global set," says Ken Williamson, leader of the financial reporting advisory team at Ernst & Young. But he adds a note of caution: "It's not in the bag yet - we need a groundswell of adoption since it is only helpful to the extent people use it."   The technicalities are one potential wrinkle, says Matt Kelly, editor of Compliance Week. "In theory, it's a good idea and a lot of people are warming to it, but there are a lot questions about how to get this done. There are all these questions around the mechanics: How are regulators going to enforce this? Do auditors have a role to play? for example," he says.  There are also questions about who will see the benefits. Users of financial statements, once used to the software, are expected to gain from the greater ease with which they can order data. Regulators should be able to gain from being able to scrutinise the information they collect in new ways.  Companies, however face early costs and upheaval.  "When it's all in place - fine. But until then, for CFOs it's all about keeping investors happy, while giving the finance team a lot of extra work," says Mr Kelly.   But further down the line, the new reporting tool has potential.  "XBRL isn't a solution, it's an enabling tool, and once companies have sorted out the external reporting bit, I think they'll start to look at what they can do internally," says Chris Rodgers, partner at KPMG. "If you're a global organisation, the chances are you're operating with a lot of disparate systems that don't match up and XBRL could significantly improve management reporting."   Even then, managers are going to think through how it affects their external communications, warns Mr Williamson.  "For companies with a good story and state-of-the-art, best-practice communications, it's a good thing. They're open and have performance they want to shout about. But it's more of a challenge for companies who like to control the messages they give to different stakeholders. You upload your data in XBRL and every-one has access," he says.  Mr Kelly likens it to the early years of the internet, when managers were trying to assess the threats and opportunities. "Right now, it's a lot like 1994, when everyone knew the internet was going to be a cool, key tool, but we didn't know quite how to use it," he says. "And some people still haven't figured that one out."

Accounting Today

By Allison M. Henry

Brussels -- The pace of accounting standards convergence is accelerating, and is being driven primarily by an investment community that is rapidly embracing International Financial Reporting Standards. At the same time, technological changes, such as the growing acceptance of the Extensible Business Reporting Language, are challenging the need for the traditional historical financial reporting model. These changes are all converging, which will have a tremendous impact on the accounting and auditing model.  

The Securities and Exchange Commission is working on a number of initiatives to ease these pressures, one of which is on the international front: expediting the convergence of U.S. GAAP with IFRS. The transition to a more objectives-oriented set of standards similar to IFRS has been progressing steadily since a concept release in 2000. In that release, the SEC outlined a framework for the convergence process.  The process has been ongoing, but questions are beginning to arise as to whether convergence has come far enough that U.S. markets can accommodate both sets of standards. The Financial Accounting Standards Board/International Accounting Standards Board convergence process is unique compared with the convergence process in other countries, where IFRS is increasingly accepted. Rather than just reducing differences to achieve convergence, the FASB-IASB process focuses on achieving the highest-quality standards. Furthermore, convergence does not necessarily mean that the two sets of standards will produce the same exact results.  

SEC ROUNDTABLE  In March 2007, the SEC convened a roundtable regarding the IFRS “roadmap,” proposing a process for eliminating the SEC requirement for foreign private issuers to reconcile financial statements prepared under IFRS to GAAP. Participants of the roundtable included issuers, investors, underwriters and CPAs. The group generally concluded that the IFRS-GAAP reconciliation requirement should be eliminated in the near future. As a result of the roundtable, the SEC issued a proposed rule in July to eliminate the GAAP reconciliation requirement for foreign private issuers who file financial statements prepared in accordance with IFRS. In November, the SEC voted in favor of this proposal. The SEC also issued a concept release in which it would explore whether U.S. issuers should be permitted to prepare financial statements in accordance with IFRS. While the SEC moves to allow foreign firms listed on American stock exchanges to file statements according to international standards, a national survey states that U.S. financial leaders are not convinced this is a good idea. According to a study by Grant Thornton, 56 percent of responding CFOs and senior comptrollers disagree with the SEC position. In addition, 49 percent believe that U.S. companies with large overseas operations should not be able to file statements using IFRS. However, a large majority — 91 percent of public companies and 75 percent of private companies — agreed that current U.S. standards are overcomplicated, and 67 percent admitted a preference for principles-based standards. The implications of these changes should not be minimized. Many issues need to be considered, including the security of the U.S. markets, the roles of various standard-setters, enforcement mechanisms at the international level, the ability and willingness of other nations to strive for and achieve the high-quality standards of financial reporting, the funding mechanism for IASB — which is currently voluntary — and the training costs and transition time to a new standard.  Additionally, as IFRS is more principles-based and requires a greater degree of professional judgment, variations in accounting treatment may result. This is an uncomfortable proposition for practitioners accustomed to consistency. At the same time, the underlying cause for much of GAAP’s complexity is the U.S. regulatory and legal environment. Clearly, reform is imperative if practitioners are going to be required to use a greater degree of judgment. A number of initiatives are in progress to reduce the growing complexity: The SEC has created an advisory committee on improvements to financial reporting to study ways to improve reporting and reduce complexity. The Private Company Financial Reporting Committee has been launched to serve as an advocate at FASB for privately held companies. FASB is working on a codification project that will flatten the GAAP hierarchy to two levels: authoritative guidance and non-authoritative guidance. The goal is to create a complete set of standards that can be accessed topically. On the international level, the IASB has published an exposure draft that seeks to provide a streamlined set of accounting principles for smaller, non-listed companies based on IFRS.  

XBRL AND REPORTING   Changes are also developing in the area of how financial and nonfinancial information is conveyed to the investment community. XBRL and sustainability reporting will impact the convergence equation as we focus less on historical accounting issues and more proactively on strategic reporting. This change in focus will also change the role of auditors. XBRL is a technology that can globally transform the process for communicating financial information. It provides investors with access to increasingly detailed information that is continuously updated and can be automatically downloaded into basic software products. XBRL also enables more accurate, expedited analytics, benchmarking and control analysis. The “data tags” used by the reporting language are universal, so information can be seamlessly compared across borders. In addition, the SEC agreed to spend $54 million on a project to overhaul the Edgar filing system to leverage XBRL. The SEC has since announced the completion of the mapping of all of GAAP. 

CONCLUSION   The idea of all these convergence efforts may spark fear in those resistant to change, but opportunities abound for CPAs eager to embrace them. There will be a need for CPAs familiar with both U.S. and international standards to assist in the transition to IFRS. Companies will be looking for experts as they reconfigure their reporting processes, and there will be a need for XBRL and IFRS trainers.

At the same time, numerous challenges lie ahead. The costs and time for retraining will not be immaterial. Changes will need to be made to the CPA Exam and the standard accounting curriculum. Finally, to a large degree, we may yield control of our professional guidance to an international standard-setter. This undoubtedly will affect the accounting profession in the U.S. as a whole. It is imperative that CPAs — in industry, practitioners and professors — keep up with the process and continue to monitor the changes as they unfold. (c) 2008 Accounting Today and SourceMedia, Inc. All Rights Reserved.

The commission's committee for simplifying financial reporting pushes hard for interactive technology, in a document sent to Chairman Cox.

A Securities and Exchange Commission advisory committee is paving the way for the regulator to require companies to turn their traditional financial statements into more easily searchable, comparable, and interactive documents.If the SEC takes the committee's advice, all U.S. publicly traded companies could be required to file audited XBRL financial statements in three years. In the near term, the largest companies could be required to use the extensible business reporting language to tag their financial data and share that information with the SEC without an external auditor's review. On Monday, the SEC Advisory Committee on Improvements to Financial Reporting (CIFR) voted to submit its midpoint progress report to chairman Christopher Cox later this week. It will also be available for public comment. CIFR's recommendations include: reduce industry-specific accounting rules, add more investor representation on the Financial Accounting Standards Board, and create guidance for auditors' professional judgment. The committee's recommendations also ask the regulator to eventually mandate that all public companies use XBRL, following a phased-in transition based on company size and reviews of the program's progress.

The SEC, whose staff members participate in the meetings, plans to act quickly on considering these recommendations. On Friday, Cox said he has asked the SEC staff to make an XBRL-related proposal to the commission later this year.But the details of the committee's recommendations for XBRL has one committee member worried that the group will constrict the program and "severely impair" its overall value for the U.S. financial reporting system. He cited the recommended review milestones as the reason for his concern.At Monday's meeting, Peter Wallison, a senior fellow at the American Enterprise Institute for Public Policy Research, tried to assuage committee members' fears that the use of XBRL could lead to high assurance costs for companies hiring auditors to check that they have tagged data correctly. He was also concerned with the committee's recommendation that the SEC accept XBRL-prepared statements as "furnished" appendages to companies' traditional financial statements, at least initially. By considering the XBRL material "furnished" rather than "filed," during the transitional phase of formally introducing the technology into its system, companies would be less inclined to carefully tag their data and would likely introduce mistakes, he claimed. The acceptance of material that is considered furnished does not carry the same liability concerns as filed documents, unless there is proof that the material was intentionally false or misleading, noted Wallison.

However, Wallison was in the minority. While the committee allowed Wallison's seven-page dissent to be attached to nearly 100-page committee report, the other members still felt a need to give companies wiggle room as the use of XBRL in SEC filings continues to be explored. "We want to go on record [as saying] we should go slow on legal liability," said CIFR chairman Robert Pozen, who also chairs MFS Investment Management.