How companies report their financials can have a big impact on investing, and ultimately on the economy. That’s why we think it’s important that new rule proposals published by the Securities and Exchange Commission (SEC) receive careful consideration from the audiences that have a stake in the outcome.
Last week, the SEC voted unanimously to propose a rule to mandate the use of Inline XBRL for public company reporting, noting:
“The proposed amendments are intended to improve the data’s quality, benefiting investors, other market participants, and other data users, and to decrease, over time, the cost of preparing the data for submission to the Commission.”
What is Inline XBRL?
Inline XBRL is a technical specification, developed by XBRL International, the global, not-for-profit standards body responsible for maintaining the standard. Inline XBRL effectively combines HTML and XBRL to create a single document that is both human-readable and computer-readable. With Inline XBRL, SEC filers will only have to prepare one submission, not two as they do today.
XBRL International and its jurisdictions, like XBRL US, continuously works to evolve the XBRL standard with modifications that make it easier and more effective for issuers as well as data users. The Inline XBRL spec was developed by staff and member-based working groups that constantly review and refine the specification. Some of the projects under development today to make XBRL better and more flexible include creating versions of XBRL based on JSON and CSV, which is referred to as the Open Information Model (OIM).
What is the SEC asking in the rule proposal?
During the SEC’s 60-day public comment period, anyone – investors, public company issuers, service and tool providers, data providers – is encouraged to let their opinion be known. The SEC has even made it as easy as possible for commenters, by posing specific questions about the rule such as:
- Should Inline XBRL be required?
- Should small filing companies be exempt from the requirement?
- Should the requirement be phased in, as proposed?
- Will a transition to Inline XBRL impose added costs on filers? On service and tool providers?
- Should other types of content be submitted using Inline XBRL?
- Are vendors ready to handle Inline XBRL creation?
- Will inline XBRL improve efficiency and data quality?
Anyone who has read a final SEC ruling knows that the Commission listens. Comments submitted are referenced throughout concept releases and in final rules – evidence that the SEC carefully reads and considers each letter. The volume of comment letters makes a difference too – if the SEC receives 50 letters in favor of a particular rule and only one letter in opposition, that can affect their final decision.
What does XBRL US think about the proposal?
If large amounts of data are required to be reported, shouldn’t a user of that data be able to not only read the data but also extract it in computer-readable form? We envision a day when any information that today is reported in HTML, is made available using Inline XBRL.
Here are the top six reasons we think the SEC should move public companies to Inline XBRL:
- Cuts down on filing prep time.
With inline XBRL, the combined HTML and XBRL document means only one document is created and submitted, reducing the time spent preparing duplicate filings.
- Reduces liability concerns.
With separate XBRL and HTML filings, there is a chance of a mismatch in data between the two documents. That requires issuers to double-check and vet each number submitted.
- Easy transition.
Vendors of XBRL creation tools have been working to adapt their offerings to inline XBRL since long before the SEC’s voluntary Inline XBRL program went into place. Their work means minimal change for issuers in the filing process. For data users, including data aggregators, investors and analysts, there is no change at all; they can access the same XBRL data they always have.
- Leverages the same “XBRL eco-system” that’s been in place since 2009.
The same US GAAP Taxonomy, the same set of creation and consumption tool providers and databases that have been serving the markets for years, will continue to work with inline XBRL.
- Inline XBRL is a proven success.
It has been required for private and public companies reporting to the HMRC Companies House in the UK since April 2011. Over 2 million UK companies report using inline XBRL every year. Separately, the European Securities and Markets Authority (ESMA), the EU agency responsible for EU securities regulation and the conduct of EU public markets, has announced that starting in 2020, public companies that prepare consolidated IFRS financial statements will provide them in Inline XBRL.
- Inline XBRL is a logical technological advance.
Inline XBRL produces the same, computer-readable data as traditional XBRL but has clear efficiencies that make it easier for issuers, with no downside for data users. Public companies, data providers and software companies are already well up the learning curve on traditional XBRL; a move to inline is simply common sense.
Technology innovation can increase efficiency and provide greater value to the market. We believe that the SEC is moving in the right direction with the Inline XBRL rule proposal. If passed, this change will make it easier and more efficient for issuers, and will help investors get better quality data. If information is important enough to include in a report, shouldn’t it be both human-readable and computer-readable?
What do you think? The SEC wants to know. Submit your comment letter to the SEC today.
Find out more about Inline XBRL and other XBRL specifications.
Read the SEC rule proposal on Inline XBRL.