Are You Ready for XBRL?

The Securities and Exchange Commission voted unanimously yesterday to formally propose new technology to get information about companies to investors faster, cheaper, and more reliably. The SEC has proposed using “interactive data tags,” similar to bar codes used to identify groceries and shipped packages, to identify individual items in a company’s financial statement.

The idea is to have the information easily accessible and searchable via the internet, while allowing the information to be easily downloaded into spreadsheets, reorganized in databases, and utilized by investors, analysts, and journalists. SEC Chairman Christopher Cox said, “It would transform financial disclosure from a 1930s form-based system to a truly 21st century model that taps the power of technology for the benefit of investors.”

As technology evolves, so does business. Corey Booth, SEC chief information officer, said, “Interactive data represents the logical next step in the evolution of company disclosure, just as HTML and Internet access were the next logical step a decade ago.” Companies will be able to provide investors with the necessary analytical tools to better analyze financial information.

Establishing a regulatory framework is intended to create a more accessible and fluid relationship between filer and investor. Companies have voluntarily provided company financials to the SEC since 2005. Approximately 500 of the largest companies would make financial disclosures using the new interactive data formatted in eXtensible Business Reporting Language (XBRL) for fiscal periods ending in late 2008. This means that the new rules would be made public in early 2009. The transition is starting to pick up speed as the SEC seeks to provide the framework for a regulated exchange of financial information between investors and companies.