Greater transparency, lower filing costs, reduced risks and better data quality – these long-promised benefits of XBRL are finally becoming a reality. As the XBRL landscape continues its swift evolution, we discussed the latest developments with five experts – as well as with a representative of the SEC.
Vintage Question > In June, the SEC announced that it would start accepting structured financial data in the Inline XBRL (iXBRL) format. What do you see as the main benefits and challenges of this new format?
Jaret Klekota > As with anything new, there are going to be challenges making sure that companies understand what all the requirements are, and what changes there are between their current process and the iXBRL process. For example, there are “hidden tags” in iXBRL – companies need to understand what this means and what they should be doing in that area.
Since the SEC says that companies should really be focusing on the quality of the data, having the XBRL embedded into the HTML financial filing could free up companies from making sure the statement was rendering on the previewer in the same way as the HTML, and instead focus on appropriate tagging. iXBRL can help them embrace and streamline that review process, since there will no longer be two separate documents to compare and try to identify the differences between them.
For now, filing the iXBRL version is voluntary but I think there’s going to be a gradual increase in filings. Some may wait a bit longer in the process to see how it goes, and also wait until they are more comfortable around the requirements before filing.
Ilya Vadeiko > In our opinion, the benefits are huge and obvious. If regular XBRL requires separate reporting and creates a significant duplication of work for auditors and filers – as well as gaps in logic – iXBRL eliminates the separation between traditional HTML and new XBRL formats, as Jaret mentions. This solves many existing problems in terms of consistency and accuracy. In terms of implementation, I would guess that this would require a fusion or transformation of old (HTML) and new (XBRL) reporting processes and procedures. This may be challenging for large filers who have already established such parallel procedures.
Hudson Hollister > For companies that have adopted disclosure management software, which is most of them, it does not take any additional effort to report using iXBRL. But, as Jaret points out, this is currently voluntary. Companies can continue reporting two versions of the financial statements if they want to, and many companies have created a review process that assumes two versions. They have some people in charge of reviewing the document and other people in charge of reviewing the data.
Even though that might be less efficient, it is not without cost to change the process. Many companies are so busy with the compliance that they might not bother. Of course, we would say that in the long run, companies should take advantage of this opportunity to combine those review processes, because it will get them ready for when the SEC moves to mandatory iXBRL – and we think the Commission will make it mandatory. Some leaders inside the SEC are hoping to propose a move to mandatory within the next year.
The reason for moving to mandatory iXBRL is beyond just fixing the problem with the financial statement itself. Inline will allow huge progress. Think about the 10-Q and the 10-K — right now, these documents are lengthy, and there is so much in them that could be structured but isn’t. For example, the cover page of the 10-Q and the 10-K have check-boxes that say what kind of company the filer is. Right now, those check-boxes are not connected to any database. If the SEC switched to using data fields instead of the document form, they could have a field that says “Check the box for which type of company you are,” and we could automatically generate a list of the all the wellknown seasoned issuers.
Campbell Pryde > Most of the work for iXBRL should be done by software, and so one of the challenges is making sure that the people preparing the files have the technology to do it. As of early August, there had been a total of four iXBRL filings – and even that number was surprising to me, since the SEC just announced it. Most people will wait and see what happens and it’s going to take a couple of months for the software community to update their systems to support the format.