Believe it or not, a decade has elapsed since June 2009, when the SEC implemented its XBRL-tagging requirement for financial disclosure filings. Three years later, the XBRL mandate was fully phased in for all SEC filers, and it continues to expand. All regulatory compliance teams at SEC reporting companies are now involved in XBRL tagging. SEC rules that took effect in May 2019 now require Inline XBRL for information on the cover of Forms 8-K, 10-Q, 10-K, 20-F, and 40-F.
To mark the anniversary, Dimensions asked six XBRL experts in the securities regulation, financial reporting, or capital markets sectors to comment on the structured-data revolution in SEC reporting: its benefits to investors and companies; the success stories thus far; and the challenges that remain for structured data and the general modernization of disclosure.
• Mike Willis, Assistant Director, SEC Office of Structured Disclosure
• J. Louis Matherne, Chief of Taxonomy Development, FASB
• Campbell Pryde, President and CEO, XBRL US
• Christine Tan, Co-Founder and Chief Research Officer, idaciti
• Pranav Ghai, CEO, Calcbench
• Lou Rohman, Vice President of XBRL Services, Toppan Merrill
NOTE: The views expressed here are solely those of the individual respondents, and they do not necessarily reflect the views of their respective organizations.
Ten years after the SEC first required companies to tag their financial statements in XBRL, do you view the XBRL requirement as a success?
J. Louis Matherne, FASB: As with any project of this magnitude, there are learning experiences and areas for improvement. The old expression, “I wish we knew then what we know now,” is apropos here. When the SEC project was launched, there was little real-world experience for a project of this magnitude to learn from. We had a sandbox with test filings, but that pales against the hundreds of thousands of filings in the system today. Without a doubt, some of our design choices would have been different, and I wish we had had higher engagement with users in the beginning. Even so, I am not sure it would have made much difference, since all of us—from preparers through to the end users—were learning as we went along and constantly making improvements.
Today there are over 200 million XBRL-tagged facts in the XBRL reports filed with the SEC. This is a massive volume of financial data, which was not available in such a cost-effective, easy-to-retrieve manner prior to this program. Data aggregators are consuming this structured data into their systems, and there are several new data aggregators with platforms built entirely using this XBRL-tagged data. While it is hard to quantify, we know that analysts, hedge fund managers, and others are using this XBRL-tagged data in their systems. Additionally, the SEC continues to extend the structured-data requirement into other areas of reporting.
More importantly, this has significantly enhanced what data aggregators, analysts, and investors can do with the data, since they are spending less time and resources on capturing that data in the first instance. Their coverage is now broader and deeper. So, yes, the SEC XBRL project is a resounding success.
Mike Willis, SEC: Overall, migrating the disclosure supply chain from electronic paper toward structured standardized disclosures now provides more useable and granular disclosures to the general public, investors, and analysts. Previously, some disclosures for some registrants were available from commercial aggregators for a fee; now investors can freely access and immediately reuse 100% of all structured disclosures (narrative and numeric) in a matter of seconds after submission.
The democratization of registrant disclosures is a clear success but not a perfect one. Like most things in life, we have some improvement opportunities, and filers have even greater opportunities to realize communication and process benefits.
Campbell Pryde, XBRL US: The original SEC final rule on interactive data to improve financial reporting stated: “The new rules are intended not only to make financial information easier for investors to analyze, but also to assist in automating regulatory filings and business information processing. Interactive data has the potential to increase the speed, accuracy, and usability of financial disclosure, and eventually [to] reduce costs.”
While there have been bumps along the way, I believe the XBRL program has largely met these goals. Today, most commercial data providers rely on XBRL-formatted corporate data because it is significantly easier and more timely to extract and process than traditional HTML files. One data provider estimated that XBRL processing takes about one or two minutes per filing, versus 20 minutes for an HTML filing and 30 minutes for a good-quality PDF. That timesavings reduces the cost of analysis and increases the timeliness of the data for investors, analysts, and regulators. The automation enabled by machine-readable XBRL data eliminates much of the data translation that had to take place with paper-based (HTML) filings. That, in turn, leads to better-quality data.
Christine Tan, idaciti: Yes, I view XBRL to be a success. Increasingly, the XBRL data is being used for analyses and research. For instance, a number of academic researchers have written and published papers in leading academic journals using XBRL. Based on our customers, we see that the XBRL data is being used by investors and analysts for company financial research. The XBRL data is also being used by corporations themselves to do benchmarking analyses and disclosure research.
How has the use of XBRL/structured data evolved over the last ten years?
J. Louis Matherne, FASB: That is an interesting question, particularly when you broaden it beyond XBRL to structured data. In the last 10 years, structured data has become almost a household term. It would be vain to think that we started this movement, but I am confident in saying that we would really be behind the eight ball if we had not started when we did. Big data is all the talk, maybe even superseded by related advances like artificial intelligence, blockchain, and distributed ledger. Imagine where we would be if we had not started when we did?
One general lesson we have all learned about technological advances is that there are generally multiple advances that need to converge before an idea is actually workable—whether we are talking about smartphones or GPS tracking devices, or the amazing number of fitness trackers that are available today and the data they provide. All these technology advances depend on multiple technologies being available and being available at a cost-effective price.
So getting to the question, the broad availability of data—both structured and unstructured, financial and everything else, and the applications and platforms that are now available to consume and use this data—is fundamentally transforming how analysts and investors consume and use the information. They have multiple sources of information, some to corroborate and some to expand beyond the foundational financial data. Analysts and investors have many sources of information that they consider useful, and they are mashing this together in their earnings models. Much of this was not possible when XBRL was first conceived 20 years ago, but the advance of multiple technologies has made it a reality.
Lou Rohman, Toppan Merrill: It took investors, analysts, and the SEC a long time to start using XBRL. The data sat idle in the early years. But that period was necessary to get to where it is today, where investors and the SEC are using it and the efficiencies are being realized. If the SEC had waited for investors to ask for tagged data, we would still be where we were 10 years ago—consuming data from paper-based, non-structured financials.
Even though the data was not used in the first several years, today’s consumers are using data that was filed during the early years. So although no one used the data then, the data from ten years ago is being used today.