How will Inline XBRL affect SEC filers and the investors who use the data?
To mark the tenth anniversary of the SEC implementing its XBRL-tagging requirement for financial disclosure filings,
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. In Part 1 (see the June/July 2019 issue of Dimensions), the experts commented on whether the XBRL requirement has been a success, how the use of structured data has evolved over the past ten years, and what challenges remain for issuers in preparing SEC filings. Here in Part 2, we cover quality issues, Inline XBRL, and future developments.
In today's blog, we will focus on Inline XBRL.
• 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.
Question: What does the future hold for XBRL-tagged data and other forms of structured data in SEC filings? For example, do you expect the SEC’s XBRL requirement to expand to other types of filings and be a
standard part of new or amended disclosure rules?
Mike Willis, SEC: As your readers know, SEC staffers are advised not to predict future Commission decisions. I am enjoying my efforts at the Commission—so the short answer is “I don’t know.”
That said, a very common set of outcomes and benefits accrues to all supply-chain participants in historical standardization market efforts (e.g., UPC/Bar Code, HTML, shipping containers, etc.). These benefits include lower costs, improved quality, enhanced processes, accelerated frequencies, increased volumes, expanded diversities, new capabilities, and new market opportunities. Further, as we are observing with the XBRL and other market data-standardization efforts, they commonly start at the end of the supply chain and work back towards the beginning.
Other potential indicators of future SEC actions may include the increasing frequency of the inclusion of structured standards within ongoing Commission rulemaking and the Open Government Data Act. If you have ever filed in EDGAR, you may have noticed an accelerating trend toward immediate use of XBRL-tagged data within the filing process, not just as a website output. Disclosures are the critical raw material for analysis. Enhancing disclosure discoverability, availability, accessibility, and reusability seems like a very useful activity for the SEC, filers, service providers, and other market participants. Stay tuned.
Campbell Pryde, XBRL US: In the last few years, we have seen XBRL referenced as a standard part of many SEC proposals. Previously this was not always the case with SEC rules that involved using standards to improve
reporting. In 2016, the SEC finalized two rules that opted for the creation of a custom XML schema instead of XBRL: Regulation Crowdfunding for Small Businesses and Investment Company Disclosure Modernization for reporting
on Form N-PORT. We disagree with those rules because creating a new custom XML schema is essentially recreating what XBRL already provides— plus, it locks those reporting systems into using XML to prepare their
documents. With XBRL, documents can be created in XML, JSON, HTML, or even CSV.
The more recent trend, though, is that the SEC is opting for XBRL. For example, in 2018 the SEC proposed that XBRL be required for reporting by variable annuity and life insurance companies, and in 2019, it proposed XBRL
be required for Business Development Companies and for Closed End Funds. The SEC also just mandated this year, through the FAST Act, that public companies report their Form 8-K cover pages in XBRL format. We expect this
trend to continue as the benefits of XBRL are recognized by both preparers and users of corporate data.
Christine Tan, idaciti: The future is positive. I see XBRL being expanded to other types of forms—such as the 8-K earnings release and proxy statements.
J. Louis Matherne, FASB: The more immediate needs are the tagging of earnings releases and the auditing of the Inline XBRL report. We know that many investors rely on the more timely earnings release for investment
decisions and the 10-K/Q to confirm and flesh out earlier decisions. Having the earnings release available in a structured format is critical to broader use of XBRL-tagged data by many investors. I understand preparer concerns here, but even if the tagging were limited to the same data points included in the 10-K/Q, which is already modeled, that would be a big step forward for many investors.
An audit requirement for the Inline XBRL filing would evaporate much of the debate we have today about data quality. The introduction of Inline XBRL mitigates earlier concerns for providing assurance on the XBRL exhibit, which
is separate from the official filing. It is now harder to argue against providing some assurance on the XBRL tagging, given that it is embedded in and is a part of the official filing.
In time, I expect all financial information and beyond to be provided in a structured format. This is how financial information is prepared and used today, but we have had this intermediate step that requires filers to convert their digital data to an analog format, and then the user has to convert it back to digital. This digital-to-analog-and-back-to-digital is terribly inefficient and error-prone. In a perfect world, we would go straight through, digital to digital.
Moreover, analysts rely on information beyond the scope of financial data. If we expect financial information to remain relevant to investors, we must be on an equal footing with these other data sources.
To read the most recent issue of DIMENSIONS, click here.