Ten years have passed since the SEC’s XBRL requirement came into effect. Despite the challenges of the transition from traditional filing to structured data, using XBRL in SEC financial reporting has proven to be a great success. The use of XBRL-tagged data in financial disclosures continues to accelerate among investors, market analysts, and the SEC staff who conduct review and enforcement activities. It is becoming the norm for the collection and analysis of financial data.
The SEC’s vast structured database is transforming and improving the way financial disclosures tell companies’ stories to investors. It is solving the two problems the SEC sought to address with the XBRL mandate: The need to make the ever-expanding universe of corporate financial information more easily accessed by investors who are facing investment decisions; and the need to regulate this data universe so that the SEC can ensure compliance with accounting rules, mitigate risks to investors, and detect accounting fraud or other forms of corporate wrongdoing.
In a Toppan Merrill webinar broadcast on September 18, 2019, three experts from different markets sectors discussed XBRL’s success story:
- Mike Willis, Assistant Director of the SEC’s Office of Structured Disclosure.
- Emily Huang, CEO and co-founder of idaciti (which makes tools for analyzing structured data). Ms. Huang explained how Inline XBRL brings a company’s financials to life and how painfully apparent XBRL mistakes are to investors and analysts.
- Mike Schlanger, Vice President of Solution Sales at Toppan Merrill. Mr. Schlanger offered best practices for filing high-quality XBRL disclosures.
Today, we'll cover how XBRL is solving the problems it was mandated to address.
To listen to the full webinar, click here.
“What problem was the SEC trying to solve with XBRL?” That was the question Mike Schlanger, Toppan Merrill’s Vice
President of Solution Sales, posed at the start of the webinar. To put the answer simply: data overload. The SEC needed a cost-effective way to harness a vast quantity of varied financial data into a readily consumable form without losing valuable information. By capturing a volume of data and reducing its variety through standardization, XBRL tagging converts human-readable filings into machine-readable units that can be grouped and processed. For investors and other data-users, this allows aggregation, comparison, and analysis at a faster rate and lower cost
than unstructured disclosures can.
With XBRL, all users of the SEC’s structured database can access instantly usable data, such as numeric and narrative-based disclosure elements of financial statements, without needing third-party data aggregators to process it first. All footnote data must be tagged, so users can mine the entirety of a company’s financial disclosures directly from the SEC’s database. By contrast, most third-party data aggregators provide access only to the face financials and select footnote information.
After ten years of the SEC’s XBRL requirement, we have proof that structured data in financial reporting is achieving the benefits the program was put into place to accomplish. XBRL makes it much easier for investors to gather and
analyze financial information quickly and much harder for companies to hide accounting problems or fraud from the SEC.
“How comfortable are you with the possibility that your XBRL and EDGAR submissions may be telling a different story?” is a concern that Mr. Schlanger wants all SEC filers to consider. Moreover, he warns, “any inconsistencies in the information between those files may subject a company to more adverse scrutiny and greater risk.” Far from making data useless, XBRL errors and sloppy tagging can give the SEC and investors valuable clues about the quality of a company’s accounting controls and even its corporate governance.
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