Great news yesterday regarding the expanded use of XBRL across the capital markets by the Securities and Exchange Commission (US SEC). The US SEC Commission voted to propose rules to require public companies (+14,500) to disclose the relationship between executive compensation and the financial performance of a company to increase transparency and accountability. The proposed rules, which would implement a requirement mandated by the Dodd-Frank Act, would provide greater transparency and allow shareholders to be better informed when they vote to elect directors and in connection with advisory votes on executive compensation. The proposed rule requires companies to tag the disclosure in an interactive data format using eXtensible Business Reporting Language, or XBRL. This requirement would be phased-in for smaller reporting companies, so that they would not be required to comply with the tagging requirement until the third annual filing in which the pay-versus-performance disclosure is provided.
The comment period for the proposed rules will be 60 days after publication in the Federal Register.
The announcement by the US SEC Chair Mary Jo White yesterday confirms the US SEC interest in actively using XBRL across the capital markets for transparency and accountability and provides further support to US Treasury and OMB in using XBRL as the possible data standard for financial government reporting under the DATA Act.
Currently the US SEC is using XBRL for enhanced transparency and disclosure for public company financial statement data posted in the EDGAR System for the public to access. Using a machine-readable format of public company financial data will help both regulators and investors better understand the financial condition of companies so the information can be put into excel spreadsheets for better analysis. Other countries such as Japan, China, Australia, UK, Israel and the Netherlands are using XBRL for financial statement transparency and accountability to help companies better obtain investor interest by having the information in a machine-readable format linked to common accounting definitions to support comparability across companies and industry sectors.
This week, US SEC Commissioner Kara Stein hinted in testimony that the securities regulatory agency will shortly be moving XBRL to the iXBRL data format to better help investors utilized company financial statement tagged data: https://www.sec.gov/news/statement/stein-statement-on-proposed-pay-for-performance.html
US Treasury is expected to announce the financial standard data format and draft taxonomy (financial data definitions) that will be used across the federal government by the end of May 2015. The IMA supports the use of XBRL for the DATA Act. State and cities would also use this same financial data format for improved data disclosure to enhance performance metrics and support open data efforts to protect taxpayer dollars.
According to the US Comptroller General of the USA in recent testimony before Congress – more than $150 billion is unaccountable by the US Government annually because financial information is not in a format for analysis and discovery.
Below is a link to the US SEC press release that provides additional information.
Stay tuned for further information!
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