TechTalk Blog - US SEC Mandates Inline XBRL for Better Public Company Transparency and Accountability to Protect Investors Enhance Capital Markets Stability

By David Colgren posted 06-29-2018 09:01 AM

  

Yesterday the US Securities and Exchange Commission moved forward with mandating Inline  eXtensible Business Reporting Language (XBRL) requirements for operating companies and funds.  The amendments are intended to improve the quality and accessibility of XBRL data. Here’s the 143-page adopting release from the US SEC to filers.

The amendments, which will go into effect in phases, require the use of Inline XBRL for financial statement information and risk/return summaries.  Inline XBRL has the potential to benefit investors and other market participants while decreasing, over time, the cost of preparing information for submission to the Commission. 

More than 140 regulators around the world in 70 countries use XBRL and its mandated in more than 100 of those and tens of millions of companies are filing in XBRL around the world for better financial and non-financial data analytics.

XBRL International will be holding its next DATA AMPLIFIED 2018 GLOBAL CONFERENCE in Dubai on November 13-15, 2018 at the Intercontinental Dubai Festival city to discuss adoption, implementation and use of data analytics using XBRL.

FROM THE US SEC PRESS RELEASE: FACT SHEET ON THE US SEC ANNOUNCEMENT:

Highlights

The amendments require the use of the Inline eXtensible Business Reporting Language (“XBRL”) format for the submission of operating company financial statement information and fund risk/return summary information and make related changes.  Inline XBRL involves embedding XBRL data directly into the filing so that the disclosure document is both human-readable and machine-readable. 

The amendments are intended to improve the data’s usefulness, timeliness, and quality, benefiting investors, other market participants, and other data users.  The amendments are also intended to decrease, over time, the cost of preparing the data for submission to the Commission. 

While the amendments modify existing XBRL requirements, they do not change the categories of filers or scope of disclosures subject to XBRL requirements.

Inline XBRL for operating companies

  • Operating companies that are currently required to submit financial statement information in XBRL will be required, on a phased basis, to transition to Inline XBRL.
  • Phase-in:
    • Large accelerated filers that use U.S. GAAP will be required to comply beginning with fiscal periods ending on or after June 15, 2019.
    • Accelerated filers that use U.S. GAAP will be required to comply beginning with fiscal periods ending on or after June 15, 2020.
    • All other filers will be required to comply beginning with fiscal periods ending on or after June 15, 2021.
    • Filers will be required to comply beginning with their first Form 10-Q filed for a fiscal period ending on or after the applicable compliance date.

Inline XBRL for funds

  • Funds that are currently required to submit risk/return summary information in XBRL will be required, on a phased basis, to transition to Inline XBRL. 
  • The amendments also eliminate the 15 business day filing period for risk/return summary XBRL data, so that the data will be more timely available to the public.
  • Phase-in:
    • Large fund groups (net assets of $1 billion or more as of the end of their most recent fiscal year) will be required to comply two years after the effective date of the amendments.
    • All other funds will be required to comply three years after the effective date of the amendments.

Website posting requirement elimination

  • The requirement for operating companies and funds to post XBRL data on their websites will be eliminated upon the effective date of the amendments.

Benefits of the Inline XBRL Technology

  • Among the potential benefits, Inline XBRL:
    • Is expected to reduce, over time, XBRL preparation time and effort by eliminating duplication and facilitating the review of XBRL data.  
    • Gives the preparer full control over the presentation of XBRL disclosures within the HTML filing.
    • Is expected to reduce the likelihood of inconsistencies between HTML and XBRL filings and improve the quality of XBRL data. 
    • Enhances the usability of structured disclosures for investors through greater accessibility and transparency of the data and enhanced capabilities for data users, who would no longer have to view the XBRL data separately from the text of the documents. 
  • In addition, tools like the open source Inline XBRL Viewer (more informationdownload) can be used by filers and the public to review and analyze the XBRL data more efficiently. 
  • For fund investors, the benefits of Inline XBRL are expected to be enhanced by the more timely availability of risk/return summary XBRL data due to the elimination of the 15 business day XBRL filing period.
  • For funds, the amendments also will facilitate efficiencies in the filing process by permitting the concurrent submission of XBRL data files with certain post-effective amendment filings.

 

The IMA Supports the Global Use of XBRL:

The Institute of Management Accountants (IMA) is the world’s leading association of management accountants driving business performance in the areas of decision support, planning and control supporting more than 110,000 accountants around the world operating in more than 140 countries, and more than 300 professional and student chapters. Management accountants are vital to the financial health of organizations. They make critical decisions, safeguard a company’s integrity, and plan for business sustainability. They might be CFOs and controllers, budget analysts and treasurers, or one of many other game changers on internal teams. Most of all, as the majority of the accounting and financial workforce, they help drive an organization’s strategy and value amid an unpredictable market. Technologies like XBRL enhanced the advisory role of management accountants to the organizations they serve.

At a macro level, the IMA is concerned that the U.S. in slipping behind in global competitiveness relative to the EU, China and other emerging economies. The IMA believes that transforming enterprise business reporting across the entire value chain will not only improve transparency but also the ability to attract funding from the capital markets.

The IMA has been a major supporter of XBRL not just for external reporting and disclosures (“the end of the value chain”), but also for internal reporting and decision analytics such as the balanced scorecard, data mining/business intelligence,

IMA is a founding member of XBRL and has been a member of the XBRL consortium since 1999. IMA’s active and vocal support includes over 100 articles on XBRL in IMA’s award winning magazine, Strategic Finance; XBRL webinars to educate our members.

IMA believes that XBRL has the potential to transform enterprise business reporting leading to improved business performance and more accurate and timely external reporting disclosures. However, there are several issues which need to be addressed to realize this potential:

There needs to be recognition that the greatest potential value of XBRL is in its ability to transform the entire end to end enterprise business reporting value chain, leading to integration, transparency and efficiency through enhanced data analytics of structured data.

For example, tagging financial reports after they have been produced significantly undervalues the full potential of XBRL and could actually add to the cost of producing financial reports. Instead, the tagging should occur much earlier in the reporting stream to allow for efficiencies at the heart of the infrastructure. Whether it be compliance or enterprise business reporting, IMA strongly believes that the best way to assure a good audit outcome, improve business performance and produce more accurate performance reports (financial and operational) at the end of the value chain is to invest in designing, building and managing business processes inside the value chain.

There needs to be greater inclusivity by engaging more associations and organizations who play major roles across the entire end to end value chain. IMA believes that there is an imbalance in the accounting profession with too much emphasis on the “tail end of the dog” (end of the value chain) – e.g., audit, final financial report preparation and delivery, etc. As noted earlier, IMA is the global advocate for management and management accountants in the best position to influence transformational change in the end to end value chain including enterprise business reporting.

If interested in knowing more about XBRL, structured data, data analytics, blockchain, distributed ledger, and smart contracts consider joining the IMA’s Technology Solutions Practices Committee.

Stay tuned.

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