XBRL, to the uninitiated, is a meaningless group of letters. But the extensible business reporting language format will have a profound impact on the availability of financial information, filed with the Securities and Exchange Commission. It will enable investors to search the SEC database for information and to manipulate that data for analysis of companies and investment firms. That is, whenever the SEC completes the project.
The SEC has no timetable for the project, which was started only last year. The new format could ultimately replace EDGAR, or the Electronic Data Gathering, Analysis and Retrieval system, begun in 1983, mandated for registrants in 1995 and now out of date. The SEC should commit this year to some deadlines.
The SEC is testing the new format in voluntary pilot programs with a few corporations and mutual fund companies to make filings more user friendly for analysis than its existing database.
The current electronic format, while making access to corporate and mutual fund reports timely, and being a great improvement compared with a paper-based system, hamstrings individuals, institutions and regulators alike in trying to collect and collate data points for comparison and analysis across companies and mutual funds.
As scrutiny of corporations and mutual funds becomes more intense by all sorts of investors, better tools will make for better analysis. The best oversight of these companies comes from the eyes of hundreds of thousands of investors evaluating the data.
Interactive data under the new format permits Internet users to search for individual items of information such as income from financial reports, executive compensation from proxy statements, defined contribution plan information from 11-K filings, and expenses from mutual fund documents.
The SEC's database now essentially allows users to pull up only a single document containing data on a single company, and the information can't easily be combined with that of other companies.
The new format, by allowing the data from several different companies or funds to be easily aggregated for comparison purposes, will enhance overall regulatory oversight.
Money managers, security analysts, mutual fund companies and pension funds, endowments and foundations ought to get behind the project and use their influence to speed up its development.
The SEC should commit to putting the ADV forms of investment advisory firms into the new format, and should revise the data to make it more usable for searching and manipulating electronically.
The project should go beyond SEC filings. The SEC, which is ultimately responsible for overseeing the National Association of Securities Dealers Inc., should push that group to begin such a program for its existing electronic data on brokers and brokerage firms. The NASD now has no such plans. The North American Securities Administrators Association, which is made up of state securities regulators, as well as users of NASD data, such as pension funds and money managers, ought to seek to have the NASD put such a program on its agenda for action.
The Department of Labor, as well, should put 5500 forms into such an electronic format.
The SEC is going about its project the right way. It has enlisted a number of volunteers among corporations and mutual fund companies to submit data in the new format.
The SEC will host June 12 the first of a series of roundtables to consider the implementation of new technology, including interactive data tools such as XBRL, to help provide investors and analysts and others with better financial information about companies and funds. The panels will include representatives from investors, corporations, mutual funds, auditors, analysts, technology professionals, and regulators. Further roundtables will be held in summer and fall.
As Christopher Cox, SEC chairman, said in a speech earlier this year: "Think how much better life will be when you can not only rely on the accuracy of the numbers, but you can instantly slice 'em and dice 'em exactly as you please."
It is an important project that deserves priority attention by the SEC, as well as all investors and corporations.
