What are the latest updates about Financial Data Transparency Act?
On December 23, 2022, President Biden signed H.R. 7776, the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023, including TITLE LVIII and the Financial Data Transparency Act (FDTA). This includes requirements for the adoption of data standards related to municipal securities.
The Financial Data Transparency Act (FDTA) aims to improve transparency in government reporting while minimizing disruptive changes and requiring no new disclosures.
About the Latest Mandate
The latest legislation would require local governments to comply with the new reporting standards by 2027.
These new financial reporting standards are to be created by the Securities and Exchange Commission.
The Final Provision
The final legislation mandates that these government agencies put their financial information in a machine-readable format – XBRL. The key difference between the initial version and the final draft of the legislation is that they will be responsible for enacting the new data standards.
It is preferable to have the SEC be the body that administers the standards because Congress has oversight of the agency, and if the rules are not working, Congress can exercise oversight of the agency.
The following Regulatory Agencies are covered under the Financial Data Transparency Act
- Securities and Exchange Commission (SEC)
- Federal Deposit Insurance Corporation (FDIC)
- Office of the Comptroller of the Currency (OCC)
- Consumer Financial Protection Bureau (CFPB)
- Board of Governors of the Federal Reserve System
- Commodity Futures Trading Commission (CFTC)
- National Credit Union Administration (NCUA)
- Federal Housing Finance Agency (FHFA)
- Municipal Securities Rulemaking Board (MSRB)
Top 4 benefits of XBRL
XBRL has several advantages in all phases of business reporting (primarily financial reporting) and the company’s financial operations analysis. However, here are the top four benefits of adopting a structured reporting format.
XBRL allows the preparation of re-usable, authoritative definitions called taxonomies. It captures the meaning contained in all reporting terms used in a financial report, as well as the connections between all of the terms.
Verifiable Business Rules
One of the best parts of adopting a structured business reporting language is that it allows the creation of business rules that restrict what can be reported. These rules can be logical or mathematical, or even both.
Availability of tools that will minimize your preparation efforts by automating entries from your previous filings.
Ease of analyzing, transforming, and comparing data
A human touch to a globally-recognized machine-readable language is the go-to solution for all stakeholders to prepare, analyze and compare financial information.
What’s the impact?
The Act directs certain regulatory agencies (including the SEC) to jointly issue proposed rules for public comment that establish new data reporting standards within 18 months of enactment of the Act. These recent SEC rules will impact entities that post on EMMA.
Proponents of the Act believe it will make the information collected and made publicly available by regulatory agencies easier to access, analyze and compare by requiring data to be posted in a machine-readable format, similar to the requirements for the information posted to the Electronic Data Gathering, Analysis, and Retrieval system (EDGAR) by publicly traded companies, mutual funds, and other regulated entities.
Stay tuned for more.
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Get in touch with an XBRL expert from our team.