Moving quickly into the world of Inline XBRL, The Securities and Exchange Commission recently issued an order “under the Securities Exchange Act allowing companies that comply with certain conditions listed in the order to file structured financial statement data required in their annual and quarterly reports that is integrated within their HTML filing through March 2020.” (see the SEC’s announcement here) According to the SEC’s website, “the Inline XBRL format has the potential to provide a number of benefits to companies and users of the information. Inline XBRL could decrease filing preparation costs, improve the quality of structured data, and by improving data quality, increase the use of XBRL data by investors and other market participants.” The marriage of financial reporting visual presentation and representative structured data is at hand.
Many were surprised about the suddenness of the announcement. Through the years, the SEC has carefully introduced changes to the filing rules by announcing change well in advance. For example, the initial XBRL voluntary reporting program was announced in the fall of 2004 with an effective date of March 2005. The Data Coalition’s Hudson Hollister commented, ““We have just one criticism of today’s announcement,” said Hollister. “The SEC issued its legal order without first publishing the inline XBRL data structure for review by public companies and the software firms serving them. Instead, the agency issued the order and published the structure at the same time. We hope that in the future, the SEC follows the practices of agencies like the Treasury Department in its DATA Act implementation, and publishes proposed data formats in advance, before the legal directives for their use are issued.”( See Data Coalition’s press release for more)
The ability to file with the SEC using inline XBRL creates several advantages over the present system. First, creating and filing one integrated document instead of two automatically cuts down on errors. No longer will companies be tempted to force the rendering of the XBRL document to look like the paper-based version of the financial statements. According to XBRL International Chief Executive Officer John Turner, the voluntary inline XBRL program “means that the US moves from requiring two different formats for the same information to a single format that is both human and machine readable (emphasis added, link to article here). Additionally, the SEC’s implementation features a powerful viewer that can give preparers and consumers of the data immediate feedback on the meaning of line items and the view the associated accounting definitions.
Up to this point, companies presenting the SEC with traditional formatted financial statements in HTML coupled with standard and unique company XBRL extensions had plenty of cover. Not many analysts could use the XBRL data because the elements did not align within industry segments. It is thought that inline XBRL could generate higher use of standard XBRL tags.
According to Turner, “(the new viewer) is a “head up display” for the company information provided to markets. It makes it immediately apparent what is being disclosed, how it is related to other disclosures and what it means. Making the metadata – the definitions – more accessible is deceptively simple and surprisingly important.”
Reasons to make the switch now
Here are a few reasons why your company should consider participating in the voluntary program right now:
It (inline XBRL) is heavily used, with over 3 million private companies in the UK providing their financial statements in iXBRL format to their tax authority. iXBRL is also in use in Denmark, Japan and Australia. Many other jurisdictions are actively looking into its use.
DataTracks participates in the filing of iXBRL reports in the UK market and others around the world. Experience counts.
Reasons to delay
Changes will benefit both preparer and users of the data. Moving to inline XBRL will generate savings to your company and should help to improve reporting quality. This is one time when everyone wins.
About DataTracks: DataTracks US is part of DataTracks Services Limited, leaders worldwide in preparation of financial statements in EDGAR HTML, XBRL and iXBRL formats for filing with regulators. With a track record of over 10 years, DataTracks prepares more than 12,000 XBRL statements annually for filing with regulators such as SEC in the United States, HMRC in the United Kingdom, Revenue in Ireland, ACRA in Singapore and MCA in India.
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