US public companies and mutual funds have been filing their quarterly and annual financial reports to the SEC both in HTML and XBRL formats since 2009. Companies need to invest considerable time and effort in creating the report in both these formats, an arrangement that is far from ideal. This dual submission mandate stems from the fact that the SEC has always been accustomed to receiving company disclosures in HTML, a format they can read manually. The XBRL mandate, though idealistic in intention, has therefore remained an inferior second cousin.
In fact, because the XBRL filing is not mandated as the only submission format by the SEC, CFOs or compliance officers managing corporate filings have not yet warmed up to its broader intent. This has led to the limited use of XBRL documents and a tendency to see the entire process as a managerial burden – a quarterly babysitting exercise, if you may, and one that is often painful.
Can iXBRL be the proverbial silver bullet?
But change is afoot at the SEC.
“SEC staff currently is developing recommendations for the Commission's consideration to allow filers to submit XBRL data inline as part of their core filings, rather than filing XBRL data in an exhibit. That data would then be available in the financial statement presentation in the filing displayed on the SEC website. Use of an inline format may help to improve the quality of structured disclosures, ease filer burden, and facilitate additional staff review.”
Inline XBRL, or iXBRL is a human-friendly version of XBRL. The SEC is considering using iXBRL as a means of collecting corporate information in a single filing that is both human and machine readable. It can definitely be a step forward in the transition to machine readable and analysis-friendly reporting, thereby reducing regulator overheads.
But whether it is a panacea to all the problems in the financial reporting area remains to be seen.
One thing we can say is this – iXBRL will greatly simplify the way data from filings is currently used. With iXBRL, investors will be able to see the financial report as they are used to, while data analysts can still extract the data from the same document.
The ‘new and improved’ version of the standard also has the ability to create greater acceptance of the underlying XBRL format and its purported benefits, in the medium to long term. It can take the XBRL reporting mandate from being seen as an administrative burden to something that can yield true benefits for the company. This includes the opportunity to bring together the many systems and databases an organization uses for management reporting, while also simplifying the process and making information available more swiftly to business leaders.
iXBRL’s true calling though will lie in its ability to make the underlying data more visible.
Currently most corporations are not even thinking about using the information in the SEC filing in a creative way to communicate their story to current and potential investors.There has been limited use of XBRL documents in areas such as investor relations websites, a section that is most often visited by research and financial analysts, not to mention the media. There is anecdotal evidence to prove that companies that make their data available in XBRL get written about a lot more than those that don’t.Companies may therefore benefit from embracing the mandate and understanding that there is indeed more to iXBRL than meets the eye.
Carbon, our disclosure management platform, is designed from the ground-up to be a single-source system. It is already iXBRL-compliant, way ahead of the time at which the SEC might spring a surprise on filers to submit their disclosures in iXBRL. Please feel free to reach out to me on email@example.com for any questions around SEC reporting, iXBRL or our platform, Carbon.