Financial Reporting

SEC’s Year-End XBRL Release Advances the Ball on Data Over Documents

The U.S. Securities and Exchange Commission’s year-end release of ‘structured data sets’ of XBRL information appears aimed at improving the access to, and usefulness of, this electronically tagged data.

The move is also consistent with calls emanating within and outside the SEC to place greater emphasis on underlying data reported by companies, vs. the existing EDGAR filing system (which is viewed by some as document-centric).

As announced in the SEC’s Dec. 30, 2014 press release, the Commission’s Division of Economic and Risk Analysis (DERA) has been tasked with organizing XBRL-tagged data that is now required to be filed by all public companies, and making it available in “combined data sets on the SEC’s website in formats other than XBRL.”

The SEC’s goal for this initiative is “to facilitate investor analysis and comparisons of public company financial statement data.” Later in 2015, says the SEC, data sets will be expanded to include information provided in electronically tagged footnotes.

Public companies have been required to provide their financial statements and certain other information in an electronically tagged format called eXtensible Business Reporting Language, or XBRL, since 2009. The requirement was phased in, starting with the largest public companies.  The SEC’s Financial Statement Data Sets released last week include quarterly information from 2009 to the present, and will be updated quarterly.

We spoke to several XBRL experts who hailed the release of the structured data sets by the SEC, and at the same time called on the SEC to continue to drive improvements in the quality of data filed by companies.

They also noted the importance of the promised follow-on release of footnote and other XBRL data beyond that released last week, which was limited to data corresponding to information reported directly on the face of the financial statements.

Hudson Hollister, executive director of the Data Transparency Coalition, praised the release of the data sets by the SEC. “Up until now, that information was only available in thousands of separate files, now it’s in one data set.”

“That lowers a barrier to use… The largest infomediaries, Bloomberg and ThomsonReuters, have people processing this,” but added other infomediaries could make use of the data more readily.

Before last week,Hollister said, access to XBRL data via the SEC’s EDGAR site required a document-by-document, company-by-company approach to extracting information from separate files.

Data, Not Documents

“Corporate disclosure should be about data – not documents, it shouldn’t be about is it a 10-Q, 8-K, 10-K,” says Hollister, adding that the SEC’s 21st century disclosure initiative  concluded in its 2009 report that “the SEC has got to get out of collecting all these forms, and has to be company-centric, not document-centric.”

The benefits of having this structured data, said Hollister, includes making competitive analysis, financial analysis over time, and ratio analysis easier. He called for additional XBRL reporting and structured data sets, noting executive comp information from proxy statements as one area he believed would be particularly useful.

The emphasis on data over documents appears to be consistent with the SEC’s plans to ‘make over’ EDGAR, and statements made by SEC’s director of the Division of Corporation Finance, Keith Higgins, and others over the past year, relating to the SEC’s Disclosure Effectiveness Initiative.

Quality of Data Needs Focus

“We are excited about this first step,” said Hollister.  (Indeed, in a DTC blog post, Hollister referred to this development as a ‘small step’ with ‘big potential.) However, he noted, “It doesn’t fix  the quality of information, except for one action last July (the release of the SEC’s ‘Dear CFO’ letter on XBRL). We hope publication of this database helps to further illuminate quality problems and illustrate to Corp Fin more strongly that they need they to fix them.”

Neal Hannon of WebPro XBRL Consulting sounded a similar note.  “Although it’s great to see all that data released, the usefulness of the data will depend upon the user’s sophistication and dealing with raw data sets that will contain errors.  Professors doing research will probably shy away from the manual work involved in getting these data up to a quality required to get meaningful results.  Larger financial institutions that already have the ability to make the necessary changes in the XBRL filings will welcome this one-stop shopping.”

He added, “The six-month lag in releasing the notes to the financial statements will be another drawback in the usefulness of the data, at least in 2015.  It is also not clear if the SEC has updated filings in the data set for companies that have refiled due to errors in their XBRL. Hopefully that will be clarified by the SEC.”

Issuer’s Perspective

Providing an issuer’s perspective, DawnDee Hankel, external reporting controller at Intel Corporation said, “Companies have spent considerable resources for several years completing quality XBRL filings with little visibility of if and how the data is being used. This pilot program appears to be a good step towards the effective use of this interactive data and towards meeting the SEC’s original intent to provide investors with quicker access to financial information.

“These data sets may allow investors and issuers to find data more efficiently for use in metrics and analytics, as well as potentially allow preparers more efficient access to compiled benchmarking data,” added Hankel.

Referencing the SEC’s announcement calling the release of the structured data sets a ‘pilot’ endeavor, Hankel noted the move could encourage further improvements.

“Although a pilot, increased attention on XBRL as a financial tool may lead to the issuance of more interpretive guidance and best practices that may help reduce the use of custom tags and increase comparability across companies.”