Securities and Exchange Commission Chairman Christopher Cox this week will likely lay out a plan for U.S. companies to incorporate interactive data into their financial reporting.
The SEC on Wednesday will hold a meeting to discuss the use of extensible business-reporting language, or XBRL. During that meeting, Mr. Cox is expected to outline a strategy that calls for a gradual transition to the use of XBRL, starting with large companies.
The SEC recently finalized coded versions of U.S. accounting rules used to tag financial data digitally.
"With a complete set of data tags for U.S. generally accepted accounting principles now in hand, we in the United States are ready to go live with interactive data," according to videotaped remarks from Mr. Cox delivered last Wednesday at an XBRL conference in Eindhoven, Netherlands.
"The preparer's guide is there, the software and vendor communities are there, and even the viewers and investor tools are there," he said. "Everything is in place."
Mr. Cox declined to expand upon those remarks last week.
For financial advisers, XBRL will make it easier to comb through financial reports and, more importantly, to compare data gleaned from one report with those from another.
EASIER COMPARISONS
"They'll be able to receive and manipulate data," Sue Childs, executive vice president of Edgar Online Inc. of Norwalk, Conn. "In interactive format, it will be much easier to make comparisons across industries and even borders, as well as drill down within specific points of data."
Edgar, which extracts information from SEC filings and resells it, has used XBRL to tag thousands of company statements for several years.
The benefits of XBRL will extend even further.
"XBRL should make not only the comparison of financial data far easier but also the publishing of that data," said Glenn Doggett, a certified financial analyst with the CFA Institute Centre for Financial Market Integrity in New York, which is an advocacy arm of the CFA Institute of Charlottesville, Va.
The advent of XBRL will allow such data providers as Lipper Inc. and Thomson Financial, both of New York, as well as Chicago's Morningstar Inc., to allocate fewer re-sources toward manually input-ting data into their own databases, he said.
As a result, those companies may be able to spend more money on analyzing those data, according to Mr. Doggett.
Advisers may also be called upon to help clients understand the data made available through the adoption of XBRL.
"You may have some retail in-vestors willing to look at this data directly using some of the simpler readers," said Darren Duffy, global head of production at Lipper. "But most likely, they'll want to go through their advisers for any sort of analysis."
A MILESTONE
The widespread use of XBRL by U.S. companies would mark a milestone for Mr. Cox, who has been championing the use of the technology since the beginning of his tenure at the SEC in August 2005. Prior to joining the SEC, Mr. Cox spent 17 years in the House of Representatives.
"Interactive data has reached an inflection point," Mr. Cox said in his videotaped remarks last week. "Today the most difficult challenges we face are no longer technological, but behavioral.
"Our main focus now must be on getting investors and other data users to be aware of XBRL and what it can do for them," Mr. Cox added. "It's time to get beyond seeing interactive data as 'technology,' and instead to see it as a tool, as help, that can make easier the work that companies and investors do every day."
In March 2005, the SEC began allowing companies to voluntarily file some documents in XBRL format. Among those participating in the program are E*Trade Financial Corp., Lehman Brothers Holding Inc. and NYSE Euronext Inc., all of New York.
To see submissions from publicly traded companies through an interactive viewer available through the SEC's public website (sec.gov). Click on "Interactive data, XBRL," go to "XBRL viewers" and then to "Interactive financial reports."
E-mail Davis D. Janowski at djanowski@investmentnews.com.
