Written by Gary Purnhagen Posted on May 29, 2007
Gary Purnhagen is vice president of strategic planning at Merrill Corporation, a leading provider of outsourcing solutions for business communication and information management requirements. Merrill has been a leader in helping companies comply with the SEC's Voluntary Filing Program.
In October 2006 I wrote a post on this blog on how the SEC was spearheading XBRL adoption here in the United States. In that piece, I praised the agency for their brilliant promotion of XBRL. (I love the word brilliant. I don't have that many chances to use it other than in the first person, but I have been consistently using it to describe the SEC's promotion of XBRL.)
I was recently asked to revisit this topic, which I have been following closely. Let me begin with a quick update. Back in October there were 29 companies that had submitted 74 XBRL exhibits; as of May 25, 38 companies have submitted over 150 filings of XBRL exhibits. Not a huge increase, but keep in mind that during the first quarter of the calendar year companies are focused on reporting their annual reports and proxy materials, and for the most part had put their plans for XBRL on the back burner.
But not the SEC. They have been steadily moving forward in promoting XBRL. In my October post I mentioned the agency was focused on overcoming the three main obstacles to adoption: meager awareness, insufficient taxonomy development, and the lack of usefulness of XBRL to investors at that time.
Let's look at how the SEC has addressed these issues:
Since October the SEC has held two additional roundtables on XBRL, bringing forward high-profile executives such as Indra Nooyi (CEO of PepsiCo) and John Brennan (Group Chairman and CEO of Vanguard) to give keynote speeches. The SEC's Chairman Christopher Cox has used these meetings to announce new initiatives in the agency's promotion of XBRL.
On the SEC's insistence, XBRL-US has been incorporated and has brought in an executive management team of very impressive professionals. The SEC has funded XBRL-US to complete the development of the taxonomies, which is scheduled for the third quarter of this year. Keep in mind that taxonomy development will be an ongoing effort, but by later this year XBRL-US will deliver a revised and more comprehensive set of taxonomies.
I believe that will be very significant because at a previous SEC roundtable, when directly asked the question when would XBRL be mandated, Chairman Cox said (I'm paraphrasing) Well, other countries have mandated it, as we have heard it's not all that difficult for companies to provide, but we can't mandate it until the taxonomies are more fully developed." If you are wondering when the SEC will announce a mandate for XBRL, I've circled the fourth quarter of this year.
The third obstacle to adoption was that, back in October, there was no apparent value in the XBRL data being submitted, and the SEC's initiative to make an analyzing/viewing tool available by April of this year was just being articulated. The SEC beat that date by releasing a beta version of their Interactive Financial Report Viewer (IFRV) in December and has since updated it. Back in October, Chairman Cox stated But now imagine you're checking out the SEC of the future say, six or eight months from now. And what you discover is that all of the information you seek is intuitively organized by company, or by fund...And now you can request exactly the information you want from any number of companies' reports, by entering a single request.
Well, the current version of IFRV realizes that vision. It's slick, it allows for very fast access of different financial information, it allows downloading into Excel, you can select periods and information to be compared in graphical presentations, and it even allows basic comparisons between two companies. And that's only the beginning.
But no one really knows about it it's like the best kept secret! I haven't seen any press on it. Maybe that's because the SEC hasn't said too much about it, since it has information for only 37 participating companies. It's interesting but not very compelling. So what's the SEC to do?
I'll venture to state the hottest business topic in the past six months has been executive compensation. So what does Chairman Cox announce at the last XBRL Roundtable? That the SEC is tagging in XBRL the executive compensation data that was submitted in the recent proxy season by several hundred of the largest companies and will make it available on their website by June of this year.
Now the editor of this blog Bob Schneider feels that this might be a wrong move by the SEC in that it skews the weight an investor should attribute to executive compensation and that the SEC might feel a backlash from executives if CEOs believe the agency is simply using XBRL to browbeat them.
That might occur, but I see it differently. I see it as a brilliant publicity move for XBRL. Serving up executive comp in XBRL will send journalists to the SEC's site, where they will find this cool tool and write about it. This will in turn send readers to it, who will then begin calling companies, asking where the rest of their financial information is in this new format, especially if their competitors have been providing their financials in XBRL. Come June a lot more people will see the value of XBRL and will be demanding it from companies.
Like I said, there's a word for the SEC's promotion of XBRL: Brilliant!