Written by Bob Schneider Posted on October 19, 2007

At a press conference held in New York on September 25, Chairman Christopher Cox of the SEC announced the completion of all work on developing data tags for the entire system of U.S. generally accepted accounting principles.

But did he also say that XBRL will be made mandatory for filers?

Traditional and Internet media expressed a wide range of views on what Chairman Cox did (or did not) say on this crucial point. Here’s a sample of leading sources:

Reuters
“U.S. regulators will decide next year if companies should be required to file financial reports in a machine-readable computer code to make data more easily comparable, Securities and Exchange Commission Chairman Christopher Cox said on Tuesday.”

AP
The Commission expects to decide early next year whether to require companies to submit filings in a format that will make it easier for investors to search and compare financial data.

CPAOnline
Cox plans to consult with the top accounting firms and with the various offices at the SEC this spring to get their opinion on when XBRL should become mandatory.

TheCorporateCounsel.net
However, I am a bit concerned about the Chairman’s remarks that rules could be proposed this Spring, and adopted as early as next Fall, mandating the use of XBRL. A change this big — and this technical — takes time, particularly if our historical experience with EDGAR is any indication.

footnoted.org
I freely admit that I may be missing something and to be sure, footnoted spends more time focusing on weird text strings than funky numbers, but it’s hard to get all that excited about today’s news, especially since it seems like just another step in the process. Even the press release said that investor-friendly financial reporting moved closer to reality today as opposed to was already here.

FEI Blog
Our understanding is this means the SEC staff has been charged with coming up with a proposal for making XBRL reporting mandatory, potentially including staged implementation [emphasis in the original].

So what did Chairman Cox say? Was it more like “There will be a study that will make recommendations for a proposal that may or may not at that time create a committee that will” Or did he really say “MANDATE!” Or was it something in between?

I listened to the webcast of the press conference, and I think the FEI blog got it about right. Crucially,”the Chairman” was specifically asked by Ellen Heffes, Executive Editor of Financial Executives magazine published by the FEI, to cut to the chase and tell us whether there will be a mandate or not. Mr. Cox responded:

“Well, this is the recommendation that we’ll be seeking from all the divisions and offices that I mentioned within the Securities and Exchange Commission, and our process will commence informally to consider recommendations in proposed form in spring of next year. If it follows the course of an ordinary rule-making, then it will probably be completed in the fall of next year, and would lay out a schedule for implementation.”

Earlier, Mr. Cox stated he had asked seven of the SEC’s offices — the Office of the Chief Accountant, Division of Corporation Finance, Division of Investment Management, Office of Information Technology, General Counsel’s office, Office of Economic Analysis, and Office of Investor Education and Advocacy — to work together to finalize a recommendation to the Commission we could act on next spring about how to deliver maximum benefit of tagged data to investors, including converting all public company disclosure to interactive data format.

Even though there’s definitely a lot of officialese in these statements and some wiggle room, the relevant question on an XBRL mandate seems when, not whether.”

Moreover, if you listen to the entire webcast, its overall thrust is that XBRL filings are something that’s going to happen. So many key XBRL players were introduced by Mr. Cox: Charlie Hoffman, the Father of XBRL (how he must get tired of hearing that tag!); FASB board members; XBRL board members; people from companies in the VFP; investor representatives; CFA Institute staff; big brokers, like UBS and Citi; representatives from the top six accounting firms, the CEOs of the AICPA and IMA; XBRL vendors, and, not least, SEC top brass.

Would the Chairman call together all these people to celebrate the completion of a taxonomy that won’t be used?

In addition, Mr. Cox’s remarks consistently assumed implementation. There were references to how all investors will be helped; that we’re at the “penultimate step”; that we haven’t landed on the moon yet, but we’re at the point where we’re rolling out the Saturn rocket. The listener comes away with the sense that, one way or the another, most, if not all, companies will be filing statements in XBRL a couple of years from now. This sense of inevitability is only strengthened by the announcement last week of a new office for interactive data within the agency to “…lead the transformation to interactive financial reporting by public companies.”

Rather than tack on a “to be sure” paragraph of counter-argument, which I can trot out two years hence should an XBRL mandate fail to materialize, let me do something more useful and address a key question:

If I was a staff accountant and my CFO asked me — given everything that’s on our plate right now whether we should join the SEC’s Voluntary Filing Program, what would I say?

I would say that the expected value of joining the VFP is now positive, and now is the time to sign up.

Add to Del.icio.us | Digg this

This entry was posted on Friday, October 19th, 2007 at 4:00 pm and is filed under General, . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.