Written by Gary Purnhagen Posted on February 22, 2008
Gary Purnhagen has more than 30 years experience in helping firms in diverse industries meet document processing challenges, including SEC disclosure. His engagements have included responding to the SEC's EDGAR program, use of the Internet and other digital media for information dissemination, and most recently XBRL. Over the past three years he has given dozens of executive briefings on XBRL and spoken about the standard at a number of professional seminars.
Last Friday, the SEC added the 'Financial Explorer' -- which allows investors to view and visualize financial data in innovative ways --to its list of interactive data viewers. The Explorer presents corporate financial performance in diagrams and charts using information provided to the SEC in the XBRL format, thereby helping investors quickly and easily analyze the results of public companies.
Since December, when the SEC posted the Executive Pay Finder for compensation data, the Commission has had the Explorer listed as a "coming soon" tool. While I was intrigued with the possibilities of its capabilities, I also wondered if it would take the Commission the same eight months it needed to make the compensation reader available after announcing it back in April 2007. The fact that it only took the SEC less than two months to make the Explorer available points to the acceleration of milestones leading to the eventual mandate of XBRL by the SEC.
My hopes for the Explorer were warranted: this new viewer is cool. It uses interactive charts and diagrams, including atomic models, to represent data disclosed in financial statements -- such as current assets, long-term investments, and goodwill, as well as the relationships among them -- and compare these items between reporting periods. The SEC press release says the Explorer can provide analysis and comparisons across competing public companies, but this really isn't the case at this point. Although these charts and tables do not take all of the work out of understanding the underlying financials, that is not the point of this compelling demonstration of the power of XBRL.
And as the press release states, the software does take the work out of manipulating the data by eliminating tasks such as copying and pasting rows of revenues and expenses into a spreadsheet. This allows investors to focus on analyzing the financial results through visual representations that make the figures easier to understand. And to that point the Explorer does demonstrate along with the other two online viewers the Executive Pay Finder and the Interactive Financial Report Viewer -- the potential power of XBRL.
The Explorer presents financial statements visually in very interesting ways. It points to the future when we will have software created by designers who specialize in conveying dense information graphically interacting with a complete database of corporate information.
But that day will not come until there is a mandate for all companies to submit their financials, including footnotes and MD&A, tagged with XBRL. The famous movie line says it well: Build it and they will come. Once there is a compelling database of corporate disclosure, very powerful tools will emerge on the marketplace. But to get there we need Chairman Christopher Cox to continue championing this business reporting standard; to date, the 307 filings from 74 companies are not compelling and does not allow for in-depth data mining within a company's financial disclosure or across an industry.
As with the Interactive Financial Report Viewer, the SEC will release under an open-source license the code for Financial Explorer to encourage developers to create other tools that take advantage of XBRL. While I applaud the Commission's efforts here, I don't think it's going to make that much of a difference in the public awareness and adoption of XBRL. The compensation reader, which made the executive compensation data of the top 500 companies easily available, demonstrated far more effectively the power of XBRL and was largely ignored by the press and public.
But with all that said, the new tool is a welcome addition to the list of real-world demonstrations of the use of XBRL.