Written by Gary Purnhagen Posted on September 12, 2008
Gary Purnhagen has more than 20 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. He is an independent consultant assisting firms in embracing innovation and responding to the SEC's pending mandate of XBRL.
I’ve been reading with interest the various takes on the SEC’s press conference introducing IDEA last month. They generally range from “ho-hum” to “there isn’t much substance,” and that EDGAR will be around for some time. EDGAR will be around for a while, just like travel agents are still around. I don’t use them anymore, but I’m sure others do. I like the value and convenience of Travelocity or Orbitz. They provide me with a better model than visiting or calling a travel agent. And I suspect that IDEA will in fact be a far better model than EDGAR is for most consumers of disclosure information.
I cannot deny that the timing of the press conference coincided with the end of the formal comment period for the SEC proposed rule for mandating XBRL. And this announcement certainly had a PR component. Nevertheless, my take is that the SEC is assuming that disclosure information will be tagged with XBRL and is planning on taking advantage of how this enabling technology can change the model of disclosure.
Up until the unveiling of IDEA, I viewed XBRL as the full realization of EDGAR. With EDGAR we had the Electronic Data Gathering and Retrieval but no Analysis. XBRL alone will give us the ability to automate analysis but EDGAR is based within the context of disclosure via documents; access to the information would still have been awkward. To the SEC’s credit, they are moving far beyond the old model to a platform that will allow new ways of interacting with the information as we wish and have yet to envision. IDEA puts XBRL into a larger context and the committee that Professor William Lutz is heading up, 21st Century Disclosure Initiative, will give us the direction for IDEA.
Dr. Lutz has stated that his group is starting with a blank page and asking the questions of what information do we want, how do we want it, and how should the SEC provide it. This is innovation at its finest. It is taking advantage of new technology to not just mimic the old way of doing things with some improvements, but rather realizing the full power of XBRL as an enabling technology and imagining how it can improve how we work with this information. All of this helps to further the argument for the rulemaking for XBRL.
IDEA also makes economic sense. The SEC is spending $48 million on the current EDGAR system contract. Much of the data that is gathered, stored, and retrieved is useless information. IDEA will streamline the data mining that takes place and the applications that will be created will have easier interfaces for small investors.
I began this article by mentioning most writers were skeptical of the whole IDEA concept. One observer who I think not only got it right but has been providing us with glimpses on where IDEA and XBRL will take us is John Turner of CoreFiling. You can read his articles on the topic at his Insight blog.