Written by Gary Purnhagen Posted on November 4, 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.
In his recent post, Matt Kelly of Compliance Week argued that nobody believes the final XBRL rule will come out before SEC Chairman Chris Cox leaves office. While I respect Matt's insight, and he does bring up many legitimate concerns, I disagree completely with his conclusions. I believe there is a high probability that the SEC will adopt a final XBRL rule this year, and the first mandated group will be required to begin submitting XBRL exhibits beginning early next year. Furthermore, I do not think I am the only one who believes that.
The fact that Chairman Cox cancelled his appearance at the XBRL International Conference in Washington D.C. in October does not diminish my confidence in the successful adoption of XBRL under his direction. Many observers had pegged the conference as the forum for the Chairman to make some announcement regarding the final rule, and they believe his canceling his appearance could only mean adoption of XBRL was in peril. I for one was not expecting Mr. Cox to make that announcement at the conference, primarily because that is not how rulemaking takes place at the SEC. The process is underway; there really is no need for Mr. Cox to continue to cheerlead this initiative.
A Voluntary Filing Program (VFP) has been conducted, rules have been proposed, and a new SEC system called IDEA has been announced that is based on XBRL. The proposed rule has been available for review, the SEC has received over 80 comment letters, and I suspect the SEC is currently finalizing the rule. Delays are the norm with SEC rulemaking. I agree with Matt that we are getting to the eleventh hour, but there still is time. Any day now, we will see a quiet announcement from the SEC that a meeting of the Commissioners is scheduled to consider the recommendations from the Division of Corporate Finance to adopt XBRL rules. Those rules will be adopted.
The recommendations should largely follow the proposed rule. Possible modifications could include delaying the first mandated filing from the 10-K to the first 10-Q. In addition, I hope they do not end the VFP, so that companies can begin to submit tagged financials without the liability associated with “official filings.”
Since Senator McCain called for Cox's head when the financial crisis took off, there have been those who have felt that Cox could be fired, thereby putting XBRL into a limbo state. If Cox were fired, I could see where XBRL could fall into such a limbo state. I do not believe that Cox has to worry about that though. If McCain had the power to get Cox fired, it would have happened already. The fact is Cox is a bright young star in the GOP. He has a future at a state- or maybe even national-level elected position. Moreover, having championed XBRL will be an asset to him.
Consider this scenario: Senator Obama, who has said that he will include Republicans in his administration, wins the election and asks Christopher Cox to stay on to help XBRL become a reality. Stranger things have happened.