XBRL Adoption in the US: A Model of American Democracy at Work

Written by Bob Schneider     Posted on April 15, 2010

The website of the Office of Interactive Disclosure – the SEC’s XBRL unit -- is an essential XBRL resource, with avenues to filings, news, taxonomies, tools, and so forth. Among its many parts, a particularly revealing page is the SEC Speeches and Public Statements Related to XBRL and Interactive Data. It has links to such discourses for the years 2005, 2006, 2007, 2008...and suddenly stops there.

Given the bureaucratic venue, this premature termination reminded me of a decades-old cartoon from a MAD Magazine series called “road signs we’d really like to see” that took a slap at the ways of government. A gleaming new highway abruptly ends in a swamp with frolicking brontosauruses; the sign at highway’s end reads “Road Stops Here (because so did Federal funding).”

That punch line, however, is not appropriate here: construction of the SEC’s XBRL infrastructure is on schedule and proceeds apace. Given that steady progress, I found it curious that no one at the SEC had bothered to mention interactive data in any public pronouncement for more than a year. Another, perhaps more likely reason for the 2008 terminus could simply be that, as often happens on the Web, nobody had bothered to update the page recently.

I did a search on both XBRL and interactive data for all News and Public Statements from January 1, 2009, to date to see if that was the case. Compared with preceding years, there were indeed few hits, and, at the Commissioner and Chair levels, only three records. Kathleen Casey mentioned XBRL in a November speech; Troy Paredes raised the subject in May and October orations. Notably, Ms. Casey gave the keynote address at the 15th XII Conference and Mr. Paredes has written for this blog; both Commissioners have long been enthusiastic interactive data supporters.

In terms of both quantity and executive level, the recent history is a far cry from the heady days a few years ago when, in one 12-month stretch between September 2006 and August 2007, Chairman Cox discussed interactive data in 16 of his 42 speeches. He even extolled the virtues of XBRL to audiences like the National Italian-American Foundation, where he might have been expected to devote his time instead to, say, Frater Luca Bartolomes Pacioli, whose Summa de Arithmetica... was the first to chronicle the Venetians’ pioneering system of double-entry bookkeeping.

Needless to say, Mr. Cox’s hard work was greatly appreciated by the XBRL community. It can be debated whether XBRL would eventually have been made mandatory for financial reporting in the US without his support. But it’s difficult to deny that his efforts accelerated implementation. Some XBRL supporters may be disappointed that, as exemplified by its silence on the standard, the SEC’s current leadership has not had the same focus (even allowing for the necessary shift in priorities because of the financial meltdown).

A few weeks ago, columnist Charles Krauthammer made an interesting point about American democracy that I find applicable to the current environment for interactive data at the Federal level. Krauthammer is, of course, a man of the right, but I think it is fair to say his argument here is non-ideological. He writes:

The rotation of power is the finest political instrument ever invented for the consolidation of what were once radical and deeply divisive policies. The classic example is the New Deal. Republicans railed against it for 20 years. Then Dwight Eisenhower came to power, wisely left it intact, and no serious leader since has called for its repeal…True, the rotation of power inevitably results in stops and starts and policy zigzags. Yet for all its inefficiency, it in the end creates a near miraculous social stability by setting down layers of legitimacy every time the opposition adopts some of its predecessor's reforms -- while at the same time allowing challenges to fundamental assumptions before they become fossilized.

I’m naturally hesitant to include interactive data among the landmark government policies that command Krauthammer’s attention. Nevertheless, I do find his words applicable to XBRL adoption in the US.

Skeptics of the SEC’s continued commitment to interactive data can point to the newly proposed rule on asset-backed securities and note that the Commission is recommending an XML, not an XBRL, solution. But consider the discussion the SEC offers on its preference for XML, in which XBRL figures prominently. Post Cox and the SEC’s adoption of XBRL for financial reporting, the terms of the conversation have changed. It’s no longer “Why XBRL?” but “Why not XBRL?”  In Krauthammer’s terms, the current Administration has adopted its predecessor’s reforms, while challenging the fundamental assumption that XBRL is always the solution of choice. 

The SEC has elected XBRL not only for company final reporting, but mutual funds as well. XBRL is being promoted for use in federal financial management: the Comptroller of the OMB has said, according to Federal News Radio, that making the data generated by agency financial offices compatible with XBRL coding is a big priority. NextGov reports that efforts are underway for using XBRL to make it easier for the public to review federal spending and how government uses funds. Interactive data is under discussion for delivering the ratings history from nationally recognized statistical rating organizations. At least at this point, the path toward continued, wider adoption of XBRL in the US seems reasonably clear.

XBRL provides a better, faster, more efficient solution for exchanging business information. Who knew it would provide an excellent civics lesson as well?   

UPDATE 4/20/10: Overall, the best gateway page for XBRL activities at the SEC is not the OID site but rather xbrl.sec.gov. The link-laden homepage makes it easy to find and open XBRL resources.