SEC Approves XBRL Reporting Format for Financial Statements
By David Feldman at 19 December, 2008, 12:59 pm
On December 17, 2008, the U.S. Securities and Exchange Commission finalized its mandate for public companies to report financial statements using XBRL format. In May 2008, the SEC first proposed the use of XBRL to be effective as of June 2009 for the largest public companies and 2011 for other public companies. The first organizations to work with XBRL in June 2009 will be those which have a market capitalization exceeding $5 billion.
XBRL stands for eXtensible Business Reporting Language, a system developed to provide a standardized way in which public companies can create, publish, and exchange financial statements. XBRL offers a variety of formats and automated features to simplify and enhance today’s existing accounting standards. Essentially, XBRL is a computer program that assigns each segment of business information with a marker or identification code. By mapping the organization of a company’s business reporting data, XBRL provides a simpler way to identify, interpret, and apply data, facilitating more efficient financial transactions.
According to SEC Chairman Christopher Cox, “By improving the methods companies use to disclose information to their shareholders and to the public, we can make that information easier for investors to get, easier for investors to use, and more efficient and more cost-effective for companies to disclose.”
There is no question that the use of XBRL, as the SEC lumbers slowly into the 21st Century, will improve both the quality and scope of financial statement reporting. The system will not only make reporting and classification of data easier within individual companies, but will also set a universal standard, creating a more compatible and uniform environment for public companies. Bravo to soon to be ex-Chairman Cox for allowing this to be a positive part of his legacy.
Very interesting. Thank you for this post.