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To XBRL or not to XBRL?

24/09/2009


On May 30, 2008, the U.S. Securities and Exchange Commission (SEC) proposes a rule that would require both U.S. and foreign public entities trading on the U.S. exchanges to file their primary financial statements using the eXtensible Business Reporting Language (XBRL) electronic data tagging taxonomy. What exactly is XBRL? In layman’s terms, it is an IT language designed to provide a standard set of “tags” that companies can use to share accounting information and investors can use to analyze data.

Some are all for the change… others? Not so much….

So what do they have against going interactive with data on public companies? Well for one, with the world moving towards global reporting standards, the adoption of the US-GAAP taxonomy at this time seems inefficient. Delaying the adoption would allow companies to focus on the convergence to global standards and avoid reimplementation of XBRL once international taxonomies are created that accurately reflect globally converged standards. Secondly, what would the auditor’s role be in this whole XBRL implementation? Would there be a requirement for an auditor’s independent attestation on the implementation? What would be the impact on the complexity and fees of the audit, the internal control certification process, etc.?

There are certainly advantages to this proposed change: consistency, reliability, accuracy and speed of reporting. But many wonder if there’s more cost than benefit associated with this, more questions asked than answers provided.

Meanwhile in Canada, voluntary use of the filing program is encouraged, but regulators are taking a “wait and see” approach to mandating the process. In the meantime, Canadian companies filing under with SEC (and there are certainly a few out there) will have to prepare in anticipation of the SEC verdict.