Financial Data 'on Steroids'

"XBRL is hyperlinks on steroids," said Liv Watson, formerly of EDGAR Online and an XBRL International board member. Watson is one of the founders of XBRL and a board member of Iris India, a company that builds XBRL applications. "It's like setting data free."

Proponents of the technology list a plethora of benefits. Filing with interactive data cuts costs, they say. The start-up period may run companies a few thousand dollars, but once a template is established, those costs decrease because future information is simply added to the existing code. There are also savings from not having to print all the pages associated with the current filings. XBRL can also cut costs by reducing the time to prepare disclosures.

The technology also makes it harder for companies to make financial errors in their filings, whether by accident or manipulation, advocates say. XBRL detects numbers that don't add up.

The loudest criticism among companies, as evident in e-mails posted on the public comments section of the SEC's Web site, concerns software availability, the timeline and start-up costs.

"This is a lot of work being added to the current company workload, and much of this work will be manual, as there is very little software available to assist," wrote Robert Gilmore, an accountant and IT engineer, on July 31.

The SEC is analyzing suggestions and making tweaks to the proposal. The agency expects final approval in the fall.

As the proposal stands, compliance would be phased in over two years for companies. The 500 largest companies would need to comply starting Dec. 15. The data would become available to the public in early 2009. A second group, about 1,200 companies, would have until Dec. 15, 2009. All other companies would have until the end of 2010 to file with interactive data.

In the first year of compliance, companies would have to submit their primary financial disclosures -- balance sheets, income statements, cash-flow statements and statements of equity -- in XBRL, along with the traditional block text. Notes and schedules would be included as blocks of text. In the second year, all material must be submitted under the new system.

Mutual funds would be required to provide interactive data beginning with registration statement filings that become effective after Dec. 31, 2009.

The SEC proposal would also require all filers to post their interactive financial disclosures on their Web sites.

For filers that choose to tag their own data, the software ranges from $1,000 to $2,000. The SEC estimates that it would take a company about 100 hours to complete the initial tagging. According to Robert Blake, senior director for interactive services at Bowne & Co., one of the largest preparers of financial filings, the time is closer to 30 to 60 hours.

Companies that offer a XBRL conversion service for primary financial disclosures charge $3,000 to $10,000 for each filing. It can take as little as a few hours.

The SEC has considered shifting to this technology for years. In 2004, the agency proposed a voluntary program for companies that wished to file using XBRL. To date, 89 companies have voluntarily filed under this program, and those filings are accessible through the agency's Web site.

"We're replacing the family station wagon with a Ferrari," Cox said.