SEC Chairman Cox Seeks to Accelerate XBRL Adoption

Washington & Wall Street
September 26, 2005

During the dog days of August, the Securities and Exchange Commission expanded its voluntary program begun in April to make it easier for investors and others to use disclosure documents filed with the Commission. The expansion allows mutual funds to file exhibits to their annual report to shareholders (N-CSR) and quarterly statement of portfolio holdings (N-Q) using eXtensible Business Reporting Language (XBRL).

As the SEC noted, "XRBL turns text-based information, such as the filings currently available through the Commission's public database, the EDGAR system, into documents that can be retrieved, searched and analyzed through automated means." XBRL stands for eXtensible Business Reporting Language. It is one of a family of "XML" languages which is becoming a standard means of communicating information between businesses and on the Internet.

But in a more significant development, a couple of weeks ago SEC Chairman Christopher Cox reportedly picked up the phone and reached out to the leadership of the XBRL consortium, which has labored for years to create support for the new XML-based reporting standard with few tangible wins to date (more on this in a future issue). But XBRL is a powerful standard for all business data, combining the attributes of an XML transport mechanism and with an accounting taxonomy to create highly structured versions of the numeric and textual information.

According to people close to the matter, Cox asked XBRL steering committee member Walter Hamscher "what it will take to make XBRL the standard for public company reporting in the US." Officials of the XBRL consortium did not respond to calls and email messages from W&WS on Friday seeking comment.

But one XBRL official, who viewed a copy of the final letter from the consortium's leadership responding to Cox, says that the SEC is seeking to accelerate the adoption of XBRL. "Cox is asking what are the practical issues which must be resolved to get from here to there," said the official. "This is a very significant development."

A technology professional who is intimately familiar with the innards of the SEC's antiquated data warehouse tells W&WS that Microsoft (NYSE:MSFT) has been "raising hell" with the SEC staff regarding some of the unfinished aspects of XBRL that prevent clean processing of these documents, another sign that XBRL may be coming of age. MSFT has not been entirely supportive of the XBRL effort, but it won't be the first time that Redmond has been wrong about technology trends.

Whereas the assumption to date has been that the SEC would initially adopt a generic XML-based filing schema for public company disclosure, it now appears that Cox intends to pull the SEC into the 21st Century a few years earlier than expected. With the Federal Deposit Insurance Corp. preparing to being accepting bank call reports in XBRL format for the Q3 2005 processing cycle, the SEC's increased interest in XBRL is very timely. Stay tuned.

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