Interactive Data Reporting Urged for All Public Companies

As the Securities and Exchange Commission (SEC) considers whether interactive data requirements for financial statements are too difficult or expensive for smaller public companies, investors and accounting professionals have warned against exempting those companies from the rules. These commenters argue that interactive data provided with eXtensible Business Reporting Language (XBRL) helps investors analyze performance more efficiently and compare results across industries.

Evolution of the requirements

The XBRL interactive data format allows financial statement information to be downloaded directly into spreadsheets, analyzed in a variety of ways using commercial software, and used within other investment models. Standardized interactive data makes financial information easier for investors to analyze and assists in automating regulatory filings and business information processing. 

In the U.S., interactive data requirements have phased in slowly over the past 10 years. In January 2009, the SEC published the initial requirements in Release No. 33-9002, Interactive Data to Improve Financial Reporting. This rule required public companies to submit XBRL statements as separate exhibits to their financial statements. It also required companies to post interactive data files on their websites. Then, in May 2009, SEC Release No. 33-9006, Interactive Data for Mutual Fund Risk/Return Summary, required investment companies to use XBRL tags in a separate exhibit.

The SEC followed up with a March 2017 rule, Release No. 33-10322, Exhibit Hyperlinks and HTML Format. It requires hyperlinks to be incorporated into registration statements and financial reports submitted through the SEC’s Electronic Data Gathering, Analysis and Retrieval (EDGAR) filing system. The data must be formatted in the online standard, HTML, rather than the much older ASCII text format. Although some companies had used ASCII, it doesn’t support hyperlinks.

Most recently, in June 2018, the SEC finalized a rule that requires public companies to embed interactive data tags directly into their financial statements using a process called inline XBRL (iXBRL). The rule, SEC Release No. 33-10514, Inline XBRL Filing of Tagged Data, aims to improve the quality, timeliness and accessibility of financial information prepared in XBRL. Investment companies are also required to provide risk-and-return summaries using iXBRL.

Too expensive for smaller companies?

The Regulatory Flexibility Act (RFA) requires the SEC and other federal agencies to review rules that affect small companies within a decade of their publication. Under this rule, the SEC is currently considering the effect 43 rules issued from 2006 to 2009 have had on small public companies. The SEC has invited public comments on whether the rules on this list — including those that require XBRL in financial reporting — should be continued without change or amended to minimize economic impact.

Smaller public companies have complained about the costs of complying with the XBRL requirements. But the Council of Institutional Investors (CII) said XBRL can be especially beneficial to smaller companies. “The automation afforded through XBRL allows small entities to be considered as investment opportunities at the same time as large companies,” CII General Counsel Jeffrey Mahoney wrote in a comment letter to the SEC. “This is a significant step forward in leveling the playing field for small entities when seeking funding in the capital markets.”

Sandra Peters, head of the CFA Institute’s global financial reporting policy, agrees with Mahoney. She believes that structured data could bring more opportunities for small and mid-cap companies by making it easier and less costly to potential investors to assess their performance.

The CFA Institute also emphasized the usefulness of machine-readable data. “With the availability of technology to sift through structured data and crunch numbers, investors today are well positioned to perform faster and better analyses,” wrote Peters in an SEC comment letter. “When some of their finite resources are freed up, analysts can not only research a greater number of companies but can also take a closer look at the companies they already follow, which supports better-informed investment decisions.”

The American Institute of Certified Public Accountants (AICPA) told the SEC that increased use of XBRL has promoted transparency and improved efficiency by helping analysts find relevant facts with a few mouse clicks. Moreover, the AICPA noted that the cost of compliance for small public companies has dropped 45% from 2014 to 2017, with the average annual cost decreasing from $10,000 to $5,476. The AICPA believes that the use of iXBRL will further bring down costs.

Are you ready?

Based on positive feedback from financial statement users in SEC comment letters, XBRL is likely here to stay for smaller companies. In addition, the first iXBRL compliance date, for large accelerated filers using US accounting standards, hits on June 15, 2019.

Weaver expects that the SEC will need to continue updating its rules to keep pace with evolving technology. For help understanding and complying with the latest rules, visit for XBRL news or contact us with your questions.

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