Late last year, the Securities and Exchange Commission officially adopted a new rule requiring public companies in the United States to file their financial statements using eXtensible Business Reporting Language (XBRL). Some have lauded the move as a good thing, and "a step in the right direction" given the current state of the economy and the push for better quality and more easily accessible data.
Last week I had the opportunity to speak with Greg Zegarowski, president of Finanacial Leadership Corp., a consultancy that advises companies on XBRL strategy and implementation, among other things. Zegarowski agrees that XBRL is a good thing, not only for improving accuracy and transparency in reporting, but also because it will give companies that might not otherwise be noticed a chance. He says:
Smaller companies that might not have the media exposure or coverage would have greater opportunity to have their data analyzed. And not just by data aggregators, but by individual investors, or potential investors. Chairman Cox has mentioned this a number of times, and it is a boon for the individual investor.
Beyond regulatory purposes, Zegarowski also notes that XBRL has the potential to not only increase efficiency in reporting, but to simplify accounting internally.
There's a taxonomy that's been in development for several years called XBRL Global Ledger, which can be used to represent data at the transactional level. Not only financial data, but also, for example, sustainability metrics. So over time, in my opinion -- and I've been a CPA for 30 years -- this technology is really going to revolutionize the way business information is communicated.
In other words, if companies approach the new XBRL requirement as an opportunity rather than just another reporting requirement, they could -- and most likely will -- find several ways to use the data standard to their advantage.