Detailed Summary of SEC Press Conference on XBRL
September 25, 2007
SEC Chairman Christopher Cox told a press conference on Sept. 25, 2007, as noted in this SEC press release, that the U.S. GAAP taxonomy for XBRL reporting has been completed. Additionally, Cox said that he has asked the SEC staff to prepare a rule proposal to be considered by the Commission in the spring, and to be included in final rulemaking by next fall, on "how to deliver maximum benefit, including converting all public company disclosure to interactive data format." We understand this effectively means the SEC staff has been asked to develop a rule proposal for making XBRL reporting mandatory, and could include staged implementation.
Cox said the SEC had learned a great deal from its XBRL Voluntary Filer Program (VFP), in which over 40 companies are currently participating, which has been ongoing while XBRL-US completed the remaining elements in the US GAAP 'taxonomy' or dictionary of data tags for all US GAAP reporting elements. He noted the SEC has gained this knowledge from the VFP, “as we prepare for the transition we plan to undertake.” (For more on that 'transition,' see "XBRL Proposed Rulemaking," further below.)
“I’d like to invite every public company to consider if they should obtain a copy of this U.S. GAAP taxonomy and its supporting documentation, and consider using it alongside what you’ve got now,” Cox suggested, as companies prepare their year-end and fourth quarter SEC filings.
U.S. GAAP Taxonomy Fits on Thumb Drive; Available on Internet by Dec. 5
XBRL-US President and CEO Mark Borgiano handed the SEC Chairman a copy of the US GAAP taxonomy on a ‘thumb drive’ – a device the size of your thumb that can be used to load the information onto a computer – and noted it didn’t even take up all the space on that drive.
Cox noted the U.S. GAAP taxonomy developed by XBRL-US should be “posted in final form on the internet by December 5th.” According to Borgiano, who also spoke at the press conference, the U.S. GAAP data tags are undergoing a final review by audit firms, the FASB and its parent organization, the FAF, and others right now.
“For any registrant who wants to work with the SEC in this way,” offered Cox, “XBRL-US and our accounting staff, Division of Corporation Finance, and whole agency will be happy to assist you as you work with these new data tags.”
XBRL Proposed Rulemaking Coming Next Spring, Final Rule Next Fall, Cox Says
“This is a momentous occasion,” said Cox. Yet, he added, it is the ‘penultimate’ step, not the final step in this process. “It reminds me a little about putting a man on the moon,” he said. “We are not here today to announce a moon landing, but that we are at the point where we have the Saturn rocket to take us out there.”
As to next steps, Cox said he’s asked the SEC’s staff to recommend a proposed rule next spring, with the goal of final rulemaking by next fall, on how and when companies should implement XBRL.
NOTE: Although Cox did not use the word ‘mandatory’ in his remarks (it was used by a member of the press asking a question), and he spoke more generally as to what the SEC’s proposal may entail, our understanding is the SEC staff has been asked to develop a proposal for making XBRL reporting mandatory, potentially including staged implementation.
Specifically, Cox stated he has asked seven of the SEC’s offices - the Office of the Chief Accountant, Division of Corporation Finance, Division of Investment Management, Office of Information Technology, General Counsel’s office, Office of Economic Affairs, and Office of Investor Education and Advocacy, to work together to “finalize a recommendation to the Commission we could act on next spring, about how to deliver maximum benefit, including converting all public company disclosure to interactive data format.”
In developing the rule proposal, he said, the SEC will focus on one question: “How can this make financial reporting better and more useful to investors?” Additionally , Cox noted the SEC will also consider how any XBRL proposal can improve the capital markets.
During the Question and Answer session that followed, Ellen Heffes, Executive Editor of Financial Executive Magazine published by Financial Executives International (FEI), asked Cox: “Is there a time you have in your mind, in your vision, of when this might be mandated?”
Cox replied: “This is the recommendation that we’ll be seeking from all the divisions and offices I mentioned. Our process will commence informally to consider recommendations in proposed form in spring of next year, to complete in fall next year, (and) would lay out a schedule for implementation.”
Additional Points Raised During Q&A
Bill Sinnett, Director of the Financial Executives Research Foundation (FERF), the research affiliate of FEI, asked Cox if all the data tagging for the U.S. GAAP taxonomy is complete – including, specifically, for footnotes and Management’s Discussion and Analysis (MD&A).
Cox responded, “All the data tags that have now been prepared to complete the automation of US GAAP include footnote reporting as well as the primary financial statements.”
Stephen Joyce, a reporter from BNA asked three questions: how investors would use XBRL information (i.e., would they need to purchase special software), whether companies would find it easier to file in XBRL, and if this would help the SEC in its enforcement actions.
Cox replied to Joyce's three part question:
- If you are an ordinary, individual person, retail investor, who wants to take advantage of interactive data, you do not need specialized software to access and use the XBRL filed data. “Depending on your level of sophistication, “ added Cox, “you might want to buy a spreadsheet program.” He noted spreadsheets like Excel may be able to be used. “Undoubtedly will be other software either for free on financial websites or for very low costs,” said Cox, noting that “software developers are really champing at the bit to provide offerings to retail customers,” but what they are waiting for is for more XBRL information to be provided by companies.
- From the preparers (i.e. reporting company’s) standpoint, said Cox, they will be able to automate some processes and “absolutely, they will be able to almost certainly see efficiencies.” He said, “I base my judgment on the reports from the test filers in our interactive data VFP, they’re seeing in some cases enormous efficiencies.” He added that software currently being updated should get even better.
- For the SEC, Cox noted, XBRL would enable more focus on analysis, and less on ‘drudge work.’ “We have people that keyboard data too, our examiners and people who work in this office have to … same as any retail customer does.” He said that by using XBRL, “a lot of the drudge work can be cut out, and a lot more time and attention can be focused on thinking. Not only on the examination, and enforcement side,” said Cox, but also for our routine reviews of offering documents.” He noted such reviews sometimes get bottlenecked, and if XBRL helps the SEC speed up the process of reviewing such documents, it will reduce the cost of capital, and strengthen the capital markets.
FEI Among Organizations Mentioned by Cox as Assisting In XBRL Development
Among the many people and organizations Cox pointed out as helping in the development of XBRL were:
- Charlie Hoffman, described as ‘the father of XBRL,’
- XBRL-US, including Mark Bolgiano, President & CEO (Bolgiano also spoke at the press conference,) Barry Melancon, Chair of XBRL-US board of directors (and CEO of the AICPA). Cox also thanked XBRL-US’ two vice chairs, Greg Hayes, CFO of United Technologies, and Al Berkeley, the former vice-chairman of Nasdaq, and currently Chairman and CEO of Pipeline Trading Systems LLC. Cox mentioned that Berkeley has helped the XBRL initiative overcome obstacles, beginning with the time he was at Nasdaq and when asked if he could help, responded, “let me see what I can do.”
- The FASB and its parent organization, the FAF. The FASB was represented at today’s press conference by board member Leslie Seidman, and FAF's former COO Bob DeSantis, since FASB Chairman Bob Herz was in London attending the World Standard Setters meeting. Citing Herz’ support for XBRL, Cox noted Herz had written in 2000: “Companies that don’t arm themselves with XBRL will be just like those that didn’t adopt the telephone [over] the carrier pigeon.”
- The American Institute of CPAs (AICPA), and, as mentioned above, its CEO Barry Melancon.
- The six largest accounting firms (BDO Seidman, Deloitte, Ernst & Young, Grant Thornton, KPMG, and PwC).
- The CFA Institute, in particular analysts from Morgan Stanley, UBS, and Citi who assisted with this project.
- Financial Executives International (FEI), (represented at the press conference by Bill Sinnett, Director of the Financial Executives Research Foundation (FERF), the research affiliate of FEI, and Ellen M. Heffes, Executive Editor of Financial Executive Magazine). Cox noted FEI has worked with its members to encourage maximizing the benefits of XBRL, and noted, “we owe them great thanks for their public mindedness and dedication to investors.” FEI’s committees include the Committee on Finance and Information Technology (CFIT), plans an expanded focus on information technology issues this year under President and CEO Michael P. Cangemi and 2007-08 Chair, M. Alexis Dow.
- The Institute of Management Accountants (IMA), and its CEO Paul Sharman, who Cox described as an "incredible leader of that organization and this interactive data effort."
Others mentioned by Cox included: the XBRL-US project team, international representatives (including XBRL-international and others), technology and software companies including EdgarOnline, Rivet Software and others, SEC staff, and the companies participating in the SEC’s VFP.
XBRL-US Press release
Prepared Sept. 25, 2007 by Edith Orenstein, firstname.lastname@example.org Director, Technical Policy Analysis, Financial Executives International (FEI). This summary does not represent FEI opinion unless specifically noted abov