SEC General Counsel Brian Cartwright, in a speech before a committee of the American Bar Association (ABA) on April 12, said, “I predict a release proposing that reporting companies be required to use XBRL in their filings will be considered by the Commission in the near future.”
Cartwright gave a detailed explanation of how XBRL works, after which he said, “So … how hard is it going to be for your clients to tag their financial data? The answer is: not hard at all, even the first time. And easier thereafter.” Detailing his views further, he added:
“I've personally watched financial statements being tagged using XBRL. And it isn't hard — thanks to the magic of computers. You go line item by line item. The tagging software reads the line item description and suggests the tag or tags that are most likely to be appropriate. The software usually makes the right guess, but you can always search for a different tag if you need to. If you're not sure what to choose, you can click and go directly to the corresponding accounting literature descriptions. Trust me, a knowledgeable accountant is not going to have a difficult time doing this.
"Beyond that, in time many companies will be using accounting software that includes XBRL data tagging as an integral part of the system. That will make it cheaper and easier for those companies to prepare their financial statements in the first place, with far less risk of human error. And the financial statements that are produced by that software then will have been tagged automatically."
Cartwright also noted thousands of companies around the world are required by their regulators (e.g. China, Japan) to file in XBRL, so the U.S. in this instance is not a leader, but a follower. He concluded his remarks by noting XBRL is part of a broader movement to global convergence, including a move to global accounting standards.
He said: “At the same time, we're also working to converge to a single global accounting standard. So it's not too hard to envision the day in the not-too-distant future when investors worldwide will be able to access, analyze and compare the financial statements of companies around the world using globally accepted tagging and accounting standards.”
Separately, if you'd like to learn more about global accounting standards - specifically, International Financial Reporting Standards (IFRS) - join us at FEI’s Global Financial Reporting Convergence Conference June 5 in New York City: “The World Is Moving To IFRS: Are You?”
SEC Corp Fin Director John White will be providing an update on the SEC's consideration of whether to permit - or require - U.S. registrants to file with the SEC in IFRS, additional speakers including leading financial executives, auditors, and more! Info is available at www.financialexecutives.org/ifrs - space is limited, register now!
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