Rep. Robert Hurt’s (R-VA) recently-reintroduced Small Company Disclosure Simplification Act, now H.R. 1965, was considered by the House Financial Services Committee’s capital markets subcommittee on April 29, 2015. By eliminating the mandate for the Securities and Exchange Commission to collect financial information in the XBRL open data format from the majority of U.S. public companies, H.R. 1965 would effectively derail the open data transformation at the SEC.
At the hearing, Reps. Carolyn Maloney (D-NY) and Keith Ellison (D-MN) criticized H.R. 1965. Rep. Maloney told her colleagues she believes the free availability of searchable data on public companies’ financial performance encourages investment. Ellison, who originally supported the bill when it was first considered by the House Financial Services Committee in March 2014, said he had changed his mind and now opposes the bill.
Reps. Maloney and Ellison cited a study by the the American Institute of CPAs, which found that for smaller issuers ($75 million in revenue and below) the median annual cost to prepare XBRL filings is approximately $8,000 per year. The AICPA finding is contrary to Rep. Hurt’s main justification for the Small Company Disclosure Simplification Act — that XBRL reporting is too expensive for small companies.
At the hearing Rep. Hurt asked Theresa Gabaldon, a law professor at George Washington University, to comment on testimony by her fellow witness, PTC Therapeutics CFO Shane Kovacs, that his company spends $50,000 annually on XBRL. Ms. Gabaldon rightly called PTC Therapeutics an “unfortunate outlier.” Indeed, according to the AICPA study, $50,000 is the highest amount that any company in PTC Therapeutics’ class spends to prepare structured-data filings.
As Rep. Maloney stated, the true cost of XBRL, reflected by the AICPA study, is simply not an onerous one for a U.S. public company. Investors need access to financial data on all public companies, even if they are getting it through intermediaries rather than directly, in order to make decisions.
Before Wednesday’s hearing, Rep. Darrell Issa (R-CA) expressed a desire to bring supporters and detractors of XBRL together to agree on long term modernization goals. In a letter to the leadership of the Financial Services Committee, Rep. Issa pointed out that H.R. 1965 would impede the long-term transformation of the SEC’s disclosure system from documents into searchable data.
For the full blog post and Rep. Issa's letter, click here.