The Securities and Exchange Commission (SEC) has taken its first foray into enforcing the accuracy of corporate financial information filed in the eXtensible Business Reporting Language (XBRL) structured data format. On Monday, the SEC’s Division of Corporation Finance announced that letters
had been sent to certain companies whose XBRL financial statements had failed to include necessary data.
The SEC’s requirement for public companies to submit a structured data version of each financial statement, alongside the old-fashioned document version, for each financial quarter has been in place since 2009,
but this is the first public call for corrections.
The agency systematically reviews the document version of each financial statement for potential errors and issues--but does not apply the same quality control to the structured data version. Errors are rampant throughout the SEC's XBRL data set, well documented by Calcbench
. These errors make the data very difficult for investors and the agency to use. Many investors and infomediaries don’t trust the data
Since its founding in 2012, the Data Transparency Coalition has called on the SEC
to apply quality control to the structured-data financial statements it receives from public companies.
Accurate structured data would bring the benefits of open data to investors, markets, enforcers, and the companies themselves. XBRL financial data, if made reliable, would help investors make better decisions, allow the agency to use analytics to find accounting fraud, and provide an opportunity for public companies to automate compliance tasks. In addition, as analysts' coverage costs drop, they would be able to cover more companies--
helping smaller companies get more attention from investors.
The Coalition will continue to advocate for the SEC to eliminate the current duplication and collect a single submission from public companies--
one that is both human-readable and machine-readable. The SEC should also re-start its stalled transformation from documents to data by adopting data standards for all the information it collects under the securities laws.
The Coalition supports the reintroduction of the Financial Industry Transparency Act
, which would require all U.S. financial regulators to replace documents with structured data throughout all the information they collect under the securities, commodities, and banking laws.