Jehu Hand's blog on securities law and related matters


August 4, 2011

What is XBRL?

If you don't know what XBRL by now, you probably don't really need to know. If you are a reporting company you probably got inundated with spam from EDGAR filing companies; I have received my fair share. None of the third party filers out there really explain what XBRL is about.

XBRL is a language for the communication of financial data and is used not only by the SEC but many business and international organizations. You can read more at www.xbrl.org.  The SEC has adopted XBRL so that analysts and other market participants can more easily research the financial condition and results of operations of public companies. Previously only applicable to larger companies, it must be included in filings of ALL issuers beginning with any 10-Q or 10-K for periods ended after June 15, 2011. That includes any 10-Q for the quarter ended June 30, 2011 or thereafter and any 10-K for a fiscal year ended on June 30, 2011 or later.

In the context of EDGAR filings, its an overlay on the existing reporting for 10-Qs and 10-Ks. In addition to the filing you are making already, there are additional XBRL  exhibits that contain the financial data and footnotes extracted from your filing. The software for producing the exhibits is expensive and the lowest price I have heard for a 10-Q is $800 provided you commit to a year of filing service. The reason for the committment is that while the initial set up for a company takes some time, the subsequent filings are easier.

The reason the initial setup takes time is that every line item on your financial statements has to be "tagged" to a specific taxonomy. From high school taxonomy, you might remember taxonomy to refer to the system of classification of living beings: Kingdom, Phylum, Class, Order, Family, Genus, Species.

In financial statements there is also a taxonomy.  Instant (that is, a number that is a snapshot as of one date, like a balance sheet item);  Assets; Current assets: Cash and cash equivalents (this example and my explanations are not exact but provided to give the reader a basic understanding). When you are preparing an  XBRL filing, you have got to provide the exact tag, which for the example here is something like CashandCashEquivalentsatCarryingValue. Because these tags have to be exact, you need some accounting background to assign tags especially when you get to esoteric items like comprehensive income. Whereas, with the html part of the filing, staff only needs to understand html.   The concept is that if all companies "tag" the exact same financial statement item the same way, then securities analysts can compare one company to another.

If you are one of the "smaller reporting companies" which are not followed by any analyst in your wildest dreams, your reaction  to this whole XBRL requirement is probably not positive. It is a waste of money and time for you  and is overburdensome. Sorry to tell you that the SEC is not convinced. I have my own political views of the issue of governmental regulation,  but this blog is not the place to share them.  Suffice it to say that many small issuers will be dropping out.  I think the SEC's attitude is "good riddance."  

I do have a couple spots for anyone who wants my firm to handle their EDGAR filings with XBRL. My rates are a lot less, because I have not been out there buying out other people but stick to my existing client base.  I give big discounts if you get the completed filing to me 5 or more days prior to the due date. We have been making EDGAR filings ever since 1996.