Wednesday, June 15, 2016
Earlier this week the Securities & Exchange Commission said that it will now let corporate filers submit financial statements using Inline XBRL, a next-generation form of XBRL to tag financial data. Given that we use XBRL for our databases and financial analyses, Calcbench thought we’d take a moment to explain what this means.

Q: So, um, what does this mean?

A: For you, the Calcbench subscriber—not much. XBRL is a technology that identifies financial data, to make presentation of that data easier. Calcbench does the identifying and presenting; you only do the reading. So from your customer perspective, nothing will change. Everything you do and see right now, you’ll still be able to do and see in the future.

Q: What does this mean for Calcbench, then?

A: If we can say “not much” again, that’s the most accurate answer right now. This is an optional program, and corporate filers will still need to submit their standard XBRL filings as well. (More on that below.) Our ability to work with XBRL-tagged data is already solid and isn’t going to change. In fact, we already simulate Inline XBRL in our interactive footnote viewer with a high degree of accuracy—so this voluntary program has little bearing on our ability to serve you.

Q: Can you tell me a bit more about what Inline XBRL is, and why this is news?

A: Right now, companies submit financial statements tagged in HTML plus another series of XBRL “exhibits,” which really are just those financial statements all over again tagged in XBRL, so machines (like our databases) can read the data more efficiently.

Inline XBRL lets a filer bake those XBRL tags right into the original financial statements, which would eliminate the need for separate exhibits. The idea of Inline XBRL has kicked around for a while, but only recently has the technology matured enough that the SEC decided to launch this program.

You can also read a short article about Inline XBRL published in 2012 by one of our senior executives here, Ariel Markelevich.

Q: Why is the SEC doing this?

A: Above all, this is an attempt to kickstart Inline XBRL as a next-generation way of filing and presenting financial data. The technology is mature enough to try a volunteer program, but it’s still nowhere near ready for full adoption. So if the SEC can entice a few companies and filing agents to start experimenting with it, that might spur other tech developers to build more Inline XBRL tools in the future.

Assuming we do move to an Inline XBRL world, the technology should reduce the time and cost to prepare financial filings. For example, if you didn’t need to file a separate XBRL exhibit any longer, that would cut the risk of errors where an exhibit tag refers to the wrong data in your HTML filing, or the risk of keying in the wrong information when preparing your exhibit. Inline XBRL could also reduce the use of customized XBRL tags, which would improve the comparability of data from one company to another.

But remember, we’re years away from those benefits.

Q: What does the SEC program allow?

A: The SEC order allows any company to submit financial filings using Inline XBRL for their quarterly and annual filings from now until March 2020.

The EDGAR Filing Manual has already been adapted to allow Inline XBRL, and the taxonomy of XBRL tags used in U.S. Generally Accepted Accounting Principles won’t change. So users of financial data shouldn’t see any difference in how they access that data, no matter how the filer itself tags its information.

Q: Anything else I should know about?

A: If your job is to prepare financial filings, yes. Right now, if your XBRL exhibits contain a major error, the SEC can suspend the exhibits to let you fix the error, while your regular financial statements proceed to get posted as usual. Major errors rarely happen, but when they do, that’s the process to resolve them.

With Inline XBRL, however, exhibit and financial statement are one in the same—so if a major error should happen, your whole financial filing would be suspended. The SEC has stressed that errors of this magnitude are rare, especially since filers can use SEC tools to validate their filings before submitting them. Still, let the filer beware.

But if you are not a preparer of financial statements—you can chill, nothing much will change in your world.

Q: OK, thanks!

A: No problem.

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