The Securities and Exchange Commission may soon permit regulatory filings to be submitted using the Extensible Business Reporting Language, an XML-based markup language for tagging individual line items in financial statements. The SEC is considering adopting a rule permitting voluntary filings of financial data using XBRL beginning with the 2004 calendar year-end reporting season.
XBRL augments existing formats such as HTML and PDF, both of which are accepted by the SEC and rendered by its online reporting system, Edgar. The SEC will assess over the next several months both the advantages and potential impact of XBRL, both on its own Edgar system and on systems used by providers of financial information. "Technical feasibility is important both for us and people creating files," says Corey Booth, CIO at the SEC.
An XBRL-formatted document prepared on one computer system is compatible with any other system. Using XBRL eliminates the duplication of effort needed to prepare documents in different formats such as HTML or PDF. Uniquely, it also enables structured queries such as "What were depreciation expenses for 1999?" But while XBRL is more powerful than HTML, it's also harder to use, requiring, for example, the creation of style sheets for rendering electronic documents into a readable format. Booth says this and other issues, such as embedding XBRL into financial accounting systems, are being addressed by financial software providers.
The SEC has tested XBRL sporadically in the past few years; in 2002, it accepted XBRL-formatted documents from financial publisher R.R. Donnelly, which filed forms on behalf of Morgan Stanley and Microsoft, which requested the test. Says Booth, "Microsoft and Morgan Stanley wanted to do it; they're early adopters of XBRL."