The US SEC issued new rules requiring companies to provide financial statement information in a new interactive data format that is intended to improve its usefulness to investors. Companies are now required to provide their financial statements on their corporate Web sites in interactive data format using the eXtensible Business Reporting Language (XBRL) not later than the calendar day that they submit their financial statements to the Commission (1). In this format, financial statement information can be viewed interactively from your investor relations websites, downloaded directly into spreadsheets, analyzed in a variety of ways using commercial off-the-shelf software, and used within investment models in other software formats.

The US SEC rules will apply to public companies and foreign private issuers that prepare their financial statements in accordance with U.S. generally accepted accounting principles (U.S. GAAP), and foreign private issuers that prepare their financial statements using International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

This interactive data format must be provided as an exhibit to all periodic and current reports and registration statements, as well as to transition reports for a change in fiscal year. The new rules are intended not only to make financial information easier for investors to analyze, but also to assist in automating regulatory filings and business information processing. Interactive data has the potential to increase the speed, accuracy and usability of financial disclosure, and eventually reduce costs.

The XBRL Challenge

Until now, individual investors could obtain only high-level key financial figures for large companies together with their stock price history from sites like Yahoo! Finance and MSN/Money. Institutional investors and research firms with deeper pockets could obtain real-time financial data feeds from pay-per-view data aggregators like EDGAR-Online.  However, these data sources are highly normalized, disconnected from the source, and lack any semantic annotations. These data sources are fed by automated screen-scraper aggregation applications culling information from the HTML or ASCII filings, and then mapped to the data aggregators’ various relational databases. This extraction process is expensive and error prone, especially when data has to be re-mapped to data aggregators’ relational databases prior to distribution to their various subscription-based data feeds.  Also lost in this aggregation process are essential features of financial information:  access to the reporting entities’ ‘as-reported’ story, trust in the authenticity of the content and granular detail. Data aggregated in this manner is not able to reflect the reporting entities’ as-reported financials.

The SEC ruling in January 2009 introduces a phased mandate for filing in XBRL starting with the largest companies in June 2009 and then extending to all sizes of companies over the next three years. As a result, we can expect to see very large amounts of financial data becoming available in a machine interpretable format (XBRL). The challenge is to exploit this data to provide new kinds of services to investors.

XBRL is a bit like drinking from a fire hose, there is a tremendous amount of metadata associated with each fact and there are lots of facts. This means that financial data has become a lot more interactive with an emphasis on helping users to make sense of the data.  What distinguishes XBRL is the precise semantics attached to every reported fact. This makes it easy to pull out specific figures and concepts, and facilitates accurate comparison. XBRL metadata also enables both drill-down to granular detail and linking to reference sources like definitions, rulings, and accounting standards documentation sets.

How to take advantage of this opportunity

Now is the time to enable your Investor Relations Website to comply with US SEC Mandate.

l          Expose this metadata-rich source data in ways that make it easily consumable by Search engines.

l          Provide data accurately without loss of the providence of the source files (linked data).

l          Enable users to share this content in social network and Web 2.0 applications

l          Improve the find-ability of your financial information

l          Deliver accurately rendered sharable ‘as reported’ views of your filings

l          Enable your content to remain connected to the source whenever the content is reused

l          Improving ‘trust’ in the provenance of the source of the information

l          Enable previously unattainable levels of granularity of information.

First, you need to ensure that your Investor Web Site is ready and able to accept and post XBRL filings in an easily discoverable and permanently linkable manner.  It is important that you clearly identify the data that you control on your Investor Relations Web Site. By assigning URIs (hyperlinks) to resources (actual XBRL-tagged Filings), you enable other people to talk about them, link to them, and return to them with ease.

Using such a numerical-based canonical URI provides an explicit hierarchical scheme that is much easier for search engines and other web browsing tools to discover. This approach represents the data in a way that people can use and enable you to expose the data to a wider world in a repeatable fashion. 

Secondly, to simply post the Raw XBRL files may not be enough.  You should also consider delivering a rendered view of your XBRL-tagged SEC filings alongside the Raw XBRL Filings.  As at this early stage in adoption, there are only a few desktop applications available to consume the XBRL Content and you will want make sure that your site’s visitors can take advantage of the Interactive data and access the rich semantic metadata-enhanced XBRL-tagged financial reports immediately.

Finally,  although the SEC Ruling only requires that XBRL data to be made available for at least 12 months on an issuer’s Web site(2) - it would be wise to continue to host your data on a longer, more permanent basis - links that disappear after twelve months can be very frustrating for users of that content and can create broken links in Search Engines. In additon, keeping the data around long term allows you to continue to control the data and allow for your site's visitors to perform historical analysis on your financials without having to look elsewhere for the files.

This new approach will enable your content to remain connected to the source improving ‘trust’ in the provenance of the source of the information and enabling a previously unattainable level of granularity of information.

If you take these few important steps you will be vastly improving the find-ability of your financial information, enable your site’s visitors to view your filings in real-time, share them with colleagues across social networks, link to the filings directly on your site, and eliminate the barriers to access to your key stakeholders.