XBRL: a 'revolution' in corporate reporting? Touted by the SEC chairman as the next revolution in corporate reporting, FERF spoke with three early-adopter companies to find out why they favor this new format.

• Author: Sinnett, William M.

Christopher Cox, the newly minted chairman of the U.S. Securities and Exchange Commission (SEC), is on a mission to improve financial reporting. "We really are on the threshold of a revolution in corporate reporting," he has said. During his tenure, he intends to "bring our system of corporate disclosure and financial reporting into the 21st century."

He presented his vision for interactive data in a videotaped speech for the 12th XBRL International Conference, held in Tokyo on Nov. 7, 2005: "Interactive data could make it possible for issuers to reduce the cost of substantiating the numbers that appear in their financial statements. It would assist regulators in maintaining the integrity of the markets. Interactive data would also make disclosures more useful to investors, and to every market participant," said Cox.

Will Cox's vision evolve into reality, or is it merely a "revolution" of a small group of pioneers?

One means to provide the interactive data Cox speaks of is by using XBRL (eXtensible Business Reporting Language), a language for the electronic communication of business and financial data. XBRL is not a technology, but a set of standards, called taxonomies, which are built using the Extensible Markup Language (XML).

XBRL is being developed by an international non-profit consortium of approximately 350 major companies, organizations and government agencies. It is an open standard that is free of license fees.

Last February, the SEC had announced an XBRL Voluntary Filing Program (VFP). Its primary purpose, the SEC said then, is to "assess XBRL technology, including both the ability of registrants to tag their financial information using XBRL and the benefits for using tagged data for analysis."

But as of Dec. 1, 2005, only nine companies were participating in the VFP (see box on next page). Financial Executives Research Foundation (FERF) spoke with financial executives at three of the nine companies: EDGAR Online Inc., Microsoft Corp. and United Technologies Corp.

EDGAR Online Inc.

EDGAR Online's Chief Operating Officer and CFO Greg Adams says his company has been an active and enthusiastic proponent of XBRL since the founding of the XBRL consortium. "Participation in the VFP was simply an extension of our commitment to fostering the adoption of XBRL and our belief that it will lead to more transparent company reporting," says Adams.

Back in 1984, when the current Electronic Data Gathering, Analysis and Retrieval System (EDGAR) was adopted by the SEC, a voluntary pilot program was also established. "The EDGAR system has been...