When a powerful Securities and Exchange Commission (SEC) committee endorsed widespread changes in financial reporting procedures in January, the SEC moved closer to achieving Chairman Christopher Cox's goal of simplifying accounting procedures by August. Even so, Cox probably wasn't as thrilled with the measured response to his much-ballyhooed push to mandate XBRL technology.
Unlike all the other authorized changes in the report, XBRL–a filing format that would make business data more interactive, reliable, timely and accessible–did not receive unanimous support from the SEC Advisory Committee on Improvements to Financial Reporting (CIFR), which stopped short of introducing a timetable for mandating its use. Some committee members worried that the cost of having auditors double-check XBRL use could be excessive and as burdensome as Sarbanes-Oxley implementation–a concern that Cox has dismissed in the past.
While backing an eventual XBRL reporting requirement, the committee noted that early results of volunteers using XBRL indicated that data-tagging financial statements ranged from 80 to 100 hours initially, but then dropped dramatically. CIFR suggested gradually phasing in XBRL requirements, with the Top 500 companies "furnishing" (which carries a lesser degree of liability than "filing") XBRL statements before requiring other companies to comply. Responding to the panel's decision, John White, director of the SEC division of corporate finance, pressed for XBRL to be made mandatory by this fall, presumably echoing Cox's wishes.
Recommended For You
The panel, which plans on issuing final recommendations this summer, approved other changes: adopting more principles-based accounting; limiting corporate restatements to "meaningful" mistakes; providing protection from lawsuits for companies and auditors who show "reasonable" judgment; and improving the standard-setting process by focusing it at one regulator: the Financial Accounting Standards Board.
The SEC committee will now turn its attention to global convergence of accounting standards–presumably how to move the U.S. rules-based system toward the International Financial Reporting Standards. There's no rush, says chairman Robert Pozen, because convergence won't take place overnight. "Whether it will be three, five or 10 years," he says. "My own cynicism is these things take longer than we think."
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
