SEC wants companies to file machine-readable financial data

NOTE: This article first appeared on FCW.com. 

The Securities and Exchanges Commission will begin requiring companies to report financial data in machine-readable format.

The SEC will phase in rules requiring companies to submit certain financial data filings in the inline XBRL data format over the next three years.

"The amendments are part of the commission's continued efforts to modernize reporting and to improve the accessibility and usefulness of disclosures to investors, including our Main Street investors," said SEC Chairman Jay Clayton in a statement. "The amendments reflect the commission's effort to use developments in structured disclosure technology to lower costs borne by filers and investors."

Inline XBRL is a data standard embedded into web documents that makes easier automated analysis of financial data. The SEC has noted inline XBRL filings are less likely to contain errors and its adoption might improve financial data quality and could decrease filing preparation costs.

The move to machine-readable format for financial filings has been strongly supported by open data advocates. Hudson Hollister, executive director of the Data Coalition, called the vote "a very, very good development for the future of modernization of capital markets."

While the SEC has required companies to report two sets of financial filings, one digital and one paper, with the vote, "the SEC is sending a message the standardized data is the official filing," he said. "It's about time."

Hollister said he believes the immediate effect will be "some of the typo-based problems," such as misplaced plus and minus signs, "will go away," adding that the move benefits companies, customers, investors and the SEC.

Sen. Mark Warner (D-Va.), Ranking Member of the Senate Banking Subcommittee on Securities, Insurance and Investment, also supported the vote.

"This is a long-overdue move that will improve the quality and accessibility of XBRL data, lowering costs for filers and investors," he said. "This is just one of several steps that the SEC should take to modernize existing reporting requirements."

The amendments will go into effect in phases. By June 2019, large accelerated filers — companies with a public float of at least $700 million — will be required to comply with the amendments. By June 2020, accelerated filers — companies with a public float of at least $75 million— will be required to file in inline XBRL. And by June 2021, the amendments will apply to all other filers.

The adoption of these amendments has been in the works for some time. In June 2016, SEC began permitting companies to file annual and quarterly financial statements as inline XBRL on a voluntary basis. In December 2016, then-SEC chairwoman Mary Jo White suggested the agency could pass the rule before the end of the Obama administration.

However, the move could meet some congressional opposition from those who believe the move would increase reporting burden on companies. Earlier in June, the House Financial Services Committee again advanced a bill that would exempt companies worth less than $250 million from XBRL reporting requirements.

Another bill in the House, the Financial Transparency Act, would replace the duplicative financial reporting process with a single, machine-readable filing. That bill, which has 34 cosponsors, has yet to receive a committee vote.