SEC’s iXBRL requirements met with optimism — and trepidation

Enabling automation

One sign of the magnitude of change currently underway is that humans are no longer the primary consumers of regulatory data. The SEC reported that about 85% of the inquiries on the Electronic Data Gathering, Analysis and Retrieval, or EDGAR, filing database are from bots.

Craig Clay

“Nearly every CIO and CFO is looking to automate and streamline the compliance reporting process. The adoption of iXBRL will help achieve greater efficiency, deliver higher quality and pave the way for growing use of AI and machine learning solutions,” said Craig Clay, president of global capital markets at Donnelley Financial Solutions.

Improved data and data use

The eventual goal of mandating iXBRL financial statement submissions is so that data provided IXBRL is the foundation for clean, organized financial data. With that foundation, CIOs and CTOs can use automation, modern machine learning and AI algorithms to create interesting applications their companies need — a move Emily Huang, CEO at securities filing research service Idaciti Inc., said opens many doors.

“Not only does this decrease the risk of errors in reporting and increase the efficiency of a company’s existing reporting process, but it also provides the opportunity to bring the data alive for consumption,” Huang said.

Simplicity

The migration to iXBRL could also lead to greater simplicity, Donnelley Financial Solutions’ Clay said, because companies will eventually only need to create one iXBRL report. “This change will be especially beneficial for smaller companies that rely heavily on manual data input, because it will remove the need to create and update both an XBRL and HTML version,” he said.

The migration to iXBRL will mostly take place behind the scenes since disclosure management systems will evolve to give users the ability to create a variety of different documents from centralized data, including reports in iXBRL.

“For CFOs, inline filings will bring the XBRL data front and center to investors. Quality matters, consistency matters and CFOs need to decide how they want their financial data to be viewed and consumed,” Clay added.

Financial analysis improvements

XBRL has been widely used to streamline various types of financial analysis, Idaciti’s Huang said. The new iXBRL requirements should make it easier to perform simple analysis from within a web browser.

For example, Huang said, Idaciti customers use XBRL analytics to conduct financial analysis, perform disclosure research and improve financial communications. XBRL also makes it easier to integrate filings into financial data and financial review workflows can be automatically updated when new reports come in. One Idaciti customer, Huang noted, was able to eliminate the need to pay $10,000 every time it needed a peer group valuation report for merger or acquisition consideration or competitive analysis.