TheCorporateCounsel.net

With the SEC’s proposed XBRL mandatory phase-in timeline looming – and SEC Chairman Cox likely a short-timer – it’s quite possible that the SEC will adopt final rules pretty soon. As you may recall, the SEC’s proposal would require the 500 largest US companies to start filing XBRL-tagged financial statements in the spring of 2009. A few weeks ago, Chairman Cox was a “no-show” as the keynote for the big XBRL International conference, but that likely had more to do with the demands of the credit crisis than the fate of XBRL. However, if final rules are not adopted soon, they may not get finalized on Cox’s watch (much to his chagrin) – and the SEC almost certainly will need to push back its timeline even they do.

Approximately 100 comment letters were submitted to the SEC on its XBRL proposal. A quick review reveals that the nature of the comments appear to be all over the lot. For example, CII’s comment letter voices concerns about the accuracy and reliability of XBRL (ie. the assurance issue) as well as the weaker standard of investor protection for XBRL compared to the financial data contained in traditional financial reports. Auditing firms – perhaps best reflected in this Deloitte letter – are understandably worried about their potential role in the assurance process.

In comparison, the 20-page comment letter from the ABA’s Federal Regulation of Securities Committee contains much commentary on the proposal’s liability provisions – and this Sullivan & Cromwell letter focuses squarely on this topic – and how they may expose companies to excessive liability. It will be interesting to see if Cox can pull off adopting something before he leaves.

Remember way back when the SEC decided it wouldn’t use “XBRL” anymore and instead use “interactive data” (because “XBRL” is too scary)? The SEC has held true to this change as the term “xbrl” is hardly used in the proposing release…

Whether the SEC Should Mandate Executive Compensation Data in XBRL?

Last week, Dave blogged about a company that has placed executive compensation data in XBRL for 4000 companies. As you may recall, in its XBRL proposing release, the SEC did not officially propose that executive compensation data be filed in XBRL, but it did solicit comment on this concept. Since it did solicit comment, the SEC arguably does have the latitude to adopt rules mandating XBRL for comp data without having to issue a re-proposing release under the Administrative Procedures Act (which is one of the many laws that govern agency rulemaking).

In footnote 94 of its proposing release, the SEC notes that Broadridge issued an XBRL taxonomy for proxy statements way back in December. I’m a member of many of the groups that would normally comment on SEC rulemakings of this nature and I don’t believe this Broadridge initiative hit many radars. Even now I haven’t reviewed this draft taxonomy, mainly because it’s not available unless you give Broadridge information about yourself – and I think that defeats the purpose of trying to obtain public comment on an idea. To date, Broadridge hasn’t provided any indication of what types of comments were collected (nor have I otherwise seen any evidence that anyone submitted comments to them).

Plus I find this reference odd because Broadridge is widely recognized as the leader in fulfillment, but it’s not considered an expert in drafting proxies. This is apples and oranges. In fact, Broadridge just went public last year and is so new of a public company, that it didn’t try e-proxy for its first annual meeting (nor will it do so for its upcoming second annual meeting).

Given the hubbub over the lack of “usability” for Broadridge’s e-proxy notices used during the past proxy season, I’m even more uncomfortable that the SEC is pointing to Broadridge to lead the way here. And it’s unusual that the SEC would seemingly use a third-party to solicit comments on its behalf. For all these reasons, the SEC should exercise restraint and not adopt rules mandating XBRL for executive compensation data until taxonomy in this area is more fully developed and that a more solid proposal is considered and commented upon.

Note that I remain a big Broadridge fan, as I continue to urge you to buy its stock, even though its been clobbered in this market downturn.

Some More XBRL Tools and Guidance

Hitachi has an “XBRL Blog,” which contains a bit of technical commentary. A lot of good stuff there if you want more information on the technical side.

On TryXBRL.com, RR Donnelley has partnered with EOL to tag ten years of data for all public companies. Once a company files financials (on either Form 10-Q or 10-K), this site tags the filings in XBRL within a 24-48 hour period and the information is available thru an Excel-based viewer.

XBRL Survey: Relative Levels of Preparedness

Recently, Compliance Week conducted a survey that revealed that of the 236 companies surveyed:

– 44% – just begun researching XBRL and their companies had done no previous testing
– 15% – no knowledge of XBRL at all
– 79% – no XBRL expert on staff at all
– 19% – have expert on the financial reporting team
– 2% – have expert in the IT department
– 7% – already participate in the SEC’s voluntary filer program
– 6% – done some small pilot tests
– 2% – testing their own systems comprehensively
– 30% – haven’t yet tested XBRL, but been following the topic closely

– Broc Romanek