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SEC committee recommends mandating XBRL

The SEC Advisory Committee on Improvements to Financial Reporting (CIFR) submitted a recommendation to the SEC to require publicly traded companies to file audited XBRL financial statements in three years.

Under the recommendation, the largest companies could be required to use XBRL to tag their financial data and share that information with the SEC without an external auditor's review in the near future.

The CIFR’s recommendations also include:

Eventually mandate that all public companies use XBRL, following a phased-in transition based on company size and reviews of the program's progress
Reduce industry-specific accounting rules
Add more investor representation on the FASB
Create guidance for auditors' professional judgment

The SEC has previously embraced XBRL by proposing and adopting a final rule on an XBRL Voluntary Program. The SEC's Office of Interactive Disclosure was created in October to lead the transformation to interactive financial reporting by public companies.

According to a report on CFO.com, one committee member is worried that the group will constrict the program and “severely impair” its overall value for the U.S. financial reporting system. Peter Wallison, a senior fellow at the American Enterprise Institute for Public Policy Research, said that the use of XBRL could lead to high assurance costs for companies hiring auditors to check that they have tagged data correctly.

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