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SEC's Chief Information Officer Addresses Challenges of XBRL Technology

R. Corey Booth, the SEC's chief information officer and director of the Office of Information Technology, sees the government's role with respect to XBRL and interactive data as supporting the adoption of new technology rather than dictating it. In remarks at a January 18 XBRL conference in San Jose, Booth said the SEC intends to consider whether XBRL filings eventually should be mandatory in connection with its monitoring of the voluntary XBRL filing program. His personal view is that the mandatory requirement should occur only after the voluntary adoption of XBRL becomes more widespread. Booth's remarks were posted on the SEC's Web site.

The voluntary filing program is an important initiative, according to Booth, but only nine companies are participating and together have submitted 22 XBRL filings. Technology and information interchange standards can take a long time to adopt, but Booth also pointed to three barriers to broad adoption of XBRL. Many believe the preparation of XBRL standards is difficult, he said. The XBRL taxonomies remain the subject of vigorous discussion and further development. Booth reported that the filings that have been submitted to the SEC suggest that there is a lot of room for technical judgment and interpretation about how to apply the taxonomies to a particular situation. Subject matter expertise is not that easy to find, he added.

There has not been a great demand for XBRL information by the investor community, according to Booth. Until the demand is there, Booth suggested that it will be hard to catalyze the market and to create interest in the filing community. The core XBRL technology also presents a number of problems and many questions remain about the future roadmap for XBRL standards and how they will evolve, he said. The market needs clear information about the development of XBRL specifications so that decision makers and developers can make the right investments to support future capabilities, according to Booth.

The SEC has established a task force that is looking at the technical challenges posed by XBRL technology. Booth referred to the SEC's recent request for information in which it solicited information from the technology industry on how to approach these issues. Booth said the results of the RFI suggest that qualified people are looking at the issues, but he urged the XBRL Consortium and others to develop a common perspective and a plan for addressing the challenges posed by the technology.

Since the SEC is one of the primary distributors of financial data, Booth said it has an important role to play with respect to XBRL and interactive data. However, Booth prefers a market-driven transition to XBRL rather than a government mandate. He also advocates maximum flexibility in registrants' presentation of their financial statements. The universe of SEC registrants is very diverse, he explained, so that must be taken into account. Booth also believes that XBRL must conform to the accounting standards rather than having to force a simplification in the standards, so the taxonomies and extensions must be flexible in order to present company financials as audited and as reported.

The SEC can track and encourage the evolution of XBRL through dialogue with the various parties involved. The SEC can also invest in technology that will enable it to better validate, analyze, store, disseminate and present XBRL information to the public, Booth said. He reported that the SEC will soon introduce a new XML-based "wrapper" for the XBRL documents on its Web site to make it easier to locate the filings.

Booth also reported the SEC's more aggressive efforts to expand the base of voluntary filers through incentives, including expedited reviews of securities registration statements and informing voluntary filers if their annual reports will be selected for review.

For now, Booth encouraged a focus on the relatively simple implementation of XBRL where it can create real value in the shorter term. One example would be the use of XBRL to encode earnings release information, he said, which would be relatively simple and would not require massive taxonomies, while at the same time offering valuable and time-sensitive information. Another example would be to permit voluntary XBRL filers to file their main financial reports in XBRL the first time out and provide the XBRL footnotes a quarter or two later. The footnotes present a greater challenge for encoding, he explained, and this approach might encourage companies to volunteer. It is important to build a critical mass of XBRL expertise, he said.