Technology Transforming Global Financial Reporting, Driving Demand for Accountants
The U.S. Securities and Exchange Commission has proposed that companies publicly traded in the U.S. adopt a specific new technology, known as eXtensible Business Reporting Language or XBRL, for financial disclosure. The technology involves computer “tags” similar to the bar codes used to identify groceries in the supermarket. The tags uniquely identify individual items in a company’s financial statement so they can be easily searched, downloaded, reorganized, and put to any number of other comparative and analytical uses, according to the SEC. “Interactive data represents the logical next step in the evolution of company disclosure just as HTML and Internet access were the logical next step a decade ago,” says Corey Booth, SEC Chief Information Officer.
New concepts like XBRL and enhanced business reporting are making real changes in the way business is being done. These major financial reporting developments are critical issues facing financial, legal, risk, audit and compliance officers at publicly held companies. As corporations strive to meet the filing requirements of the SEC, executive search firm, A.E. Feldman, reports that accounting jobs are opening up. Opportunities currently exist for senior-level professionals with expertise in the preparation and maintenance of financial, accounting and statistical reports.
XBRL is a language for the electronic communication of business and financial data which is transforming global business reporting with the promise of greater efficiency and improved accuracy. The technology is being developed by an international non-profit consortium of approximately 450 major companies, organizations and government agencies, according to XBRL.org. Right now, implementations of XBRL are growing rapidly around the world. Here in the U.S., the mandate issued by the SEC outlined a graduated process for adoption of XBRL.
The largest organizations, those with a market capitalization in excess of $5 billion, must file their XBRL formatted financial statements for fiscal periods ending December 15th 2008. All other publicly traded companies will have to adopt XBRL by 2011. Those companies not immediately affected, however, are still being encouraged by the SEC to voluntarily adopt XBRL before it is mandated.
The AICPA quotes Mike Willis, a partner with PricewaterhouseCoopers and founding chairman of XBRL International as saying, “Once CPAs can electronically receive, validate and send standardized information, they can more quickly analyze and confidently redistribute it to managers, stakeholders and others for use in better informed decision-making.”
The SEC says adoption of XBRL will provide investors expedited access to the information they want in a form that’s easily used and will help companies prepare the information more quickly and more accurately. These motives are in line with the driving force behind Enhanced Business Reporting (EBR).
With EBR the focus is on shifting the model from one that is based primarily on historical or lagging financial information to a model that incorporates relevant value drivers, financial and non-financial performance measures, and qualitative information around management’s strategy, plans, opportunities and risks, according to the AICPA. Coupled with XBRL, EBR delivers a broader view of current performance and a greater understanding of an entity’s future.
David Blaszkowsky, Director of the SEC’s Office of Interactive Disclosure, notes that the SEC has so far received over 400 interactive filings from companies participating in the voluntary XBRL filing program, reports WebCPA.
