Why Would Companies Want To Make It Easier For The SEC To Find Their Mistakes?

from the blame-the-xbrl dept

Mon, Feb 19th 2007 11:40am — Joseph Weisenthal

For some time, the SEC has been pushing companies to file their reports in XBRL, a language that allows computers to understand business filings. XBRL does have some advantages for investors, such as the ability to analyze and crunch data automatically, but what really excites the SEC is the ability to automate the detection of reporting mistakes, be they accidents or willful fraud. A couple years ago we noted that many companies were hesitant to adopt XBRL for precisely this reason. What CFO would want to make it easier for the government to catch their mistakes? It looks like these initial fears were well founded. At a recent speech, SEC commissioner Christopher Cox cited the agency's use of XBRL as a key factor in breaking open the options backdating scandal that has rocked so many companies in the last year. In theory then, this should reduce the need for a massive bureaucracy at the SEC, but somehow we doubt that the agency will be slimming down any time soon.

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Rajesh, 19 Feb 2007 @ 12:55pm

Cox is spinning
I think Cox is overhyping the benefits of XBRL. The bulk of the data on this "scandal" came from academic researchers. SEC was late to the game. Cox himself acknowledges that certain aspects that were unclear previously were revealed thaks to XBRL but it is unclear how much and how.
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a, 19 Feb 2007 @ 1:41pm

How do you know it wasn't XBRL that the academics were using to discover this?

Why in the world would we want the SEC slimmed down? Do you have any clue as to how bad Wall Street is screwing the public each and every day? Hell, the SEC should double its size.
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Anonymous Coward, 19 Feb 2007 @ 2:18pm

Why should we care if companies don't want us to f
Your title makes no sense. Why should we care if companies don't want us to find their mistakes? Clearly XBRL is not something that should need to be to the liking of the "Companies".
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Quantum John (profile), 19 Feb 2007 @ 4:38pm

Works both ways...
If XBRL makes it easier for the SEC to find errors in reports, it also makes it easier for CFO's. Here's a crazy idea... perhaps the CFO's could check for errors and correct them before they submit the documents to the SEC.
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Prof X, 21 Feb 2007 @ 12:04pm

XBRL has nothing to do with options backdating
Section 16 data has certainly been driving options backdating investigations at the SEC. However, that data is not in XBRL format but another simpler interactive format.

XBRL is much more complicated than the simpler interactive data formats. Because of that honest mistakes will happen. Mistakes that will lead to dead end investigations and financial risk in the markets. Companies may not need to like it but they don't have to roll over, either.
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