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Securities and Exchange Commission proposes mandating XBRL for financial reporting

The Securities and Exchange Commission voted in favor of a proposal to mandate XBRL for financial filings.

The Securities and Exchange Commission (SEC) voted last week in favor of a proposal that would require U.S. companies to submit earnings reports and other financial filings in extensible business reporting language (XBRL).

Filing financial reports in XBRL will make it easier for investors and analysts to find relevant data through Internet searches, download financial statements into spreadsheets and databases, and analyze and compare the data, the agency said. XBRL is an open, XML-based language designed specifically for automating business information requirements.

The proposal, which was recommended by a unanimous vote of the SEC on May 14, requires large U.S. companies to provide financial information using XBRL starting in 2009 and public companies of all sizes to begin doing so within three years.

"This is all about bringing investors better, faster, more meaningful information about the companies they own," SEC chairman Christopher Cox said in a statement. "It would transform financial disclosure from a 1930s form-based system to a truly 21st-century model that taps the power of technology for the benefit of investors."

The SEC has been operating an XBRL pilot program since 2005, with some companies voluntarily submitting financial information in an interactive data format. Companies can begin filing financial statements in XBRL immediately if they choose.

"Interactive data represents the logical next step in the evolution of company disclosure, just as HTML and Internet access were the next logical step a decade ago," SEC CIO Corey Booth said in a statement. "And like a decade ago, this move will usher in a quantum leap in helping companies explain their business to investors."

XBRL is being developed by an international nonprofit consortium of about 450 companies and government agencies. It is intended to replace manual and other financial data reporting methods, which can be error-prone and difficult to identify and analyze.

There is a 60-day public comment period, after which the SEC is likely to approve the proposal.

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