UPDATE: As expected, the House passed H.R. 5405 on Sept. 16 by a vote of 320-102.
You have to admire the determination of our elected officials. When they wrap their arms around a really bad idea, they simply will not let go. And they won’t let a little thing like common sense get in the way, either.
Case in point: H.R. 5405.
Also known as the “Promoting Job Creation and Reducing Small Business Burdens Act,” this proposed bill would, in part, exempt small public companies — defined as those with less than $250 million in annual revenue — from having to comply with the XBRL filing mandate for five years. The reason? The bill’s sponsor, Rep. Robert Hurt, R-Va., says the costs of filing financial reports via XBRL far outweigh the benefits for small businesses.
The XBRL exemption was raised and defeated earlier this year. This time, though, it has been mixed into H.R. 5405 with a number of overwhelmingly popular proposals. That means the bill will probably be approved by the House of Representatives, possibly as early as this week.
Here’s the good news, though:
“We’ve been assured by allies in the Senate that the upper chamber will not act on H.R. 5405, and that the measure will expire when the Congress ends at the end of 2014,” says Hudson Hollister, executive director of the Data Transparency Coalition. “However, it’s important for us to raise objections now to address the danger that the next Congress may seek to pass the XBRL exemption early in 2015.”
So why do we object to this exemption? It would help small businesses, after all, right?
First, let’s talk about implementation costs. The MACPA — a small non-profit with an operating budget of about $6.5 million — figured out how to implement XBRL more than two years ago. It can be done, and for a lot less money than Rep. Hurt would have you believe.
Plus, the mandate has been in effect for more than two years now. These companies are already using XBRL — or they should be, anyway. If they opt out now, they’ll have to start from scratch again in five years and will lose all of that start-up time and money all over again.
“Small companies have been filing in XBRL format for at least two years now, which means they are well up the learning curve,” XBRL US, an organization that has been supporting the implementation process, said in a statement. “Removing the XBRL requirement means a loss of valuable knowledge that they will need to relearn when the exemption is lifted. Investors will be harmed because they will lose access to small company data that they have been enjoying for the past several years since the XBRL requirement was put in place.”
The bill’s most devastating consequence, though, will be the loss of transparency. More than six years after the worst economic downturn since the Great Depression, we finally have all public companies speaking the same financial language, and now Congress wants to allow more than 60 percent of all public companies to run back to the Stone Age? In an era when transparent financial information is more important than ever, that would be a huge mistake.
Keep an eye on this one, folks. Even if it dies this year, it will probably be back in 2015. That, unfortunately, would be the latest example of the old guard circling the wagons to protect the status quo.
Here’s the problem: The status quo is a death sentence. Change isn’t always bad. XBRL and data transparency are good things — for our businesses, our clients, our country, and our economy.
This bill won’t protect small businesses. In the long run, it will hurt them. It will put them so far behind the change curve that they won’t be able to catch up.
Stop clinging to an outdated past. The only way to make progress is to move forward.