Our elected officials’ logic is truly dizzying.
In 2014, both houses of Congress unanimously — unanimously! — passed the Digital Accountability and Transparency Act, or DATA Act, which standardizes the ways in which federal spending information is reported and calls for the creation of a searchable online database that would let all Americans see how the government is spending their money. President Obama signed the measure into law in early May 2014.
The debate, it seemed, was over: Literally everyone in Congress had told the world they support open, transparent data.
Except they don’t.
Barely eight months later, the House of Representatives has passed a bill that would ease a number of financial regulations on small businesses. Among them: The bill would exempt nearly 60 percent of public companies from having to comply with a mandate that requires them to file their financial reports via Extensible Business Reporting Language, or XBRL.
First, some history.
Back in 2009, the SEC began a three-phrase initiative to require all public U.S. companies to file their financial reports via XBRL. The reasoning was simple: If all companies are using the same taxonomy to file their financials, that data becomes transparent, searchable, and easy to compare. Investors, issuers, and analysts alike make better decisions. The markets are freed from data gridlock and become living, breathing, robust arenas in which to do business. By the summer of 2011, nearly 10,000 public companies were filing their financial reports via XBRL.
Now, three and a half years later, the House wants to shatter that data transparency by letting nearly 60 percent of public companies ditch XBRL and do something else. And why? According to Reps. Robert Hurt, R-Va., and Terri Sewell, D-Ala., the cost of implementing XBRL is too great a burden for our smaller public companies to bear.
For starters, an AICPA survey shows that the costs of implementing XBRL are far lower than expected. In fact, according to the survey, 69 percent of companies pay less than $10,000 annually “for fully outsourced creation and filing solutions of their XBRL filings.” The MACPA — a small non-profit with an operating budget of about $6.5 million — figured out how to implement XBRL about three years ago. It can be done, and for a lot less money than Reps. Hurt and Sewell would have you believe.
Plus, the XBRL mandate has been in effect for 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 and will be at a huge disadvantage in the markets. If they ditch XBRL now, their data won’t be nearly as accessible or comparable as their competition’s information. That hurts investors and, in turn, our markets.
More important, as Data Transparency Coalition Executive Director Hudson Hollister says, “(if) the SEC is forced to stop collecting searchable data from the majority of public companies, it will be unable to use data tools to illuminate potential fraud and protect investors.”
Boom. The less transparent our data becomes, the more likely it is that fraud will occur.
This is a no-brainer, folks. Free our data. Let’s keep the XBRL mandate in place.