A Disclosure Revolution

Posted on May 13, 2016 by Dave Nitchman

Comments this week by US SEC Commissioner Kara Stein are making waves in the XBRL community as she talked about ways to “breathe new life into the critical matchmaking process between companies and investors” by continuing efforts to bring financial disclosure fully into the digital age, meaning “disclosure that can evolve to provide the right information at the right time by utilizing the right technology”. She called for an ambitious agenda that goes beyond the current redesign of EDGAR and the ongoing Disclosure Initiative.

Specifically, she is asking the following two questions: What information do investors want, and how do they want to receive such information? It’s pretty simple on the face of it and really the principles that should be driving the actions of any agency around the world looking to improve their capital markets, enhance transparency and protect the interests of investors.

When it comes to the arguments for XBRL, we talk a lot about making data available, accurate and useful, but Commissioner Stein outlines an interesting rationale for structured disclosure that takes those arguments one step further. She drills down on the fact that machine readable data makes it possible for analysts, investors and other stakeholders to get business information exactly the way they want itand in an extremely timely way – possibly even in real time. This argument goes to format as well. Graphics, videos, targeted news stories, all could be useful, and all can be created using structured data, possibly without human intervention.

By dint of the size of the US market, structured data efforts at the SEC have an outsized impact and call for careful scrutiny. Although a relative early adopter of XBRL, especially given the complexity of disclosures in the US and a political climate that resists regulation as a matter of principle, the SEC has been rather deliberate in its march towards a fully digital disclosure environment. But there is more than a hint of enthusiasm in Commissioner Stein’s speech for the SEC to take the next big step and truly revolutionize the way business information is collected and shared in the US and around the world. Read the speech.

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