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

from the blame-the-xbrl dept

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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Comments on “Why Would Companies Want To Make It Easier For The SEC To Find Their Mistakes?”

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Prof X says:

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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