It sounds a bit like alphabet soup to the uninitiated, but its impact on the financial world promises to be sizeable; yesterday, the IASC (International Accounting Standards Committee) announced its XBRL taxonomy, or set of codes, for companies electronically issuing financial information via IFRS (international financial reporting standards).
Aside from all the acronyms, the main obstacle for the IFRS XBRL taxonomy is its reliance on global companies favoring it over a local taxonomy, assuming, that is, their domestic financial regulator has made the move to XBRL in the first place.
Luckily for the IASC, the SEC has agreed that non-US companies filing in XBRL will need to do so using the IFRS taxonomy.
Had the US not chosen to accept data filed via the IFRS taxonomy, the IASC may have found itself up a creek with no paddle, with a brand new code it had spent months slaving over and no one to use it.
Chatting to two SEC officials yesterday, I couldn’t help but get the feeling they had resigned themselves to the inevitable. Besides, IFRS taxonomy can only help in the conversion process when the SEC eventually goes down the path of adopting IFRS for all its issuers.
The officials, who were on a one-day jaunt from Washington to visit the IASC, appeared more enthusiastic about the notion that the US use of the IFRS taxonomy might prompt other issuers to jump on the bandwagon. They recognized a common electronic reporting language was the best way of fending off competitors. ‘If you can’t beat us…,’ smiled the head of the SEC’s interactive disclosure office.
The IASC might be waiting some time before UK companies join the party. The Financial Services Authority (FSA) the UK's financial regulator, posted a statement on its website declaring it had considered XBRL and ‘determined that it is not the most appropriate technology for the FSA or UK financial services regulation at the current time.’ Later it adds: ‘Unlike other regulators, the FSA is not required to provide or facilitate access to such corporate disclosures. Therefore, one of the main benefits of XBRL as a 'firm-oriented' technology would not be realized by the FSA.’