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In October 2005, the US Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board launched an XBRL (eXtensible business reporting language) project that mandates banks to submit quarterly reports in XBRL format. 8300 banks are now participating. The SEC has been moving towards standardizing XBRL as the language for exchange and reporting of financial information.
SEC Chairman Christopher Cox is pushing adoption of XBRL and is recommending to an advisory panel a new requirement that the largest 500 US companies exchange all their financial data using XBRL. Benefits of XBRL include making of financial reports and data more accessible, increasing data quality and speeding the time to report data. Currently about 60 companies are filing information in the US using XBRL.
Using data from the companies that do file with XBRL, the SEC launched in December an online tool to compare executive pay from those companies to showcase some of the capabilities that XBRL will introduce for creating financial reports and side-by-side corporate comparisons.
People worry that this new requirement would have a financial hit similar to that of Sarbanes-Oxley section 404, a requirements that added an additional $2.9 million in costs to large US companies in 2006.
But XBRL is a global phenomenon and will be something that will be hard to resist. Adoption of XBRL will be the first step for US companies to standardize along the same lines as other countries. It is expected that at some point the US will move from the US-based GAAP to international standards like IFRS.