Finally, some good news for investors
Posted
Aug 20 2008, 07:13 PM
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This post is by MSN Money columnist Michael Brush:
If you’re sick of using the clunky Cold War-era Edgar system to check out companies as investments, you just got good news.
The Securities Exchange Commission (SEC) has finally unveiled a new technology platform that will move it into the 21st century for financial filings – and make it a lot easier for you to research investments.
The new tech platform, unveiled Tuesday, is a breakthrough because it will let the SEC present company financials in a format known as XBRL, short for eXtensible Business Reporting Language. XBRL tags numbers in company financials with “bar codes” so that no matter what company is filing, each quarterly sales number will have the same tag.
This makes it a lot easier for investors to call up benchmarks like sales or profit margins, and quickly make comparisons across companies. Right now, you have to check filings for each individual company to get at the numbers – or subscribe to an expensive database that does this for you.
The SEC calls its new technology platform IDEA, for Interactive Data Electronic Applications. Edgar, which stands for which stands for Electronic Data Gathering, Analysis and Retrieval, will linger for a couple of years as a parallel universe, but eventually go away.
“Edgar is a big electronic file cabinet. The IDEA system changes Edgar into a database,” says Charles Hoffman, who originally thought up the idea of XBRL a decade ago. Hoffman now works for UBmatrix, which helps companies implement XBRL.
“This is part of a sustained effort to use all of the available technology to better serve investors,” says Bill Lutz, who heads the 21st century disclosure initiative inside the SEC. Under a proposed change in SEC rules likely to be approved by the end of the year, big companies will have to start filing with XBRL early next year. All companies should be using XBRL by 2011, Lutz told me.
In a press conference Tuesday to announce the new tech platform, SEC Chairman Christopher Cox said IDEA will bring “a fundamental change in how the SEC collects, manages and distributes information.” He said IDEA will make analysis of companies quicker and cheaper, and that “investors who want to perform analysis are going to see very fast progress and improvements.”
Let’s hope so.
Because the U.S. is far behind many parts of the world in offering investors the convenience of XBRL by forcing companies to use it when filing results. China already requires XBRL for companies listed on both of its exchanges, and XBRL is widely used in Japan, Europe, and elsewhere.
As I pointed out in a column back in May, the U.S. is embarrassingly behind in implementing XBRL given how cheap and easy it is to file financials using the format, and how much it would help investors.
Every day that we don’t XBRL is another day in which Wall Street pros, who can afford expensive databases, have a big and unnecessary advantage over the little guy. If you’d like to tell SEC chairman Cox to you think this is unfair and that he should speed things up, email him here.
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