AS THE US Securities and Exchange Commission (SEC) considers new rules to require companies to begin filing their documents in eXtensible Business Reporting Language (XBRL), it has been having trouble finding software experts who can help make those filings usable to investors.
The commission put out a pressing call in June for contractors to help it develop an “XBRL Rendering Engine,” a vital software tool that converts raw XBRL files into HTML information that investors can readily read in a typical Internet browser.
Without the rendering engine, investors will not be able to easily view XBRL filings on the SEC’s website when companies begin furnishing raw XBRL files to EDGAR early next year under new rules proposed by the commission. They will only see a jumble of code as shown below.
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| Without an XBRL rendering engine to convert code to a viewable format, gobbledygook is all that investors will see of the SEC’s new “interactive data.” |
The SEC twice extended the deadline for proposals for the rendering engine, the last time to August 15. It also relaxed its initial requirement for detailed pricing, saying prospective vendors could simply submit “price ceilings” and provide a more detailed breakdown after the contract was awarded.
The SEC said it was relaxing the pricing requirements because it was “important that work start immediately” to meet the December 15 deadline for having an XBRL software engine in place.
According to questions and answers provided by the SEC as part of the RFP process, prospective suppliers were concerned about the SEC’s requirement that they sign away all of their intellectual property rights for the tool’s source code.
The SEC said it wanted to offer the rendering engine’s source code to software and web developers for them to develop their own XBRL software and web applications.
No mention of Rendering Engine at IDEA press conference
It is not known if the SEC received formal bids for the rendering tool contract. Only a handful of vendors publicly expressed interest in the contract, none of which is a major provider of XBRL software tools. Based on information in the RFP, any contract award for the rendering engine should come this week.
Last week, four days after the final deadline for submissions to its RFP, the SEC held a press conference to announce that the agency would replace EDGAR with an entirely new system called Interactive Data Electronic Applications (IDEA). Chairman Chris Cox remarked that grafting XBRL technology on EDGAR was proving expensive.
Under the new IDEA system, which is expected to be mature in five years, the SEC will provide access to raw XBRL files, which investors can access using private sector software and websites like Yahoo! Finance.
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| SEC Chairman Cox made no mention of the rendering engine RFP at last week’s IDEA press conference, even though the SEC planned to provide the software to help foster development of new applications that can use the database. |
Nowhere in any of the materials or in his statements at the press conference did the SEC or its chairman mention that the commission plans to acquire an XBRL rendering engine that it will offer to developers who want to build applications for IDEA.
They also did not explicitly say that investors will be able to view rendered XBRL data on the SEC’s website like they do current HTML filings. However, most news media interpreted the announcement that way.
Instead, the SEC’s press release said that during the transition to IDEA, investors using EDGAR would be able to “tap IDEA’s advanced search capabilities, and to use the information from EDGAR within spreadsheets and analytical software.” The SEC is understood to be developing a web-based interface that allows for searching, sorting, printing and downloading of XBRL filings, but being able to view XBRL in a browser depends on the agency acquiring a rendering engine.
At the press conference, SEC chairman Cox provided a demonstration of XBRL’s capabilities using two prototype viewers developed for the SEC as part of its XBRL voluntary filer program. However, according to the RFP, the rendering technology for the prototype financial report viewer is not considered suitable for the SEC’s needs under the pending mandatory XBRL filing rules.
Shortage of qualified service providers
In May, the SEC issued proposed rules for comment that will require the largest 500 US-listed companies to begin tagging their financial statements and footnotes in XBRL beginning with 10-K annual reports early next year. All other companies will be required to follow suit by 2011.
The SEC’s experience trying to obtain the XBRL rendering engine parallels comments to the SEC from companies and vendors who have questioned whether there are sufficient resources and qualified service providers available to support companies in meeting the coming XBRL mandate.
In his comment to the SEC, Florida Power & Light Controller and Chief Accounting Officer Michael Davis said XBRL service providers had hiked their prices following the SEC’s proposed rule to mandate XBRL: “We received an estimate for XBRL/HTML software in May 2008 from a software vendor. After the proposed rule was released by the SEC, two months later, the vendor’s quote increased 64.8%.”
Vendors themselves predict there will be problems once the SEC makes XBRL mandatory. Rivet Software Inc. President Michael Rohan told the SEC “the biggest challenge” will be the bunching of filings into a very short period as “most filers will inevitably file in the last few days, causing a major problem for service providers.”
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