Financial Reporting: The next generation!

SEC Announces Successor to EDGAR Database
“IDEA” Will Make Company and Fund Information Interactive


The SEC announced a very important development in the future of financial reporting today. The EDGAR database is to be replaced by a new platform called IDEA. This is a completely new way of making financial data available to the public. In its press release the SEC stated


The decision to replace EDGAR marks the SEC’s transition from collecting forms and documents to making the information itself freely available to investors to give them better and more up-to-date financial disclosure in a form they can readily use.


Currently, most SEC filings are available only in government-prescribed forms through EDGAR. Investors looking for information must sift through one form at a time, and then re-keyboard the information — a painstaking task. With IDEA, investors will be able to instantly collate information from thousands of companies and forms, and create reports and analysis on the fly, in any way they choose.

Obviously this initiative ties in very closely with the SEC's XBRL requirement that will require data tagging of financial statements. There was a very good discussion of that topic in today’s Washington Post “Financial Data on Steroids” by Christopher Twarowski.

Well all of this is a lot of extra work but it seems to me that it will be worth it in the end. The volume of financial information has increased exponentially and it has become cumbersome to produce financial reports that are paper based. The move to IFRS will cause even more disclosure and furthermore the world is becoming increasingly more complex. However, there will be challenges to control how the information is being produced and disseminated. Truly the SEC is to be complemented for leading this next generation in financial reporting. It will be interesting to see how the Canadian Securities Administrators will respond. Of course any initiative needs careful dovetailing with the move to IFRS.

Will all this render mute the debate as to whether information is in the financial statements (including the notes), the MDA, the annual report or elsewhere? Financial Analysts often say they do not care where the information resides, only that they can get at it readily. That proposition will now be put to the test as the various aspects of the new generation of financial reporting are explored. Clearly readers need to know though the level of audit assurance that has been given on the data and how will that be accomplished? And what about potential legal liability?

We live in interesting times indeed.

Thanks to the US FEI Financial Reporting Blog for the heads up on this story. http://www2.financialexecutives.org/blog/blog.cfm?blog_id=1#20080819125456