Small companies see big benefits from XBRL adoption

The SEC has made eXtensible Business Reporting Language (XBRL) a mandate for financial filers. The largest companies will begin using the electronic data tagging system for financial submissions beginning June 15.

The SEC has made eXtensible Business Reporting Language (XBRL) a mandate for financial filers. The largest companies will begin using the electronic data tagging system for financial submissions beginning June 15.

Though smaller companies do not have to use the financial language for two more years, they can gain analyst attention and set a tagging standard for industry-specific filing traits by implementing sooner than that.

“By reporting in XBRL, analysts will be able to retrieve your data and run ratio analyses on your company,” says Michael Becker, VP of global disclosure and financial reporting services at Business Wire. “In a static environment, your company may never pop up on the radar. [Yet] if you have industry-specific terms that aren't part of the taxonomy, by adapting early, you can influence how others are going to tag those line items.”

When smaller companies employ the language early they also convey a commitment to transparency.

“From 1993 to 1996, the EDGAR system was phased in the same way,” says Philip Moyer, president and CEO of EDGAR Online, a company specializing in the distribution of electronic corporate data. “You didn't want to be the last one to say, ‘Let's be transparent.' It puts you on par with some of the best organizations for transparency. And it makes you more attractive to the analyst community [more quickly].”

Using XBRL also increases a smaller company's ability to engage with both analysts and investors.

“If your disclosure is cohesive, strategic, and used in many different manners, you can really... do a better job of getting your message across,” says Scott Mozarsky, EVP and chief strategy and development officer at PR Newswire. “It adds credibility to start early. [It also] makes it easier for analysts and others to work with data, which makes a company look that much more professional.”

Key points:
  • Taking early advantage of XBRL allows smaller companies to display their commitment to transparency
  • XBRL helps smaller companies gain previously unavailable analyst attention
  • Using the XBRL systems helps smaller companies better engage investors

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