House backs e-standards for financial reports

The House is pushing to simplify mandatory financial reports for companies receiving federal funds, by forcing agencies to collect the data in a uniform, searchable format.

Lawmakers passed two measures in the past week that would encourage the use of technologies that make it easier to scrutinize the complex financial results of private sector firms.

One bipartisan bill, introduced by Rep. Darrell Issa, R-Calif., calls on the White House to issue rules within 18 months that direct every agency to use the same financial data format, called eXtensible Business Reporting Language. The measure, which the House passed on Dec. 14, would require companies to file activity reports to agencies in XBRL and order agencies to ensure the public can view the standardized financial information. In addition, the sweeping financial regulatory overhaul legislation (H.R. 4173) that the House passed Dec. 11 includes a loose reference to XBRL, stating that regulators must report to Congress on how they are "encouraging the use and acceptance of interactive data" to increase transparency in financial reporting.

Proponents of XBRL say the format levels the playing field for businesses, citizens, lawmakers and agencies that are trying to make sure no one cheats the federal government. XBRL technologies check company filings for all the required data fields and make sure the numbers add up correctly. For example, reported credit card income on the income statement should have a corresponding asset on the balance sheet.

Agencies collect financial reports in many different formats, making it hard to access and compare the data. The process is frustrating, time-consuming and largely manual, increasing the likelihood of human error, said Liv A. Watson, a co-founder of XBRL who serves on the board of directors of the financial information management firm IRIS India.

"The government would have to invest in tools and infrastructure to store and render XBRL data, but if you think about it, today they do that many times over to deal with many different data formats," Watson said. "What it really is about is the process of getting your information into a discoverable standard that can be analyzed and compared. It is an accountability and responsibility they have to taxpayers."

The Issa legislation likely would require agencies to spend $50,000 to $100,000 on new technologies to standardize on XBRL, she added. To expedite passage, the House Oversight and Government Reform Committee, where Issa serves as ranking member, on Thursday added the bill (H.R. 2392) to a Senate-passed measure (S. 303) that reauthorizes the award-application site Grants.gov.

While extracting data in XBRL carries costs, many technologies for viewing the information are free. Citizens can download a viewer at no expense from the Securities and Exchange Commission's Web site. SEC and the Federal Deposit Insurance Corporation already use the standard to ease the process of analyzing financial filings.

Before regulators moved to XBRL several years ago, 30 percent of banks' filings contained inaccuracies, according to a 2006 report by the Federal Financial Institutions Examination Council, an interagency standards-setting body for FDIC, the Federal Reserve System and the Office of the Comptroller of the Currency. With XBRL, all of the banks' data was accurate and added up in all mathematical relationships.

Banking industry officials said the burden of converting their reports to XBRL would be outweighed by the benefits of a uniform standard, especially if it is adopted internationally.

"We are supportive of transparency and consistency in reporting requirements," said Scott Talbott, the chief lobbyist for the Financial Services Roundtable.