Wednesday, May 21, 2014

XBRL for Other Forms

by: Michael Castro, XBRL Production Manager
CompSci Resources, LLC

The introduction of XBRL has not only improved transparency, but also provided a way for investors to more efficiently process and use corporate information. While it has been extremely useful, more information should be provided in the specification so that investors have even more transparency and information. Companies file a lot more than just their quarterly statements to communicate their earnings to potential investors. In order to more fully realize the benefits of XBRL, more United States Securities and Exchange Commission (SEC) forms should be included in the mandate. Below, I outline three examples of commonly filed financial forms that companies should tag in XBRL to provide more complete information to investors:


What is it? An 8-K filing is an interim report that announces any material events or corporate changes that occur between quarterly filings. This can be anything from a change in the management team, or to an earnings release.

Why should it be included in the mandate? Oftentimes, companies will release earnings reports ahead of their quarterly statements, which get filed as an 8-K. This information may provide a simple discussion of the company’s earnings, but it can also show full financial statements. Filing these statements in XBRL will bring the same benefits as filing the subsequent 10-Q or 10-K, and provide more timely XBRL data to investors.


What is it? An N-Q filing shows the quarterly schedule of portfolio holdings of investment companies. Often presented in a tabular form, it shows the composition of a portfolio of companies it is invested in, and their portfolio weights.

Why should it be included in the mandate? This document ties together the XBRL produced on the corporate finance side and the mutual fund side. It can provide important information on how much of the company’s stock is institutionally-owned, as well as provide additional insight for holders of mutual funds to be able to more closely track a fund’s holdings. Often, these forms are formatted in a variety of ways, so the standardized format provided by XBRL could make these forms more accessible to mutual fund owners.


What is it?  A 6-K filing is a form submitted by foreign private issuers of securities who sell shares in the United States (U.S.). Similar to a 10-Q or 10-K that a domestic issuer would file, it contains quarterly information that a foreign company issues to its local regulators, investors, or exchanges.

Why should it be included in the mandate? Foreign shares make up a large, and growing, proportion of publicly traded companies on U.S. exchanges. As such, foreign issuers who trade shares in the U.S. should be held accountable to the same disclosure rules as domestic issuers. By mandating that foreign entities file their 6-K filings in XBRL, they would be on the same level as U.S. issuers in terms of providing timely and transparent financial information. 

Do you agree with the addition of these forms? What other forms do you believe should be a part of the SEC’s XBRL mandate?