December 10, 2007
Financial Reporting and Chairman Cox
Posted by Troy Paredes

Although Enron, WorldCom, etc. are in the rearview mirror, the SEC remains very busy.  One initiative that has received relatively little attention in legal academic circles (at least by my count) is so-called XBRL (or interactive data).  In short, XBRL provides a way for information to be "tagged" so that it is easier for users to manipulate as they see fit.  With XBRL, users of information can readily re-fashion an issuer's financials, or that's the hope.  Without question, XBRL poses several challenges.  That said, XBRL is an important move in that it has the potential to make company filings more understandable, thus enhancing transparency. 

XBRL is really just part of a broader development.  Not only is the Commission advancing XBRL, but the shift from GAAP to IFRS appears to be underway, at least to some extent.  Further, the SEC's Advisory Committee on Improvements to Financial Reporting is considering a number of items.  The bottom line?  Under Chairman Cox, financial reporting could dramatically change -- in terms of both its form and substance.  Although topics such as shareholder access get more attention, the changes to financial reporting could have a much more significant impact on securities markets.  Stay tuned.

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