The SEC saved the best for last in their Concept Release on Regulation S-K. Read pages 327-340 of 341-page document and I think you'll agree with me: These are the most interesting pages; and they could produce revolutionary changes that significantly improve the consumption of SEC disclosures. These 14 pages address the increasing use of structured data, including XBRL tagging, to consume business and financial data in a computer-readable format. And they ask for input on the topic.
Inevitable changes coming for structured data
It seems inevitable that requirements for structured data tagging will expand to include further SEC business and financial disclosures. I’m primarily talking about expanding tagging to information in Parts I and II of Forms 10-K and 10-Q, areas which are currently not required to be tagged. That’s one key item the SEC is asking about in those 14 pages.
How do we improve quality? Enforce consequences
My favorite question in the Concept Release is Question #330 “How can the quality of structured disclosures be enhanced?” It is widely known that SEC XBRL data quality just isn’t where it needs to be. Don’t get me wrong, certain companies are submitting properly tagged XBRL for their 10-Ks and 10-Qs. But most are not, primarily since the SEC is not enforcing quality. So although there are many answers to the quality question, the obvious one is that before companies will really start submitting good quality XBRL, there needs to be consequences for submitting poor quality XBRL.
The theoretical concept is simple. I remember years ago that my father had a rule not to run through his garden. But when my siblings or I had to catch a foul ball or needed to capture that butterfly for an insect collection, we ran through the garden, knocking tomatoes off the vine and trampling the cabbage plants. My father always just yelled from afar, reminding us to stay out of the garden. Then one day he caught my brother running through the garden and made him spend two hours tending the garden and pulling weeds, while the rest of us went to play. That was the last time any of us ran through the garden. Consequences for violating the rule created adherence to the rule.
Submit your feedback by July 21
So consider your own situations and experiences and read the Concept Release. The last day of the public comment period is July 21, 2016. I encourage any interested party to submit your own response or at least to follow along with the issues. Changes are on the way.