2.2 Impact of Technology upon Accounting Disclosure: Interactive Data Disclosure
The SEC summarized its
Interactive Data Disclosure requirements as follows (adopted
in Securities Act Release No. 9002, 2009):
SUMMARY: We are adopting rules requiring companies to
provide financial statement information in a form that
is intended to improve its usefulness to investors. In
this format, financial statement information could be
downloaded directly into spreadsheets, analyzed in a
variety of ways using commercial off-the-shelf software,
and used within investment models in other software
formats. The rules will apply to public companies and
foreign private issuers that prepare their financial
statements in accordance with U.S. generally accepted
accounting principles (U.S. GAAP), and foreign private
issuers that prepare their financial statements using
International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board
(IASB). Companies will provide their financial
statements to the Commission and on their corporate Web
sites in interactive data format using the eXtensible
Business Reporting Language (XBRL). The interactive data
will be provided as an exhibit to periodic and current
reports and registration statements, as well as to
transition reports for a change in fiscal year. The new
rules are intended not only to make financial
information easier for investors to analyze, but also to
assist in automating regulatory filings and business
information processing. Interactive data has the
potential to increase the speed, accuracy and usability
of financial disclosure, and eventually reduce costs.
This was optional in 2010
and is required in 2011.
An important unit of the SEC is the Division of
Corporation Finance (DCF).
This unit is responsible for reviewing filings by
companies for conformity with accounting standards, full
disclosure, and comparability.
These filings are
added to the SEC’s EDGAR Database which today is the primary
source of data for researching a company.
Interactive Data Reporting requires that the filings
with SEC are electronic in XBRL:
Extensible Business Reporting Language, form.
The objectives for this are described as follows:
(source www.XBRL.sec.gov).
“Interactive
data can provide investors quicker access to the information
they want in a form that's easily used and can help
companies prepare the information more quickly and more
accurately.”
The SEC’s interactive data
approach to financial reporting is also becoming the new
standard for international financial reporting.
They report a growing list of countries are now
beginning to incorporate interactive data into their
disclosure systems, including: Australia, Belgium, China,
Committee of European Banking Supervisors (CEBS), Ireland,
Japan, Singapore, Spain, Sweden, and the United Kingdom.
Interactive data has a
simple objective:
to enable the users of financial information to
perform faster and more accurate analysis of business data.
This includes being
able to quickly and easily access the data.
There are four major
financial statements:
·
Consolidated Statement of
Income – presents results over a period starting with the
top line (sales) down to the bottom line (net income).
·
Consolidated Balance Sheets
– presents the financial position at the end of a period.
·
Consolidated Statement of
Cash Flows – presents information about cash inflows and
outflows summarized by operating, financing and investing
activities.
·
Consolidated Statements of
Shareholders’ (Stockholder’s) Equity – presents a
reconciliation of the beginning and ending balances of
accounts appearing in the Shareholders’ equity section of
the balance sheet
You will quickly learn that
in practice, companies use multiple names to refer to the
same statement.
For example Amazon and Wal-Mart refer to their Consolidated
Statement of Income respectively as:
·
Consolidated Statement of
Operations (USD $).
·
Consolidated Statement of
Income (Audited) (USD $)
There are many supporting
statements to these main statements.
These are referred to as the Notes to the Financial
Statements.
These communicate assumptions, changes in accounting
policies and additional information.
Valuation Tutor provides convenient access to those
notes that are filed as part of the Interactive Statements
in a drop down menu.
In the 2011 10-K, the set of Amazon’s support
statements was large and the following example lists about
half of the total number.
