Hang in there, says Mike Starr to public companies bemoaning the cost and questioning the utility of the new data-interactive XBRL reporting system. The benefits will eventually become apparent.

Starr is the deputy chief accountant for policy support and market monitoring at the Securities and Exchange Commission, and he's the point person on the SEC's initiative to bring all public company financial data into XBRL, which is shorthand for “eXtensible Business Reporting Language.” He told accountants at a recent national conference of the American Institute of Certified Public Accountants that it will take another two to three years for the XBRL mandate to be fully implemented. “These are still the early days,” he said. “Changes of this magnitude take time.”

The largest public companies are completing their third year of reporting into the XBRL system this year, tagging each piece of data in their financial statements to make the information available to investors in a format that is machine-readable and therefore easier to sort and search. A middle tier of public companies completed their second year of reporting, which included their first pass at the detailed tagging of all accounting policies, footnotes, and amounts within footnotes, in addition to the block tagging of the financial statements. The final group, including the smallest public companies, completed their first phase of reporting into XBRL, getting their first taste of selecting tags from the GAAP Taxonomy approved by the SEC to map each piece of financial statement data to a precise location in the XBRL system.

Starr and other XBRL speakers at the AICPA conference fielded numerous questions about the benefits of XBRL when there's little visible evidence that investors or other users of financial statements are actually using the data that companies are tagging or outsourcing to third parties. The SEC staff is using it, Starr assured. “At the SEC, the number of software licenses for our own analysis has increased fivefold in this fiscal year,” he said. Data aggregators and investors also are getting familiar with it, according to Starr, and the development of software tools needed to analyze the data is coming along as well.

Other indicators also suggest the technology is further developing to make XBRL-tagged data more accessible and meaningful to users of financial statement data, Starr said. An increasing number of public companies are beginning to bring the tagging process in house after relying in the early stages on third-party service providers to perform the tagging. “We expect that trend to continue in 2012,” he said. The rate at which companies are creating extensions, or custom tags, is declining, suggesting companies are getting better at making good tag selections, and industry groups are starting to discuss some standardization ideas that will further contribute to development.

Susan Yount, a staff member in the SEC's Office of Interactive Data, said during the conference that Congress is showing a growing interest in structured data as a way to improve reporting for various government programs and initiatives. “This is an area that is not going to go away,” she said. “The notion of transparency and providing information in a format that can be put into a data warehouse and pulled out is a notion that in the 21st century is here to stay. If Congress, of all places, is interested in it, you can look for that sort of thing in the future.”

AICPA manager Ami Beers says Congress is considering measures now to require XBRL-like reporting in areas such as health and human services programs and federal spending. Taxonomies surely will proliferate for such varied reporting purposes, but that shouldn't worry companies that may find themselves one day facing multiple structured data reporting requirements. Each taxonomy will serve a different purpose, so there shouldn't be conflict. “Utilizing different taxonomies is like looking up words in different areas of the dictionary,” she said. “You're looking for different information.”