House Panel Approves Bi-Partisan Legislation Exempting Smaller Companies from Using XBRL in SEC Reports

The House Financial Services Committee has marked up and approved by a 51-5 vote bi-partisan legislation exempting smaller public companies from requirements relating to the use of Extensible Business Reporting Language (XBRL) for periodic reporting to the SEC. The Small Company Disclosure Simplification Act (H.R. 4164), was introduced by Rep. Robert Hurt (R-VA), Vice Chair of the House Capital Markets Subcommittee, and is co-sponsored by Rep. Terri Sewell (D-AL). Rep. Hurt believes that the legislation would streamline regulations for small public companies and remove a disincentive for companies to access capital in the public markets. Public companies are required to provide their financial statements in an interactive data format using XBRL. XBRL tags certain data points in issuers’ reports and exports them in a standardized format. XBRL is reported in a unique computing language, one that requires specific expertise outside the bounds of traditional financial or accounting training. Rep. Hurt noted that a glaring example of a regulation where costs currently outweigh potential benefits is related to the use of XBRL. The bill offers a commonsense solution to this problem, ensuring that regulations are not hampering the success of smaller companies. Currently, he continued, in order to comply with the XBRL regulation, small companies must expend tens of thousands of dollars on average. However, evidence suggests that less than ten percent of investors actually use XBRL.