As federal policymakers wrestle with how to track companies that receive bailout funding, consensus is slowly building that an emerging Web language being promoted by a Norwalk-based company could provide a key.
As of June 15, companies with at least $5 billion in market value must file financial statements with the Securities and Exchange Commission using Extensible Business Reporting Language (XBRL), a derivation of Extensible Markup Language (XML) used to format Web documents.
All publicly traded companies must use XBRL for their quarterly and annual reports by the summer of 2011. The SEC will allow “hardship exemptions” for companies that experience early technical difficulties in converting financial data to the XBRL format.
The SEC has created a compliance guide for small companies to help them use XBRL to tag financial statements and make the information available on their Web sites.
The SEC has dedicated a portion of its Electronic Data-Gathering, Analysis, and Retrieval (EDGAR) system for companies filing forms voluntarily under the XBRL language, with Fairfield-based General Electric Co., Stamford-based Pitney Bowes Inc. and Norwalk-based Xerox Corp. among the companies already doing so.
Add to that list Norwalk-based Edgar Online Inc., whose software helps companies convert their financials to XBRL format.
Edgar Online CEO Philip Moyer is on the board of XBRL US Inc., a Washington, D.C.-based organization that works for mass adoption of the standard. Other XBRL US members regionally include Hartford-based United Technologies Corp. and the government of Rye, N.Y.
In the planning stages for more than a decade, the move to XBRL has gained traction as federal agencies grapple with how best to regulate financial entities following the Wall Street collapse.
Mark Bolgiano, CEO of XBRL US, said the standard could even be used to track the underpinnings of asset-backed securities that contributed to the financial collapse.
“You can”™t provide oversight to something you can”™t see,” Bolgiano said, testifying on the topic before a Congressional committee last month. “This common standard does provide a powerful tool for the government and for markets to get true visibility and transparency into ”¦ the books.”
According to Moyer, the new rules could allow Edgar Online to double the size of its business over the next three years, adding between $10,000 and $20,000 in revenue for each company it helps convert to XBRL. Edgar Online”™s largest customer currently is NASDAQ, for whom Edgar Online built last year a data base of information from 144A forms on file with the SEC.
The company also has partnerships with Stamford-based Thomson Reuters Corp. and Chicago-based R.R. Donnelley & Sons Co., which Moyer said has the potential to “dramatically” impact the future of Edgar Online.
Of course, Edgar Online is not the only company hoping to cash in on the conversion to XBRL. Armonk, N.Y.-based IBM Corp. partnered last month with Englewood, Colo.-based Rivet Software Inc., whose software was used by 38 percent of companies in the voluntary SEC XBRL filing program as of a year ago, according to researchers at Middle Tennessee State University. Just over a quarter of those companies used Edgar Online”™s I-Metrix software, with United Kingdom-based CoreFiling Ltd. holding the third-best market share.
Edgar Online makes money by:
Ӣ charging fees to create the XBRL-tagged files that companies submit to the SEC;
Ӣ aggregating public-company financials and licensing the data to financial organizations
Ӣ selling subscriptions to Edgar OnlineӪs analytical software that sorts through XBRL data
That last business has been affected by the turmoil in the financial markets.
“If the country can turn the corner on job creation, we could see increased (subscription) growth,” Moyer said. “But predicting that change is difficult at best.”
