July 26, 2004

Spotlight on Environmental Disclosure On

On July 14, the GAO issued a report on environmental disclosure in SEC filings. The report addresses (1) market participants’ views on how well the SEC has defined the requirements for environmental disclosure, (2) the extent to which companies are disclosing such information in their SEC filings, (3) the adequacy of the SEC’s efforts to monitor and enforce compliance with disclosure requirements, and (4) suggestions for increasing and improving environmental disclosure.

As you might expect, the GAO found that market participants vigorously disagree about whether the SEC’s existing disclosure requirements are adequate. Also, the GAO was unable to determine the extent to which companies are disclosing environmental information without access to companies’ records because no disclosure on environmental issues could mean that a company does not have existing or potential environmental liabilities, has determined that such liabilities are not material, or is not adequately complying with disclosure requirements. Consequently, the GAO couldn’t determine the adequacy of the SEC’s efforts to monitor and enforce compliance with environmental disclosure requirements without more information.

Ultimately, the GAO recommended that the SEC “take steps to improve the tracking and transparency of information related to its reviews of companies’ filings” by increasing the amount of information available within the SEC and to the public on the results of the SEC’s filing reviews (e.g., public availability of comment letters) and by improving the level of coordination between the SEC and EPA.

Introducing XBRL

The SEC announced last week that it is pursuing a rulemaking project to permit public companies to file financial reports using XBRL technology, which tags data for easier online searches. Unlike HTML (hypertext mark-up language), XBRL (extensible business reporting language) allows for ready comparisons and analysis of financial results.

The relatively new XBRL software reportedly makes it easier for companies to prepare quarterly and annual financial reports because it creates a single document that is able to be converted to different formats, reducing duplication, inefficiencies and errors.

Last summer, the FDIC, Federal Reserve and the OCC launched a project to create a shared data repository of Call Reports (a quarterly financial statement filing made by banks) that would be submitted via the Internet in XBRL. It is expected that banks will file their 3rd quarter 2004 Call Reports via the new system.

This year, TSX Group, Inc. (listed on the Toronto Stock Exchange) became the first public company to publish annual financial results in XBRL. To learn how to view those financial statements, click here. To learn more about XBRL, click here.

-Submitted by Julie Hoffman