27 August 2008

Financial Statements: Changes are Coming

Floyd Norris, in the New York Times (NYSE: NYT), wrote about a step by the U.S. Securities and Exchange Commission to allow, and eventually require, U.S. companies to prepare their financial statements in accordance with International Accounting Standards.  Our parochial concern is that comparisons between new and old financial statements could be misleading in the first years after the transition.  We prefer to have a five-year (20-quarter) or longer historical record for the companies we analyze, to get the full benefits of the GCFR methodology.  We're thrilled when we have 10 years of data.
The SEC also recently announced a replacement for the EDGAR repository of financial reports.  We love having online access to every company's 10-Q and 10-K since 1994, and these reports are only a fraction of the information available from EDGAR.  However, we spend too much time retyping data from the forms into custom spreadsheets, and the process is error-prone.  The replacement system, Interactive Data Electronic Applications (IDEA), promises to make data available in more useful and convenient ways.

The ongoing transition to eXtensible Business Reporting Language (XBRL) is a key enabler for IDEA.

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