SEC panel warns XBRL could have costs like Sarb-Ox

By Karey Wutkowski

WASHINGTON, Jan 11 (Reuters) - Requiring companies to file their financial statements with electronic tags known as XBRL could cost millions of dollars similar to the controversial Sarbanes-Oxley legislation, members of a U.S. advisory committee said on Friday.

Made up of business executives and academics, the advisory group to the U.S. Securities and Exchange Commission proposed the regulator take a staged approach in requiring companies to file financial data in XBRL.

The letters stand for eXtensible business reporting language that its supporters say would improve the usability of financial reports and data, increase data quality and speed the time to publishing.

SEC Chairman Christopher Cox has championed the use of XBRL and the advisory panel is recommending that the 500 largest companies be the first to test it.

"People are afraid that what has happened with Section 404 of Sarbanes-Oxley will be what accountants will do with this new issue," said Peter Wallison, a researcher at the conservative American Enterprise Institute, and member of the 17-member committee put together by the SEC.

Section 404, part of the 2002 corporate reform law, requires companies to assess their internal controls over financial reporting and requires external auditors to report on management's assessment and on the controls themselves.

The average cost for Section 404 compliance was $2.9 million during fiscal 2006, the third year the law was in force for large companies, according to an advocacy group for corporate financial managers, Financial Executives International.

Thom Weatherford, former chief financial officer at Business Objects SA, said if the SEC requires independent assurance of XBRL documents, auditors could become overly cautious, adding burdensome costs.