Canadian issuers busy with the transition to International Financial Reporting Standards (IFRS) in 2011, will also feel the impact of the adoption of Extensible Business Reporting Language (XBRL).

Both the U.S. Securities and Exchange Commission and the International Accounting Standards Boards, the body that oversees IFRS, have adopted timelines for the adoption of XBRL.

On Wednesday, XBRL Canada, a not-for-profit group that promotes XBRL and writes its tagging system, hosted a webinar to discuss the timeline and the consequences for Canadian issuers. Representatives from the SEC, the IASB and the Canadian Securities Administrators spoke to the important role of the relatively new technology.

As usual, U.S. policy is leading the way forward. The SEC finalized its release “Interactive data to improve financial reporting” last month. The first phase in a three-year timeline for its implementation starts in a few short months — for fiscal periods ending on or after June 15, 2009. “In year one, foreign large accelerated filers with a world wide public float of over $5 billion calculated as of the end of the second fiscal quarter of the most recently completed fiscal year are required to submit their XBRL data” explained Stephen Sadoski from the SEC.

“In year two, all other domestic and foreign large accelerated filers using U.S. GAAP would be required to submit their data using XBRL for fiscal period ending on or after June 15, 2010,” added Sadoksi. In the last phase all companies using U.S. GAAP and foreign private issuers that use IFRS will have to add the tags to their electronic filings for fiscal periods ending or after June 15, 2011.

XBRL will replace the current standard for electronic financial statements — PDF documents — that read as text. Instead, XBRL statements, which will still read like a page if any one wants to do it the old fashioned way, will tag individual items of data, such as figures, tables and footnotes, using a standard taxonomy. The information can then be processed automatically into databases for analysis. One of the benefits of the adoption of XBRL standards is that it will increase analyst coverage of issuers because of the increased ease of use and comparability of data.

It will not, however, change disclosure requirements. “Under securities laws, it adds interactive data as an exhibit to the filings” explained Sadoski.

The consequences for the Canadian market are less certain. As it stands Canadian companies who use Canadian GAAP and U.S. GAAP reconciliation are not permitted to file interactive data because there is no standard tagging system approved — there is no guarantee the data would be comparable.

On behalf of the Canadian Securities Administrators, Andrew Lowe, from the Ontario Securities Commission, outlined the measures that Canadian regulators have taken to inform issuers of the increasing important role of XBRL in the capital markets.

While there has been a voluntary program in place for a few year, only six companies so far have listed XBRL documents alongside their PDFs on the System for Electronic Document Analysis and Retrieval. SEDAR itself poses problems. Launched in 1997, it was build for PDF documents, not interactive data.

A dozen of the 500 Canadian companies that are listed in the U.S. as well as Canada will be affected by the first phase of the SEC’s new policy. If these companies chose to post their XBRL documents to SEDAR, they will be a step closer to introducing Canadians to the advantages of the format.