BIO Applauds Reps. Robert Hurt and Terri Sewell for Introducing the Small Company Disclosure Simplification Act
Washington, DC, March 7, 2014 - Today, the Biotechnology Industry Organization (BIO) applauds Reps. Robert Hurt (R-VA) and Terri Sewell (D-AL) for introducing the Small Company Disclosure Simplification Act. This bill reforms the existing eXtensible Business Reporting Language (XBRL) compliance regime to reduce the regulatory burden on small businesses.
Public companies are required to provide their financial statements in an interactive data format using XBRL. XBRL “tags” certain data points in issuers’ reports and exports them in a standardized format. XBRL is reported in a unique computing language – one that requires specific expertise outside the bounds of traditional financial or accounting training.
Companies need experts in the XBRL language to properly file the appropriate reports, so small issuers turn to external contractors to complete their XBRL filings. The cost of an external XBRL contractor is significant for an emerging company, reducing the capital available for more vital functions like research and development.
The legislation will broaden the IPO On-Ramp created by the Jumpstart Our Business Startups (JOBS) Act by exempting emerging growth companies (EGCs) from the XBRL compliance requirement. It also will institute a temporary XBRL exemption for small public companies and require the SEC to make recommendations on how to improve the compliance mechanism.
Jim Greenwood, BIO’s President and CEO, made the following statement:
“BIO thanks Rep. Hurt and Rep. Sewell for introducing this important legislation. The efficient use of investment funds is of paramount importance to a growing biotech company. Spending valuable innovation capital on costly regulatory burdens like XBRL can delay scientific progress and slow the growth of a promising company. By exempting EGCs from XBRL compliance, the Small Company Disclosure Simplification Act removes an expensive bureaucratic roadblock from the path of emerging biotech issuers.
“The true value of a biotech company is found in scientific milestones and clinical trial advancement rather than financial disclosures. Investors often make their decisions based on these criteria, not XBRL filings. A recent study of investors across all sectors of the market found that 92% of investors do not consider data from XBRL reports when making investment decisions. The cost of preparing these filings clearly outweighs any potential benefits.
“BIO supports this legislation because it takes a commonsense approach to the regulatory regime for public companies. By requiring the SEC to study the effects of XBRL compliance on the market while giving emerging innovators a break from this costly regulatory burden, the bill provides important regulatory relief for small issuers. More than 70 biotech companies have gone public using provisions in the JOBS Act, and this legislation will support their growth.”
For more information on the biotech industry and emerging companies can be found at www.bio.org.
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