The SEC on Wednesday proposed requiring that public companies and mutual funds start submitting their financial filings using Inline XBRL—an advance that should make the preparation of financial reports much easier.

XBRL is a technology that lets computers digest financial data quickly. It’s a godsend to financial analysts who want to answer specific research questions (“what’s the revenue generated in Mexico by the S&P 500 for the last three years?”); or to corporate financial planning execs who want to benchmark themselves against peers (“let’s look at R&D expenses as a percent of revenue, for all filers in oil & gas industry”).

That said, compliance with XBRL can be a bit tedious and expensive, especially for smaller filers. XBRL filings are submitted to the SEC as exhibits attached to a company’s standard filings. While numerous vendors are happy to help companies with their XBRL filing processes, small filers are not wrong when they complain that relative to their revenues, compliance with the XBRL mandate costs real money.

Inline XBRL makes that headache recede. Without getting too technical, Inline XBRL allows a filer to embed its XBRL data directly into its SEC filings. The need for extra exhibits goes away, and the chance for inaccurate or inconsistent tagging falls.

Acting SEC chairman Michael Piwowar said it best at the agency’s meeting on Wednesday: “While XBRL technology has made disclosures easier to access for investors, there are legitimate concerns about the burdens smaller companies face when preparing their filings. Today the SEC is asking comment on a way to streamline this process to ensure usability for the public while keeping compliance costs down.”

The SEC will solicit comments on the proposed amendments (you can read all 121 glorious pages on the SEC website) for 60 days.

Inline XBRL History

The SEC launched a pilot program last summer to allow voluntary Inline XBRL filings for quarterly and annual reports. In December, European securities regulators went one step further and announced that all filers there must start using Inline XBRL in 2020. So the SEC is just trying to accelerate the inevitable, really.

Still, Inline XBRL (also known as iXBRL) does have kinks that need to be smoothed over. For example, if your XBRL exhibits contain a major error, currently the SEC can suspend the exhibits to let you fix the error, while your regular financial statements proceed to get posted as usual. Major errors rarely happen, but when they do, that’s the process to resolve them.

With Inline XBRL, exhibit and financial statement are one in the same—so if a major error should happen, your whole financial filing would be suspended. (The SEC has stressed that errors of this magnitude are rare, especially since filers can use SEC tools to validate their filings before submitting them.)

One kingpin in helping companies prepare SEC submissions, Donnelley Financial Solutions (spun out of R.R. Donnelley last year), was quick to praise the SEC’s proposal.

“The SEC has taken an important step today toward simplifying and modernizing corporate financial reporting standards,” said Craig Clay, president of global capital markets for DFS. “The shift to iXBRL is particularly significant for smaller companies and filers who use stand-alone software solutions because more manual input of data is necessary for them … This iXBRL initiative should lead to even greater simplification and transparency in financial reporting.”

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