On January 30, 2009, the SEC issued rules mandating public companies to provide their financial statement information in Extensible Business Reporting Language (“XBRL”) interactive data format. Compliance with this mandate means that in addition to their existing EDGAR filing requirements, companies must attach an XBRL version of their financial information as an exhibit to their SEC filings. Companies must also post the XBRL exhibit on their corporate website by the end of the calendar day that they submit their filing or are required to submit their filing. For all public companies, the mandate has been broken down into two stages: year 1 and year 2. The year 1 requirement will mean a detailed XBRL tagging of each item in the financials and a block XBRL tagging of the notes and schedules (block tagging means that you can attribute a single tag to an entire note or block of text). In year 2, companies will be required to not only tag the financials in detail but also tag in detail the notes and schedules (this means tagging any accounting policies, tables and numbers within the footnotes). The SEC scheduled the XBRL mandate for public company implementation according to a 3 phase plan:
|Phase 1 ||Phase 2 ||Phase 3 |
As of June 2009, large accelerated filers using U.S. GAAP with a worldwide public float of greater than $5 billion (Approximately 6% of SEC filers)
As of June 2010, the remaining large accelerated filers using U.S. GAAP (Approximately 14% of SEC Filers)
As of June 2011 all remaining reporting companies (Approximately 80% of SEC filers)
Complying with the SEC Mandate
The overwhelming majority of public companies filing with the SEC have been unaffected by the first two phases of this mandate. June 2011 is only 8 months away, and many smaller reporting companies still do not have a plan to comply with the upcoming XBRL requirement.
You must know when your company will be required to start filing with XBRL.
Most large accelerated filers were mandated to begin filing with XBRL as of this past June. If you are a large accelerated filer, chances are you should already be filing with XBRL or you will have to file with your upcoming periodic report. For smaller reporting companies, the XBRL filing mandate begins with your first periodic report (Form 10-Q, 20-F, or 40-F) containing financial statements for a fiscal period ending on or after June 15, 2011.
The SEC is requiring that XBRL tagged reports are to be filed at the same time as the rest of the associated reports or documents. For both year 1 and 2 the first XBRL filing for any company will be granted a 30 day grace period from that report’s filing date or due date (whichever comes first).
For the first 24 months that a company is filing their XBRL submissions, there will be limited liability should XBRL data fail to meet the SEC requirements. As long as the filer made a good faith effort and any mistakes are promptly corrected, the company will not be penalized.
- Understand what XBRL is.
XBRL is an Extensible Markup Language (XML) that allows for the standardization of information across different businesses and software systems. It accomplishes this by tagging information with standardized definitions or taxonomies. The SEC has developed a list of taxonomies which cover a variety of standard US GAAP and IFRS financial concepts. (The SEC has listed these taxonomies at http://www.sec.gov/info/edgar/edgartaxonomies.shtml)
These taxonomies will be tagged to corresponding information within your financial statements. For instance, cash and cash equivalents on your balance sheet will have a tag attached to it with the US GAAP concept defining what that item is. Every other public company with that specific item will also have that item tagged with this corresponding standardized US GAAP definition (taxonomy) in their financial statements. Now that these items have been defined this financial information can become interactive allowing investors and corporate executives to compare similar information with other public company financial statements. These XBRL tags or definitions are computer readable. Currently companies are required to file their EDGAR documents in ASCII or HTML formats. These are static text based formats which are difficult to parse through and analyze. XBRL is a language that allows the tagged financial information to become interactive. Financials coded in XBRL can be dynamically searched. This will facilitate automated business processes, and increase the efficiency in analyzing financial disclosure. XBRL does not require you to disclose additional financial information; it simply is taking the information from your SEC submissions and putting it in a format that makes it readable by automated computer processes.
- Decide a workflow that works for your external reporting process.
Companies must decide what works best for their external reporting workflow. There are a number of software solutions and XBRL filing services that can help you with your XBRL filing needs. Should a company decide to handle this process internally there are commercially available software solutions on the market. In addition the SEC provides a free XBRL previewer so companies can upload their XBRL files to ensure that they have been tagged accurately and display in satisfactory manner. XBRL tagging can be time consuming and labor intensive (especially the year 2 detail tagging). Many companies are choosing to outsource this XBRL process. Most financial printers and EDGAR filing agents have XBRL solutions to assist their clients with the tagging process.
David Rosenfeld is the Director of Operations at Quality EDGAR Solutions (QES), a full service SEC filing agent and financial printer, providing SEC compliance and financial document services. David can be reached at (212) 631-7591 or via [email protected]
Philip Weiner and Sunil Jain contributed to this article.