UPDATE The Securities and Exchange Commissions XBRL Mandate
By Alan Markowitz, Partner - Assurance Services
On January 30, 2009, the Securities and Exchange Commission (“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. The XBRL requirement was phased in over the last two years, based on the registrant’s filing status.
As of June 15, 2011, the third phase of the SEC’s mandate requiring all public companies, including foreign filers, to provide their financial information utilizing XBRL took effect. This phase impacted all remaining public companies (which are companies that are not large accelerated filers) and beginning with the first quarterly report on Form 10-Q that contains financial statements for a period ending on or after June 15, 2011, they now must attach an XBRL version of their financial statement as part of their SEC filing. The SEC’s mandate applies not only to annual and quarterly reports but also other filings, including transition reports and Form 8-K which include previously issued annual or quarterly financial statements. Also after June 15, 2011, newly public companies will become subject to XBRL requirements for the first quarterly report on Form 10-Q or annual report on Form 20-F or 40-F, for foreign filers, due after they become public companies.
XBRL is a form of electronic communication through which companies can report, analyze, and compare data through standard processes and software systems.To do this, XBRL “tags” financial items with standardized GAAP definitions or taxonomies. As all companies using XBRL tag the same items with the same definitions, multiple sets of data can easily be analyzed, compared, and searched.
The requirement to attach an XBRL version of the financial information as an exhibit applies to all publicly traded companies, including foreign filers, with only three exceptions:
- Investment companies registered under the Investment Company Act
- Business development companies and others that prepare their financial information under Article 6 of Regulation S-X
- Private issuers that report under IFRS
Due Dates and Grace Period
XBRL exhibits must be submitted, as well as posted on the company’s website, on the same calendar day as the traditional filing. The SEC has allowed for a 30 day grace period for first time XBRL filers in the following instances:
- Companies fulfilling the first year requirement in which a detailed XBRL tagging of each item in the financial statement and block tagging of the notes and schedules is prepared
- Companies fulfilling the second year requirement in which all aspects of the financials are tagged in full detail
The 30 day grace period begins on the earlier of the due date or the filing date of the traditional filing.
As was the case for large accelerated filers during the phase in period, 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.
Should a company fail to file the XBRL exhibit while still submitting the traditional filing by the required date, the company will be deemed not current with its Exchange Act reporting. Once the company submits or posts that exhibit, it will be deemed current and will not lose its status as having filed its reports in a timely manner.
SEC Advice on XBRL Filings
On June 15, 2011, the SEC issued suggestions regarding the proper filing of the XBRL exhibits, derived from their review of the Interactive Data Financial Statement submissions during the first two months of 2011. This feedback mainly pertains to 1) the format of the exhibit, 2) tagging negative values, and 3) creating custom tags.
- Format of the Exhibit
According to the SEC, many firms have been concerned with duplicating the format of the traditional HTML filing in the XBRL exhibit. However, it is more important to correctly tag each item in the XBRL version rather than try to mimic the traditional format. Thus, the format of the XBRL does not need to mirror that of the traditional filing.
- Tagging Negative Values
In many instances, XBRL tags already have negative values built in to the existing definition. Thus, inputting data as negative will lead to improper presentation. To avoid this, the preparer must review each tag’s definition for key words that would indicate that a negative value has been built in to the definition. Some key words to watch for are “increase”, “decrease”, and “change in”.
- Creating Custom Tags
The SEC has suggested that preparers do their best to use the software to find and utilize appropriate tags rather than create their own. The use of custom tags makes it more difficult to compare and analyze the data due to the divergent classification. Custom tags should only be used in very unique situations and only where there is a material difference between what is being reported and what is defined in the standard tag.
The above observations are based on the identification of certain areas where there were significant and common issues with the filings. The staff intends to continue to evaluate the interactive data filed and publish their findings, and encourages companies to prepare future filings that are consistent with the themes of the observations. The SEC believes this will result in an increase in the overall quality of the interactive data submissions and the usability of the data.