January 26, 2018

XBRL Requirements for Foreign Private Issuers

By Ted Lucas, Director, Assurance Services

Contributor Jonathan Tomazic, Partner, Assurance Services

Related Services Assurance, Sarbanes-Oxley Compliance, SEC Services, SEC Advisory, Post-Merger or Acquisition Services, International Financial Reporting, Employee Benefit Plans (ERISA), Compilations & Reviews, Advisory, Audits, Attestation Engagements

XBRL Requirements for Foreign Private Issuers Assurance

In case you were too busy back in March 2017 wrapping up your audit and finalizing your year-end financials to notice, the Securities and Exchange Commission (“SEC”) issued guidance to Foreign Private Issuers (“FPIs”) on eXtensible Business Reporting Language (“XBRL”) requirements.

On March 1, 2017, the SEC provided notice that the International Financial Reporting Standards (“IFRS”) Taxonomy was available on the commission’s website. Henceforth, all FPIs that prepare their financial statements in accordance with IFRS as issued by the International Accounting Standards Board (“IASB”) and are subject to Rule 405 of Regulation S-T were required to start submitting their statements in XBRL using the above-referenced taxonomy. While previously, FPIs had the choice of submitting their financial statements in XBRL, it became mandatory that all FPIs described above submit their financial statements in XBRL using an IFRS Taxonomy, as of their first annual report on Form 20-F or 40-F for a fiscal period ending on or after December 15, 2017. FPIs have the option to use a 30-day grace period for their initial filings, as an amendment to an original submission.

What is XBRL?

In general, XBRL requirements stack up to submitting an interactive data file along with filings. In other words, certain data within the filing must be “tagged,” which makes finding the data easier for the users of the filing. Information that must be tagged includes:

  • Financial statement amounts (individual line items);
  • Each separate note to the financial statements;
  • Any tables within the notes to the financial statements;
  • Each accounting policy within the notes to the financial statements listing the significant accounting policies; and
  • Any financial statement schedules that accompany the financial statements.

What are the key considerations for preparing an XBRL filing?

As domestic public companies that prepare their financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) found out when they were tasked with implementing XBRL, the process is cumbersome. For this reason, many companies elect to outsource the function, while others choose to self-perform it.

  • Companies that self-perform this process need to research the taxonomy and have the technical and practical knowledge to perform the tagging. Self-performing companies typically find the task extremely time-consuming and challenging to complete.
  • Companies that outsource the tagging also find the process somewhat more complex than they might have expected. A vendor must be secured, and a first-pass must be performed on a “typical” set of financial statements of the filer. Once a first-pass is done, the onus is on management to ensure all requirements are met, which typically means that the controller/manager of financial reporting needs to spend the necessary time approving the tagging and flagging information missed, and then re-performing the review until satisfied.

In summary, XBRL tagging is a complex and onerous process. Companies will need to weigh the options and the costs/benefits when deciding whether to self-perform or outsource the XBRL process. Considerations include the availability of technical expertise, appropriate quality control processes, sufficient staff time, and compensation cost.

For FPIs that have already taken all the necessary steps, congratulations! For FPIs that have ignored the XBRL requirement, timing is of the essence. Start the process now to ensure your 2017 filing is in compliance.