- SEC Votes to Adopt Interactive Data Format (XBRL) for Financial Reports
- January 27, 2009 | Authors: Michael P. O'Brien; Laurie A. Cerveny
- Law Firm: Bingham McCutchen LLP - Boston Office
At its December 17, 2008 meeting, the SEC voted to adopt final rules requiring issuers to file financial statements in an interactive data format using eXtensible Business Reporting Language (XBRL). The new rule will be phased in and will apply to both domestic and foreign companies that report using U.S. GAAP and to foreign private issuers using International Financial Reporting Standards (IFRS).
XBRL is a collection of unique, computer-readable tags which function like bar codes and make financial information more searchable on the Internet and more readable by spreadsheets and other software products. Users will be able to download XBRL financial data directly into spreadsheets and computer programs, allowing them to search, analyze and compare data.
In the first year of XBRL reporting, only the face of financial statements will be tagged. Footnotes and schedules to financial statements will be tagged, but in block text only. Detailed tagging of footnotes and financial statements will begin in the second year of XBRL reporting. Tagging of narrative disclosures is permitted, but will not be required under the new rules.
Issuers must file XBRL financial reports as exhibits under Item 601 of Regulation S-K. XBRL will be required for all Forms 10-K, 10-Q, 20-F and 40-F, reports on Forms 8-K and 6-K that contain updated or revised financial statements, and Securities Act registration statements. XBRL exhibits must also be posted on an issuer’s website on the same day they are filed with the SEC and must be maintained on the website for 12 months. XBRL will supplement, but not replace, required disclosure in the traditional electronic filing format of ASCII or HTML on Edgar.
XBRL will be phased in over a three-year period as follows:
- Domestic and foreign large accelerated filers that have a worldwide public float above $5 billion as of the end of the most recently completed second fiscal quarter must file XBRL exhibits in periodic reports for periods ending on or after June 15, 2009. For a calendar year-end company, the first required XBRL exhibit will be required for the company’s second quarter 2009 Form 10-Q.
- Other domestic and foreign large accelerated filers that have a worldwide public float of $700 million or more must file XBRL exhibits in periodic reports for periods ending on or after June 15, 2010.
- All remaining filers, including smaller reporting companies, and all foreign private issuers that report using IFRS must file XBRL exhibits in periodic reports for periods ending on or after June 15, 2011.
Companies are encouraged to voluntarily adopt XBRL earlier than required. For the first XBRL exhibit, an issuer is permitted a 30-day grace period from the date it files its periodic report. Any issuers taking advantage of the grace period must file the XBRL exhibit as an amendment to the original periodic report. The SEC is also granting a 30-day grace period for the first XBRL exhibit required to have detailed tagging of footnotes and schedules.
Issuers who fail to file required XBRL exhibits will be deemed not current with their Exchange Act reports and, as a result, will be ineligible to use short form registration statements and will not be deemed to have adequate current public information as required by Rule 144. However, once an issuer files the required XBRL exhibit, it will be deemed current and timely.
Liability for XBRL data is limited and XBRL exhibits will be deemed “furnished” not “filed” for purposes of specified liability provisions. However, this limitation on liability will be phased out over a rolling two-year period for each company, completely terminating on October 31, 2014. XBRL data will be excluded from officer certification requirements under the Exchange Act rules and issuers will not be required to obtain auditor assurance on XBRL exhibits.
With the adoption of XBRL, public companies should begin taking steps to comply, including reviewing internal disclosure controls and procedures and researching the processes and software programs required to properly tag their financial statements.