Understanding SEC EDGAR XBRL

What is XBRL?

XBRL (eXtensible Business Reporting Language) - also known as "interactive data" - is a standard used to define and exchange business and financial performance information. The purpose of using XBRL in regulatory filing is to uniquely code numbers and content within financial statements allowing computer programs to easily identify, extract, and compare them.

How will the introduction of an XBRL interactive data requirement affect my SEC EDGAR regulatory filing process?

Through including XBRL interactive data as part of an EDGAR filing, extra steps will be added to the filing process. As a result the process will become more extensive and turnaround time will increase. While XBRL interactive data may offer cost savings and efficiencies in some situations, most issuers generating XBRL interactive data strictly for regulatory filing purposes can expect costs to increase. Issuers will need to finalize financial statements several days prior to a deadline to ensure sufficient time is available to prepare and finalize the XBRL component of the EDGAR filing. Issuers will also need to either obtain or develop an XBRL resource to assist in the creation of XBRL interactive data.

The XBRL process has been portrayed as simply “barcoding” numbers in an issuer’s financial statements. This is inaccurate. The end result of the XBRL process is “barcoding,” but is trivial when compared to the prior tasks of both understanding XBRL and mapping line items to XBRL codes to construct a set of core “taxonomy” files for the issuer. XBRL US has assembled a 120 page preparer’s guide which provides a framework of XBRL essentials and information that enables preparers to proceed in an XBRL financial reporting environment.

Year Two "Detail Note Tagging" XBRL Requirements

According to pages 39 – 65 of the final XBRL rule, one year after adopting XBRL the mandate intensifies and requires reporting issuers to additionally "detail tag" the content within each note to the financial statements. Whereas in Year One the content within a note was “block tagged” and matched to a single XBRL element, in Year Two:

• each accounting policy and schedule (tabular structure) within the note must be individually block tagged and matched to a single XBRL element; and

• each number appearing within the note must be individually tagged to an XBRL element.

The process of individually tagging numbers in notes to XBRL elements will significantly increase the amount of time necessary to prepare an XBRL filing. Service providers will need to read and interpret text within notes to correctly identify extracted numbers. Reporting issuers will need to be more involved in the review process, ensuring the most appropriate elements have been selected to represent a much larger collection of facts.

What solutions are available (software or otherwise) to assist in developing an SEC EDGAR XBRL process?

There are three key steps in creating XBRL interactive data for EDGAR filing: the creation of core “taxonomy” files specific to the issuer, the generation of XBRL interactive “instance” data for filing, and the validation of such data. Most software solutions available on the market today include components for addressing these three steps. However, XBRL software requires a good understanding of XBRL, something that must be learned prior to being in a position to properly use the software solutions and obtain the required output. As a result, issuers may find it most effective to outsource the tasks associated with one or more of the three steps, thereby finding a balance between the company’s internal knowledge and resources and external expertise.

Will my company be required to file in XBRL format and if so, when?

According pages 39 - 65 of the final XBRL rule, an XBRL interactive data requirement will be phased in for domestic and foreign filers over a three year period. The largest issuers are required to file XBRL interactive data beginning with the quarterly report with a fiscal period ending on or after June 15, 2009 (provided this document contains financial statements). The smallest companies are required to do the same for quarterly reports with a fiscal period ending on or after June 15, 2011.

For most U.S. companies and foreign private issuers filing on domestic forms, the periodic report to which this will first apply will be the June 30 quarterly report. For a company that files on domestic forms with a June 30 fiscal year, the first report will be the September 30 quarterly report. Foreign private issuers not using domestic forms will first provide interactive data in connection with their first Form 20-F or Form 40-F annual reports for the year ended on or after June 15.

The proposed rules would not alter the requirements to provide financial statements and any required financial statement schedules with the traditional HTML and ASCII format filings. Beginning one year after adopting XBRL, reporting issuers will be required to additionally provide XBRL content for schedules, policies, and individual numbers appearing within the notes to their financial statements.

What are the SEC EDGAR XBRL requirements for a foreign private issuer?

According page 42 of the final XBRL rule, foreign private issuers with “large accelerated filer” status reporting in US GAAP are required to begin filing XBRL interactive data in conjunction with annual reports on Form 20-F or 40-F during years one and two of the phase-in period. For these foreign private issuers, worldwide public common equity float will determine whether the introduction of XBRL interactive data is required in year one or year two. All other foreign private issuers filing in either US GAAP or IFRS are required to begin filing XBRL interactive data in conjunction with annual reports on Form 20-F or 40-F in year three of the phase-in period. It is anticipated all foreign private issuers will be filing in either US GAAP or IFRS by year three of the phase-in period, based on the requirement for such issuers to move to international accounting standards.

The proposed rules would not alter the requirements to provide financial statements and any required financial statement schedules with the traditional HTML and ASCII format filings. Beginning one year after adopting XBRL, foreign issuers will be required to additionally provide XBRL content for schedules, policies, and individual numbers appearing within the notes to their financial statements.

On March 1, 2017 the SEC announced that it had published a taxonomy on its website so that foreign private issuers that prepare their financial statements in accordance with International Financial Reporting Standards (IFRS) may submit those reports using XBRL. All such foreign private issuers must submit their financial statements in XBRL for fiscal periods ending on or after December 15, 2017.

What documents require an XBRL component?

According to pages 65 - 70 of the final rule, the following documents will require an XBRL component:

• Securities Act Registration Statements containing financial statements including Forms S-1, S-3, S-4, F-9, F-10, S-11, F-1, F-3, and F-4¹.
• Quarterly Reports on Form 10-Q
• Annual Reports on Forms 10-K, 20-F, 40-F
• Transition Reports on Forms 10-Q, 10-K, and 20-F
• Updated or revised financial statements on Forms 8-K and 6-K²

¹This requirement will apply to the issuer’s financial statements for all periods included in the registration statement as required by Regulation S-X and other rules. The rules would apply from the first filing of a registration statement. The rules as adopted, however, require that interactive data be submitted only after a price or price range has been determined and any time thereafter when the financial statements are changed. Further, interactive data will be required for the acquiring company, the filer, but not for the company being acquired, in the context of a business combination. The rules as adopted provide that a company’s first filing to be subject to the interactive data requirement would be a quarterly report or, for a foreign private issuer not required to file quarterly reports, an annual report. Accordingly, interactive data exhibits will not be required for initial public offerings. There is no requirement to submit interactive data for the financial statements contained in registration statements under the Exchange Act on Forms 10, 20-F (20FR12G) and 40-F (40FR12G).

²Under the final XBRL rule, foreign issuers would not be required to file XBRL interactive data for interim reports as exhibits to Form 6-K.

How is XBRL interactive data handled in relation to amended reports?

According to pages 64 - 65 of the final rule, a filer is required to provide revised interactive data at the same time it files the restated or revised traditional format financial statements. If a filer decides to change a tag it used previously that was not inappropriate at the time used, it would not be required to disclose the change. If the financial statements are not revised in connection with an amended registration statement, periodic report, or transition report, the exhibit index will indicate that the interactive data file was already provided.

What information requires XBRL coding?

According to pages 57 - 65 of the final XBRL rule, interactive data tagging is required for a filer’s complete financial statements³ including any required financial statement schedules.

Specifically, the final rule:

• requires the interactive data be filed as an exhibit to an HTML or ASCII filing;
• requires interactive data for all periods included in the filer’s financial statements;
• requires that the line item descriptions and amounts presented on the face of the financial statements in the traditional format filing be the same as in the interactive data format;
• prohibits partial presentation of face financial statements in interactive data format; and
• requires footnotes be tagged using four different levels of detail:
  1. each complete footnote tagged as a single block of text;
  2. each significant accounting policy within the significant accounting policies footnote tagged as a single block of text;
  3. each table within each footnote tagged as a separate block of text; and
  4. within each footnote, each amount (i.e., monetary value, percentage, and number) separately tagged.

To allow filers time to become familiar with tagging footnotes, in each filer’s first year of interactive data reporting, only level (i) will be required. All four levels will be required starting one year from the filer’s initial required submission in interactive data.

³ The new rules will not require interactive data submissions for other financial statements that may be required of filers, including those provided pursuant to Rules 3-05, 3-09, 3-14, and 3-16 of Regulation S-X (17 CFR 210.3-05, 17 CFR 210.3-09, 17 CFR 210.3-14, and 17 CFR 210.3-16). Additionally, pro forma financial statements prepared under Article 11 of Regulation S-X are not subject to the interactive data requirements.

Is there a grace period to assist with an initial XBRL interactive data filing?

Yes, according to pages 70 - 74 of the final rule, each company’s initial interactive data submission, regardless of filing type, will have a 30 day grace period, and therefore will be permitted as an amendment to a:

• periodic report on Form 10-K, 20-F, 40-F or 10-Q within 30 days after the earlier of the due date or filing date of the related report;
• Securities Act registration statement within 30 days after the filing date of the price or price range as part of the related registration statement; or
• report on Form 8-K or 6-K that contains revised or updated financial statements that have been revised to reflect a subsequent event rather than the correction of an error within 30 days after the filing date of the related report.

In addition, in year two for the first filing that is required to have footnotes and schedules tagged using all levels of detail, the interactive data exhibit will be required within 30 days after the due date or filing date of the related registration statement or periodic, current or transition report or Form 6-K, as applicable.

Grace period submissions filed with amended periodic reports need contain only the relevant interactive data as an exhibit. An amendment whose sole purposes is to submit interactive data as an exhibit is not subject to the certification requirements of Rule 12b-15 under the Exchange Act.

What liability provisions are in place for XBRL interactive data?

According to pages 84 - 97 of the final rule, an XBRL interactive data file generally will be subject to the federal securities laws in a modified manner under new Rule 406T if the filer submits the interactive data file within 24 months⁴ of the time the filer first is required to submit interactive data files but no later than October 31, 2014. Rule 406T provides that during the time a filer’s interactive data files are treated in this modified manner, they will be:

• subject to specified anti-fraud provisions except in connection with a failure to comply with the tagging requirements that occurs despite a good faith attempt to comply and is corrected promptly after the filer becomes aware of the failure;
• deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act and not otherwise subject to liability under these sections;
• deemed not filed for purposes of Section 18 of the Exchange Act or Section 34(b) of the Investment Company Act and not otherwise subject to liability under these sections;
• deemed filed for purposes of (and, as a result, benefit from) Rule 103 under Regulation S-T; and
• excluded from the officer certification requirements of Rules 13a-14 and 15d-14 of the Exchange Act.

In regard to correcting or amending an interactive data file, the term “promptly” has been added to the list of defined terms in Rule 11 under Regulation S-T. Rule 11 defines “promptly” as “as soon as reasonably practicable under the facts and circumstances at the time.” The definition is followed by a non-exclusive safe harbor. The safe harbor generally provides that a correction made by the later of 24 hours or 9:30 a.m. on the next business day after the filer becomes aware of the need for the correction is deemed promptly made. If a filer fails to correct within the safe harbor timeframe, the filer still may have corrected promptly depending on the applicable facts and circumstances.

⁴The 24-month period would be exclusive of a grace period.

What are the ramifications of incorrectly coding or “tagging” XBRL data?

What are the ramifications of not filing the required XBRL interactive data in a timely manner?

According to pages 106 - 111 in the final rule, if a filer does not make the required interactive data submission, or post the interactive data on the company Web site, by the required due date, the filer will be unable to use short form registration statements on Forms S-3, F-3, or S-8. This disqualification will last until the interactive data are provided. During the period of disqualification, the filer also will be deemed not to have available adequate current public information for purposes of the resale exemption safe harbor provided by Rule 144. Once a filer complies with the interactive data submission and posting requirements—provided it previously filed its financial statement information in traditional format on a timely basis—it will be deemed to be timely and current in its periodic reports.

What is the role of my auditor in an XBRL filing process?

According to pages 94 - 97 of the final XBRL rule, auditor review and approval is not mandatory; auditors would not be required to apply AU Sections 550, 722, or 711 to the XBRL interactive data. However, XBRL interactive data will be made public for viewing and may be imported into various analytical tools. Your company may wish to have auditor expertise involved in the preparation and/or review of XBRL interactive data for filing with the SEC EDGAR system.