Details
In 2008, the SEC determined that all companies should file information in an interactive data format using eXtensible Business Reporting Language (XBRL), which enhances the ability of users to analyze and compare financial information. The Commission divided registrants into three groups and began phasing in XBRL reporting in 2009. This June, the third and last phase-in group (domestic and foreign filers that prepare their financial statements in accordance with U.S. Generally Accepted Accounting Principles [GAAP] with under $700 million in public float, including smaller reporting companies) are required to begin XBRL reporting. These "Group III" companies must provide XBRL data when they file their first Form 10-Q (or, for foreign private issuers, their first Form 20-F or 40-F) for a period ending on or after June 15, 2011.
Group III companies have the choice of mapping and tagging financial information themselves or hiring a vendor to help prepare their first XBRL submission. Many registrants and vendors have found that the initial XBRL preparation process takes an average of 20 hours. Companies that plan to outsource, but have not yet hired a vendor, are encouraged to act quickly. Many providers are already at maximum capacity, as approximately 8,700 companies are required to submit XBRL exhibits for the first time in 2011. A summary of frequently asked XBRL questions and answers follows:
Q: What information must be included in the XBRL exhibit?
A: The exhibit must include financial statements for all periods presented in the regular SEC filing (Form 10-Q, 20-F or 40-F) along with related footnote information. In the first year of XBRL reporting, companies can "block-tag" their footnotes, meaning each footnote generally only needs to be tagged as a single block of text. Beginning in the second year, companies are required to tag the footnotes in detail.
Q: What are the advantages to preparing my first XBRL submission in-house?
A: Companies that have developed an internal XBRL process have been able to establish and control the timeline for preparing their submissions and are familiar with the mapping and tagging of their financial information. However, many companies, particularly smaller reporting companies, do not have the time and resources needed to perform XBRL functions in-house. For those companies, outsourcing some or all of the process has more advantages. Service providers offer varying levels of support, from consulting to providing tagging software to handling substantially all of the process. XBRL US is a nonprofit organization that provides XBRL resources and links to vendors and proprietary tools. See below for information on XBRL US and a list of vendors.
Q: If my company uses a service provider, what role will we play in the XBRL process?
A: Since the integrity of the XBRL financial data is the responsibility of management, you should understand how your financial information is mapped and tagged. Your XBRL formatted financial information allows computers to read the financial information, and this information will be accessed and analyzed by investors and analysts. You should make sure your data will be tagged correctly, and be able to answer questions on the information obtained from this format.
Q: How do we get started?
A: Attend an XBRL Webinar[1] and speak with other registrants about their experience. Talk to third party service providers, including your printer. Find out about services and cost and the vendor’s capacity to meet your timing requirements. Weigh the pros and cons of each alternative and determine the approach which best fits your company’s needs and resources.
Q: How much time will this process take and when should I begin?
A: The initial process of tagging and mapping a Form 10-Q document can take 20 hours or more. To avoid unnecessary delays caused by unexpected complexities, start early. Line up the service providers or support needs you will require to tag and prepare the exhibit, including validation and pre-test filing. Remember, all Group III registrants will be facing the same initial implementation date of June 15, 2011 and competing for vendor services.
Q: What were some of the lessons learned by the Group I and II registrants?
A: Over the past two years, the SEC staff has reviewed and provided informal feedback on the submitted XBRL exhibits and offered the following insights:
Data Quality – The tagging process is the key to creating a quality XBRL submission. Being familiar with the taxonomy, the standard list of tags used for financial reporting in interactive format consistent with US GAAP and the Commission regulations, will enable registrants to select the best tag that represents the financial information in their financial statements. The SEC staff observed that filers created unnecessary extensions and did not identify the appropriate existing elements.
Viewing/Rendering – The XBRL rendering will not always be identical to the financial statements that correspond to traditional HTML submissions. The SEC staff cautioned filers not to manipulate the tagged data for visual effect, and that the integrity of the individual XBRL elements should be maintained. The use of a previewer will aid in verifying the completeness of the XBRL exhibit. Service providers and software vendors offer reports and software tools that can validate the completeness and appropriateness of the tagged information.
Validation tools – Validation tools provided by vendors and the SEC test filing mechanism should be used to ensure technically validity of the XBRL report. The SEC previewer and validation tools have been updated. Registrants should allow sufficient time to pre-validate their exhibit to ensure acceptance and time for any last minute corrections in case of rejection before the deadline.
Q: When is the XBRL exhibit due?
A: The XBRL exhibit is due at the same time as the related Exchange Act report (e.g., Forms 10-Q and 10-K) or registration statement (e.g., Form S-1) with the financial statements in traditional format. The rules provide registrants with two grace periods to ease the transition. A filer’s initial interactive data exhibit is not required until 30 days after the earlier of the due date or filing date of the related report. In the second year of XBRL reporting, a filer also has an additional 30 days to provide the first interactive data exhibit that includes the detailed tagging of its footnotes and schedules.
Q: Are the XBRL exhibits subject to officer certification requirements for disclosure controls and procedures?[2]
A: XBRL documents are not subject to officers’ certification for disclosure controls and procedures; however the XBRL formatted documents are a part of the disclosure controls and procedures and the company is responsible for its accuracy and reliability, regardless of whether it is using an outside third party vendor or service provider for its preparation.
Q: Can we obtain an extension for the XBRL exhibit by filing a Form 12b-25?
A: No. Rule 12b-25 was amended to specify that it does not apply to XBRL exhibits. If a registrant is not able to submit the XBRL exhibit when required, the company should seek a hardship exemption pursuant to either Rule 201, temporary hardship exemption, or Rule 202, continuing hardship exemption. Consistent with the treatment of other applicable reporting obligations, hardship exemptions are available for the inability to timely submit an XBRL exhibit without undue burden or expense. The exemptions will grant an extension of up to six business days (for a temporary hardship exemption) or for an indefinite period (for a continuing hardship exemption) from the date the XBRL exhibit was required to be submitted. If the XBRL exhibit is not electronically submitted by the end of the exemption period, from the next business day forward the issuer will not be deemed a current and timely filer until it submits the exhibit.
Q: Are the XBRL exhibits considered filed in the first two years of XBRL reporting?
A: No. The data provided in XBRL format will be considered furnished rather than filed for the first two years. After that, the data will be filed and subject to correspondingly increased liability. Beginning October 31, 2014, all XBRL exhibits will be considered filed.
Q: When are foreign private issuers that prepare their financial statements in accordance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) required to begin XBRL reporting?
A: The XBRL rules required foreign private issuers that prepare their financial statements in accordance with IFRS as issued by the IASB to begin XBRL reporting with Phase-in Group III. However, due to the fact that the taxonomy for IFRS is not yet complete, the SEC has issued a no action letter in which states that foreign private issuers that prepare their financial statements in accordance with IFRS as issued by the IASB are not required to submit XBRL documents until the Commission specifies on its website an IFRS taxonomy.
Additional Resources – SEC
The SEC staff has provided a number of resources to assist you in understanding the XBRL requirements, and to answer common questions. You can review the information at http://xbrl.sec.gov/. You may also find the following links particularly helpful:
The SEC staff is available to answer your questions. You may send an email to ask-oid@sec.gov or call (202) 551-5494.
XBRL US, found online at http://xbrl.us, is the national consortium for XML business reporting standards. The following links to XBRL US Webinars may be helpful:
Additional Resources – FASB
The Financial Accounting Standards Board (FASB) produced a webcast, IN FOCUS: How to Use the XBRL 2011 US GAAP Financial Reporting Taxonomy, which took place on June 22, 2011. The webcast featured J. Louis Matherne, FASB chief of taxonomy development, Christine Tan, FASB XBRL project manager and Susan Yount, Office of Interactive Data, SEC. The presenters focused on how to use the soon-to-be-released Taxonomy Online Review and Comment System’s search and navigation functions to efficiently find the tags that meet the SEC’s filer requirements. The areas covered included:
- Navigating the taxonomy
- Considerations for tag selection
- Understanding tag relationships and how to use the network views
- Using advanced search and shared search functions to find relevant tags
- Quickly finding certain types of tags
- Understanding when to use industry entry points
- Finding tags using the Accounting Standards Codification
- Using specialized labels to find tags
- Providing feedback on the Development and Accounting Standards Update Taxonomies
This archived event can be accessed free of charge through the FASB website at http://event.on24.com/r.htm?e=321145&s=1&k=7A1C65A3A61A52E4F53A511755D65793, and will be available through September 21, 2011.