Interactive Data for Financial Reporting — A Small Entity Compliance Guide
Interactive Data for Financial Reporting — A Small Entity Compliance Guide*
The Securities and Exchange Commission has adopted amendments that require companies to provide their financial statements in interactive data format using eXtensible Business Reporting Language (XBRL) by submitting them to the SEC and posting them on their corporate Web sites. The amendments are located principally in form exhibit requirements (e.g., Item 601(b)(101) of Regulation S-K), Rules 405 and 406T of Regulation S-T and the EDGAR Filer Manual.
The disclosure in interactive data format will be in addition to, rather than instead of, disclosure in the traditional electronic filing formats of ASCII or HTML. Financial statements already are, and will continue to be, required to be submitted to the SEC in traditional format under existing requirements.
Companies will become subject to the interactive data requirements in three groups. Smaller reporting companies will be in the last group. These requirements will not apply to investment companies — they will be subject to a separate set of requirements.
The primary purpose of the amendments is to make financial information easier for investors to analyze and to assist companies in automating regulatory filings and business information processing.
The phase-in schedule will apply to three groups of companies.
Year 1 —
Domestic and foreign companies that are large accelerated filers under Exchange Act Rule 12b-2, use U.S. Generally Accepted Accounting Principles (U.S. GAAP) and have non-affiliate held equity securities valued at more than $5 billion (about 500 companies).
Requirements begin for the first quarterly report on Form 10-Q or annual report on Form 20-F or 40-F, as applicable, that contains financial statements for a period ending on or after June 15, 2009.
Year 2 —
All other domestic and foreign companies that are large accelerated filers and use U.S. GAAP.
Requirements begin for the first quarterly report on Form 10-Q or annual report on Form 20-F or 40-F, as applicable, that contains financial statements for a period ending on or after June 15, 2010.
Year 3 —
All other domestic and foreign companies that use U.S. GAAP and foreign companies that use International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS/IASB).
Requirements begin for the first quarterly report on Form 10-Q or annual report on Form 20-F or 40-F, as applicable, that contains financial statements for a period ending on or after June 15, 2011.
A company will be required to tag the face of its financial statements in its first year of interactive data reporting. A company also will be required to tag its financial statement footnotes and financial statement schedules in its first year, but only as blocks of text. After the first year of such tagging, a company also will be required to tag the detailed quantitative disclosures within the footnotes and schedules.
After the phase-in, newly public companies will become subject to the interactive data requirements for the first quarterly report on Form 10-Q or annual report on Form 20-F or 40-F, as applicable, due after they become public companies.
Optional Early Compliance
Companies that are not required to provide interactive data until a later time will have the option to do so earlier. They may provide interactive data at their discretion until required by the amendments. They also may tag footnotes and schedules individually as blocks of text until required to tag the detailed quantitative disclosures within the footnotes and schedules. Otherwise, however, they must follow the same requirements as those mandated and can only use a grace period (discussed below) for their initial submission and their initial detail-tagged-footnote and schedule submission, whether submitted voluntarily or as required by the amendments.
Creating Required Interactive Data
Specifically, the amendments will require that companies submit to the Commission and post on their corporate Web sites (if they have one) a new exhibit with their financial statements (Exhibit 101), including the footnotes and schedules to the financial statements, in interactive data format.
Financial reporting in interactive format requires a standard list of tags. The standard list’s tags are similar to definitions in an ordinary dictionary, and they cover a variety of financial concepts that can be read and understood by software applications. A company must use the appropriate list of tags specified by the EDGAR Filer Manual available on the SEC’s Web site. This list of tags contains not only financial statement items but also items that provide contextual information needed for software to recognize and process interactive data, including:
authoritative references to U.S. GAAP or IFRS/IASB;
SEC regulations; and
other elements of information.
Data tags are applied to financial statements by using commercially available software that guides a preparer to tag information in the financial statements with the appropriate tags in the standard list. The software must use the appropriate standard list of tags as specified by the then current version of the EDGAR Filer Manual in order to submit the tagged information to the SEC. Each element in the standard list of tags has a standard label. A company can therefore match the standard labels to each caption in its financial statements.
Occasionally, because companies have considerable flexibility in how financial information is reported, it is possible that a company may wish to use a non-standard financial statement line item that is not included in the standard list of tags. In this situation, a company will create a company-specific element, called an “extension.” For example, what a company identifies in its traditional format financial statements as “operating revenues” may be associated with an element that has “net revenues” as the standard label. In this situation, a company will need to change, or extend, the standard label to become “operating revenues” when it tags that disclosure with the element.
A company may choose to tag its own financial statements using commercially available software, or it may choose instead to outsource the tagging process. Software also is able to process interactive data so as to automate and, as a result, facilitate access to and analysis of tagged data.
Because financial statements in interactive data format are intended to be processed by software applications, the unprocessed data are not readable by humans. Thus, viewers are necessary to convert or “render” the interactive data into human readable format. Some viewers are similar to Web browsers used to read HTML files. The SEC’s Web site will enable users to view interactive data in human readable format.
Financial Statements to Which Requirements Apply
The requirements apply to a filing company’s financial statements in its:
annual reports on Forms 10-K, 20-F or 40-F, as applicable and quarterly reports on Form 10-Q;
transition reports for a change in fiscal year;
current reports on Form 8-K and reports on Form 6-K that contain revised or updated versions of financial statements that appeared in an annual or quarterly report; and
Securities Act registration statements (but only after a price or price range has been determined and any later time when the financial statements are changed).
Due Dates/Grace Periods
Interactive data exhibits are required to be submitted to the Commission at the same time, and posted on the company’s Web site, if any, on the same calendar day, as the related traditional format filing except that:
the initial interactive data exhibit of a company will be required within 30 days after the earlier of the due date or filing date of the related report or registration statement, as applicable; and
a company will have a similar 30 day grace period for its first interactive data exhibit that includes or is required to include, whichever occurs first, detailed tagging of its footnotes and schedules.
A company required to provide financial statements in interactive data format to the Commission also will be required to post those financial statements in interactive data format on its corporate Web site not later than the end of the calendar day it filed or was required to file the related report or registration statement with the Commission, whichever is earlier, unless a grace period is available. The company must keep the interactive data posted for at least 12 months and cannot comply with the posting requirement by including a hyperlink to the SEC’s Web site.
Consequences of Non-Compliance
Companies that do not submit or post required interactive data on the date required will be deemed not current with their Exchange Act reports and, as a result, will not be eligible to use the short Form S-3, F-3, or S-8, or elect under Form S-4 or F-4 to provide information at a level prescribed by Form S-3 or F-3. Similarly, these companies will not be deemed to have available adequate current public information for purposes of the resale exemption safe harbor provided by Rule 144.
A company that is deemed not current solely as a result of not submitting or posting an interactive data exhibit when required will be deemed current upon submitting or posting the interactive data. As a result, it will not lose its status as having “timely” filed its Exchange Act reports solely as a result of the delay in submitting or posting interactive data.
Consistent with the treatment of other electronic reporting obligations, companies can obtain temporary or longer term hardship exemptions under appropriate circumstances. Rule 201 of Regulation S-T will provide a temporary hardship exemption from submitting or posting interactive data without staff or Commission action, when a company experiences unanticipated technical difficulties that prevent timely submission or posting of interactive data. The temporary hardship exemption will cause the company to be deemed current for purposes of incorporation by reference, short form registration, and Rule 144 for a period of up to six business days from the date the interactive data were required to be submitted and posted if the company otherwise is current.
Rule 202 of Regulation S-T will permit a company to apply in writing for a continuing hardship exemption if interactive data otherwise required to be submitted and posted cannot be submitted or posted without undue burden or expense. It is expected that these requests would be granted infrequently. If the Commission or the staff, through authority delegated by the Commission, grants the request, the company will be deemed current until the end of the period for which the exemption is granted if the company otherwise is current.
Interactive data generally will be subject to federal securities law liability in a modified manner if the company submits the interactive data within 24 months of the time the company first is required to submit interactive data, but no later than October 31, 2014. See Rule 406T of Regulation S-T. During the time a company’s interactive data are treated in this modified manner, they will be:
deemed not filed for purposes of specified liability provisions; and
protected from liability for failure to comply with the tagging requirements if the interactive data failed to meet those requirements but the failure occurred despite the company’s good faith effort, and the company corrected the failure promptly after becoming aware of it.
Companies are not required to obtain assurance on their interactive data or involve third parties, such as auditors or consultants, in the creation of their interactive data filings.
Interactive data will be excluded from the officer certification requirements under Rules 13a-14 and 15d-14 of the Exchange Act.
The SEC’s Division of Corporation Finance, Office of Interactive Disclosure and Office of the Chief Accountant are available to assist small companies and others with questions regarding the new interactive data submission and posting requirements. You can contact the Division and Offices for this purpose as follows:
This guide was prepared by the staff of the U.S. Securities and Exchange Commission as a “small entity compliance guide” under Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996, as amended. The guide summarizes and explains rules adopted by the SEC, but is not a substitute for a rule itself. Only a rule itself can provide complete and definitive information regarding its requirements.
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