What is XBRL?
eXtensible Business Reporting Language, or XBRL, is an interactive data, computer-readable format that encodes specific financial data with standardized identifying tags, making it easier to retrieve, analyze, compare and repurpose that data than is possible with paper or flat electronic formats such as ASCII or HTML. The extensibility of the language allows for its adaptation to meet the unique requirements of different companies and organizations. XBRL documents consist of an interactive data file, also known as an instance document, which contains data tagged with concepts from U.S. GAAP or IFRS taxonomies, and supporting files called linkbases, which establish various relationships within the instance document, such as calculation, presentation, definition and reference. Taxonomies can be thought of as dictionaries containing the accounting concepts to be applied to data.
The SEC and XBRL
The SEC has adopted a final rule and amendments for corporate issuers to provide to the SEC and on their corporate web sites the facing sheets of their financial statements, notes to financial statements and financial statement schedules in interactive data format using XBRL. Companies are required to comply with the new rules and amendments per the following phased-in schedule:
- Domestic and foreign large accelerated filers that use U.S. GAAP and have a public float above $5 billion as of the end of the second fiscal quarter of their most recently completed fiscal year: periodic reports on Forms 10-Q, 20-F or 40-F containing financial statements for a fiscal period ending on or after June 15, 2009;
- All other domestic and foreign large accelerated filers using U.S. GAAP: periodic reports on Forms 10-Q, 20-F or 40-F containing financial statements for a fiscal period ending on or after June 15, 2010; and
- All remaining filers using U.S. GAAP, including smaller reporting companies and all private foreign issuers that prepare financial statements in accordance with IFRS as issued by the IASB: periodic reports on Forms 10-Q, 20-F or 40-F containing financial statements for a fiscal period ending on or after June 15, 2011.
Standard U.S. GAAP taxonomies have been approved for the following entities: commercial & industrial, banking and savings institutions, insurance, real estate and broker-dealer. Investment management companies are not currently subject to the final rule because their taxonomy is still under development.
The SEC has also adopted a final rule and amendments for investment management companies requiring all mutual funds to submit interactive data with any registration statement or post-effective amendment on Form N-1A that includes or amends risk/return summary information and with any form of prospectus filed pursuant to rule 497(c) or (e) under the Securities Act that contains risk/return summary information that varies from the registration statement. The first required submissions will be for initial registration statements and post-effective amendments that are annual updates to effective registration statements and that become effective after January 1, 2011. No mutual fund is required to comply with the provision to submit a tagged risk/return summary exhibit with any form of prospectus filed pursuant to rule 497(c) or (e) under the Securities Act until that fund has first submitted an exhibit with its registration statement.
The new interactive data requirements will not change disclosure requirements under the federal securities laws and regulations, but will add a requirement to include, along with the traditionally formatted ASCII or HTML documents, supplemental exhibit documents in XBRL format, attached as new Exhibits 101. The interactive data files are deemed to be furnished rather than filed, for various purposes under the federal securities laws.
The SEC’s adoption of the final rules followed its assessment of whether the use of tagged data in EDGAR filings would provide better and more effective means for them to obtain and analyze necessary business information from registrants. To that end, earlier rule amendments were adopted establishing the XBRL Voluntary Filing Program on EDGAR. Filers may choose, before their scheduled phase-in date, to voluntarily submit supplemental exhibit documents in XBRL format to accompany certain periodic reports and investment company act filings, which would be attached as Exhibits 100.
Considerations for Participants
Registrants must study the issue and perform due diligence in order to make an informed decision with respect to when and how they will address the XBRL requirements, including determining how to comply and identifying which internal resources, third party providers and/or software tools to engage. Registrants will also have to take into account regulatory review considerations and liability provisions of the final rules. Initial compliance efforts will require a significant amount of time, resources and expense, but subsequent preparation and cost efficiencies will be realized.
Initial participation in the program will demand a significant amount of time, resources and expense, but future preparation and cost efficiencies will likely be realized.
Command Financial Press and the XBRL Initiative
Command Financial is committed to embracing the latest technologies necessary to provide our clients every advantage when it comes to their SEC filing requirements. As such, we have closely monitored and responded to the SEC’s XBRL initiative since its onset, participating in the voluntary program and providing feedback to SEC staff and its Office of Interactive Disclosure.
Command is currently providing XBRL seminars, consulting services and production services including mapping, tagging, validation, rendering and filing with the SEC to law firms, corporations and mutual funds.