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What is XBRL?XBRL (eXtensible Business Reporting Language) 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 within financial statements allowing computer programs to easily identify, extract, and compare them. XBRL interactive data is for computer programs to read and interpret. There are XBRL viewing tools available; however, the presentation of XBRL information on screen will not be identical to the financial statements included in SEC EDGAR filings. What is the SEC IDEA system?Announced on August 19, 2008, the IDEA system - short for Interactive Data Electronic Applications - will be the successor to the SEC's EDGAR database. Through the use of XBRL interactive data, IDEA will provide investors with far faster and easier access to key financial information about public companies and mutual funds. See the SEC's press release for the details. How will the introduction of an XBRL interactive data requirement affect my 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. What solutions are available (software or otherwise) to assist in developing an 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. While there are a variety of XBRL software solutions available, each solution typically focuses on one of these three key steps. We at XBRLit have not yet encountered an “all in one” XBRL solution that efficiently masters each step – instead we have been utilizing a variety of XBRL software tools to maximize the efficiency of the overall process. For this reason an issuer wishing to generate XBRL interactive data in-house may need to purchase numerous software tools. In addition, each software tool 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 to page 16 of the proposed XBRL rule, the largest issuers would be required to begin filing XBRL interactive data for financial statements and applicable schedules as exhibits to their HTML formatted annual, quarterly and transition reports and registration statements beginning with fiscal periods ending on or after December 15, 2008 and the smallest companies beginning with fiscal periods ending on or after December 15, 2010.
The initial XBRL interactive data of an issuer would be required within 30 days of the earlier of the due date or filing date of the related report or registration statement, as applicable. In year two, an issuer would have a similar 30 day grace period for its first XBRL interactive data that includes detailed tagging of its footnotes and schedules. All other XBRL interactive data would be required at the same time as the rest of the related report or registration statement. 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. It is recommended companies take a proactive stance in adopting an XBRL filing process through joining the SEC's voluntary filing program, thereby avoiding last minute time constraints. What are the XBRL requirements for a foreign private issuer?According to the proposed XBRL rule, foreign private issuers with “large accelerated filer” status reporting in US GAAP would be required to begin filing XBRL interactive data in conjunction with annual reports on Form 20-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 would be required to begin filing XBRL interactive data in conjunction with annual reports on Form 20-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.
Foreign private issuers would not be required to file interim financial information reported on Form 6-K in XBRL interactive data format. In addition, the proposed XBRL rule does not mandate XBRL interactive data be filed in conjunction with Form 40-F; it is expected the final XBRL rule will clarify the role of XBRL interactive data for 40-F filings. What documents require an XBRL component?Under the proposed XBRL rule, the following documents would require an XBRL component:
Under the proposed XBRL rule, foreign issuers would not be required to file XBRL interactive data for annual or interim reports as exhibits to Form 6-K. In addition, the proposed XBRL rule does not mandate XBRL interactive data be filed in conjunction with Form 40-F; it is expected the final XBRL rule will clarify the role of XBRL interactive data for 40-F filings. What information requires XBRL coding?Under the proposed XBRL rule the following information requires XBRL coding:
*It is proposed that footnotes and financial statement schedules would initially be tagged individually as a block of text. After a year of such tagging, an issuer also would be required to tag the detailed disclosures within the footnotes and schedules. What liability provisions are in place for XBRL interactive data?According to pages 19 and 60 of the proposed rule, viewable XBRL data as displayed through software available on the Commission’s Web site, and to the extent identical in all material respects to the corresponding portion of the traditional HTML or ASCII format filing, would be subject to all the same liability provisions of the federal securities laws as the corresponding data in the traditional HTML or ASCII format part of the official filing. XBRL interactive data would be:
What are the ramifications of incorrectly coding or “tagging” XBRL data?According to the proposed rule, provided an issuer corrects coding or tagging errors as soon as reasonably practical after becoming aware of them, failures to comply with the proposed tagging and related requirements would be protected from liability. However, potential problems resulting from coding errors in XBRL interactive data filed with the SEC go beyond liability issues – such errors may cause a company to be either incorrectly or unfavourably compared and evaluated in analytical tools. For example, incorrectly coding Gross Margin as Revenues will skew the company’s earnings ratios. What are the ramifications of not filing the required XBRL interactive data in a timely manner?According to page 20 of the proposed XBRL rule, issuers that do not provide or post required XBRL data on the date required would be deemed not current with their Exchange Act reports and, as a result, would not be eligible to use the short forms 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, such issuers would not be deemed to have available adequate current public information for purposes of the resale exemption safe harbor provided by Rule 144. An issuer that was deemed not current solely as a result of not providing an interactive data exhibit when required would be deemed current and timely upon providing the interactive data. Therefore it would regain the ability to incorporate by reference, short form registration statement eligibility, and current status for purposes of determining adequate current public information under Rule 144. As such, it would not lose its status as having “timely” filed its Exchange Act reports solely as a result of the delay in providing XBRL interactive data. What is the Voluntary Filing Program?The voluntary filing program was launched in 2005 to enable the SEC to further evaluate the use of XBRL in regulatory filing and provide a means for preparers and users to test and evaluate the XBRL format. The voluntary filing program allows participants to submit XBRL interactive data as exhibits to either the official EDGAR filing (i.e. 10-Q, 10-K, 20-F, etc.) or a Form 8-K or Form 6-K that references such filing at a later date. Participants are free to submit XBRL exhibits regularly or from time to time and can stop or start as they choose. Why should I participate in the Voluntary Filing Program?Through becoming an early adopter of XBRL and submitting XBRL interactive data as part of the SEC’s voluntary filing program your company will be in a position to develop both an XBRL process and the required resources without the pressure of last minute time constraints. The development of an XBRL process is more extensive than generating HTML documents for EDGAR filing and will require participation from the company’s accountants, filing agent, and possibly an external XBRL resource. What are the liability provisions in place for the Voluntary Filing Program?The voluntary filing program provides limited protections from liability under the federal securities laws under Rules 402(a) and 402(b). Please see the final rule. What is the role of my auditor in an XBRL filing process?According to page 68 of the proposed 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. Can XBRL interactive data be filed on the Canadian SEDAR system?Yes, it is possible to file XBRL interactive data on SEDAR as part of the CSA voluntary program. No plan has been announced in regards to mandating the filing of XBRL data on SEDAR. |
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