The Securities and Exchange Commission recently approved rules requiring public companies to file financial statements in eXtensible Business Reporting Language (XBRL) format. This allows the information to be easily searched and incorporated into spreadsheets and other analytical programs used by investors. According to the SEC, “Investors will be able to instantly find specific facts disclosed by companies and mutual funds, and compare that information with details about other companies and mutual funds to help them make investment decisions.”
You will need to plan ahead because converting to XBRL will involve significant changes in your company’s approach to public filings, and will require training of personnel.
XBRL provides interactive data tags that uniquely identify individual items in a company’s financial statements.
XBRL-tagged financial data must be filed with a company’s quarterly and annual reports, transition reports, reports on Form 8-K and 6-K that contain updated or revised versions of financial statements, and registration statements. If a company maintains a corporate website, the interactive financial statements must be posted there as well.
The requirements apply to a company’s primary financial statements, notes and schedules. During a company’s first year of XBRL use, it is only required to tag notes and schedules as blocks of text. However, during the second year of XBRL use, a company must provide tags for the details (individual facts) within the notes and schedules.
Companies may use XBRL on a voluntary basis now. Mandatory XBRL will be phased in over three years starting with the first fiscal period ending on or after June 15, 2009, as follows:
- During the first year, only “large accelerated filers” that use U.S. GAAP and have a worldwide public float above $5 billion must comply. This group includes approximately 500 companies.
- Beginning with the first fiscal period ending on or after June 15, 2010, all other large accelerated filers using U.S. GAAP must comply with the XBRL requirements.
- Beginning with the first fiscal period ending on or after June 15, 2011, all remaining filers using U.S. GAAP (including smaller reporting companies) and all foreign private issuers using IFRS must comply with the XBRL requirements.
A 30-day grace period is permitted for the first interactive data exhibit of each company and also for the first interactive data exhibit that is required to include notes and schedules tagged in detail. If a company fails to file its interactive data by the date required, it will be deemed to be “not current” for purposes of short form registration statements or Rule 144. However, this filing deficiency is cured as soon as the interactive data filing is made.
The SEC expects to publish the final rules relating to XBRL use in early 2009. In the meantime, you may find more SEC guidance on the following websites:
- http://www.xbrl.us/ (contains tags and an XBRL guide)
- http://www.sec.gov/spotlight/xbrl.shtml (SEC’s XBRL website)
- http://idea.sec.gov/ (website relating to the SEC’s new IDEA program
- http://www.sec.gov/spotlight/disclosureinitiative.shtml (SEC’s 21st Century Disclosure Initiative)
In addition, the principal financial printers are gearing up to assist companies with the process. However, XBRL is not just a mechanical filing process, like EDGAR. Using XBRL successfully will require a close understanding of the method of presentation and of the opportunities and pitfalls presented. Companies must learn the requirements and begin preparing well in advance of their scheduled phase-in.