The SEC recently adopted final rules that will require public companies to publish their financial statements in an interactive format using the eXtensible Business Reporting Language, or XBRL. The final rules are designed to provide financial statement information in a form that will enable investors and analysts to more efficiently analyze financial and business performance across companies, reporting periods and industries. The interactive data will be provided as an exhibit to periodic and current reports, and registration statements.
The requirements to include interactive data are phased in for domestic filers as follows:
- Large accelerated filers with worldwide com¬mon equity float of $5 billion (as of the end of their second quarter for their most recently completed fiscal year) must begin providing interactive data with Form 10-Q for a fiscal period ending on or after June 15, 2009.
- All other large accelerated filers (generally those with a public float of more than $700 million as of the end of their second quarter for their most recently completed fiscal year, subject to special rules for exiting accelerated filer status) must begin providing interactive data with Form 10-Q for a fiscal period ending on or after June 15, 2010.
- Other filers must begin providing interactive data with Form 10-Q for a fiscal period ending on or after June 15, 2011.
Financial Statement Footnotes and Schedules
Financial statement footnotes and financial statement schedules initially will be tagged individually as a block of text. After a year of such tagging, a filer also will be required to tag the detailed quantitative disclosures within the footnotes and schedules and will be permitted, but not required, to the extent they choose, to tag each narrative disclosure. More specifically, after the first year:
- Each significant accounting policy within the significant accounting policies footnote must be tagged as a single block of text.
- Each table within each footnote must be tagged as a separate block of text.
- Within each footnote, each amount (i.e., mon¬etary value, percentage and number) must be separately tagged.
Web Site Posting
A filer required to provide financial statements in interactive data format to the SEC 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 registration statement or report with the SEC, whichever is earlier. The interactive data should be accessible through the filer’s Web-site address normally used by the filer to disseminate information to investors. The interactive data is required to be posted for at least 12 months. Filers may not comply with the Web posting requirement by including a hyperlink to the SEC Web site.
Consequences for Failure to Provide Interactive Data
Filers that do not provide or post required interactive data on the date required:
- Will be deemed not current with their Securi¬ties Exchange Act reports and, as a result, will not be eligible to use the short Form S-3 or S-8, or elect under Form S-4 to provide information at a level prescribed by Form S-3.
- Will not be deemed to have available adequate current public information for purposes of the resale exemption safe harbor provided by Rule 144.
A filer that is deemed not current solely as a result of not providing or posting an interactive data exhibit when required will be deemed current upon providing or posting the interactive data. Therefore, it will regain current status for purposes of short form registration statement eligibility and for determining adequate current public information under Rule 144. As such, it will not lose its status as having “timely” filed its Securities Exchange Act reports solely as a result of the delay in providing interactive data.
CEO and CFO Certifications
When adopting the new rules, the SEC amended Rules 13a-14 and 15d-15 to explicitly state that the CEO and CFO certifications do not apply to the interactive data required to be submitted as an exhibit.
Financial statements submitted on a Form 8-K are required to be submitted in interactive format only when the Form 8-K contains audited financial statements that are a revised version of financial statements previously filed with the SEC and the revisions are made pursuant to applicable accounting standards to reflect the effects of certain subsequent events, including a discontinued operation, a change in reportable segments or a change in accounting principle. The rules do not, however, require interactive data submissions for financial statements of acquired companies that are filed pursuant to Rule 3-05 of Regulation S-X.
Liability Under Securities Law
The final rules provide relief from the securities laws in certain circumstances. For the first 24 months of the time the filer is first required to submit interactive data files:
- Subject to certain antifraud rules, there is no liability for errors in interactive data that occur where a good faith attempt has been made to comply with applicable requirements and errors are corrected promptly after the filer becomes aware of the failure.
- Interactive data is deemed not filed or part of a registration statement or prospectus for purposes of § 11 or § 12 of the Securities Act of 1933 and is not otherwise subject to liability under these sections.
- Interactive data is deemed not filed for purpos¬es of § 18 of the Securities Exchange Act and is not otherwise subject to liability under this section.