Wednesday, December 17, 2008

SEC Votes To Mandate XBRL; Launches IDEA

At an open commission meeting on Dec. 17, 2008 the SEC voted to issue a final rule requiring financial statements and certain other information to be filed with the SEC in interactive data format, specifically, using eXtensible Business Reporting Language (XBRL). In related news, the SEC also launched its IDEA system, which will supplement, and eventually replace, the EDGAR system.

SEC Mandates XBRL
Four of the five commissioners agreed with the decision to mandate XBRL; Commissioner Luis Aguilar dissented due to the limited liability provision that will be offered during the first two years of companies’ XBRL filings, which he believed was in conflict with investor protection. Following are some highlights of the XBRL rule, further details are in remarks of Corp Fin staff. See also SEC Chairman Christopher Cox' opening remarks, and Commissioner Aguilar's dissent. (We will update this post to add links to other commissioner statements if posted, and to an SEC press release if posted.)

Effective date
  • Three year phase-in by company size (described further below), with the first interactive data reports due beginning with the first quarterly report on Form 10-Q (or annual report on Form 20-F or Form 40-F, as applicable), for fiscal periods ending on or after June 15, 2009.
  • For a calendar year-end company, the first required interactive data would be in connection with its June 30 Form 10-Q.

Three year phase in by company size and GAAP vs. IFRS filing status

  • In year 1, the new rules would apply only to domestic and foreign large accelerated filers that use U.S. GAAP and have a worldwide public float above $5 billion, which the SEC estimates would cover approximately 500 companies.
  • In year 2, all other domestic and foreign large accelerated filers using U.S. GAAP would be subject to interactive data reporting.
  • In year 3, all remaining filers using U.S. GAAP, including smaller reporting companies, and all foreign private issuers that prepare their financial statements in accordance with IFRS as issued by the IASB would be subject to the same interactive data reporting requirements.
    Interactive Data Provided in Exhibit Filed With SEC, and on Corporate Website
Interactive data will be provided in a new Exhibit to the financial statements.

  • The interactive data also would be required to be posted on the company’s corporate website, if it maintains one.
  • Disclosure in interactive data format would supplement, but not replace or change, disclosure using the traditional electronic filing formats of ASCII or HTML.
Face of Financial Statements, Block Tagged Footnotes & Schedules In First Year

  • The face of the financial statements would be tagged in each filer’s first year of interactive data reporting.
  • The financial statement footnotes and financial statement schedules would be block tagged in companies first year of XBRL filing, with detailed tagging beginning in the second year.
  • In a change from the proposal issued in May, tagging of narrative disclosures would be permitted but not required.
Limited Liability For Two Years Only
  • Data in the interactive data file submitted to the SEC would be subject to liability similar to that of the SEC’s XBRL voluntary filer program. However, in a change from the proposal issued in May, the limited liability provision would be phased out after two years for each company.

No Auditor Assurance Required; Exclusion from Certs

  • Issuers would not be required to obtain auditor assurance on their interactive data exhibits. Interactive data files would be excluded from the officer certification requirements under the Exchange Act rules.
Grace Period For First Interactive Data Filing
  • A 30 day grace period (vs. the required filling date for the related form for which an interactive data exhibit is required) is provided for the company’s first interactive data exhibit (i.e., with block tags for footnotes and block tagged schedules) and a 30 day grace period will also be provided for the first exhibit required to have detailed tagging of footnotes and schedules.

IDEA System Launched, Will Supplement, and Eventually Replace EDGAR
Also on December 17, the SEC launched its IDEA system. IDEA stands for Interactive Data, Electronic Applications. IDEA will initially supplement, and eventually replace, the EDGAR system. (EDGAR = Electronic Data Gathering, Analysis and Retrieval System). Further information about IDEA is on the SEC's "What Is IDEA?" webpage, and the IDEA system can be directly accessed at: http://idea.sec.gov/

The SEC is working on moving ahead in all aspects of technology, as exhibited by their naming Mark Story to the position of Director of New Media. In that role, Story organized a conference call of bloggers on the afternoon of Dec. 17th following the Commission vote. Bloggers were invited to hear some additional insights by – and raise some questions of - David Blaszkowsky, Director of the Office of Interactive Disclosure, Walter Hamscher, Taxonomies and Development, Office of Interactive Disclosure, and Ann Sulzberg, Office of Investor Education and Assistance. [NOTE: corrected spelling of Hamscher's name, spelled incorrectly in our original post, we apologize for this error, thank you to Bob Schneider and Neal Hannon for pointing it out.]

Blaszkowsky gave some brief highlights from the XBRL rule, but much of the call was focused on Hamscher walking attendees through a live demo (via GoToMeeting) of the SEC’s new IDEA system.

To show the power of IDEA, the SEC’s demo used actual data from General Electric Company. (I’m not sure if GE was chosen for this reason - but like the SEC’s march forward on XBRL and IDEA, led by Chairman Christopher Cox, GE stresses innovation and imagination.)

As an aside, it was interesting to hear Commissioner Elisse Walter note in her remarks during the open commission meeting - when she noted her support for the final rule on XBRL - that for those who are concerned about the move to XBRL, similar trepidation was expressed by some when the SEC first launched EDGAR. She added that back when EDGAR was first adopted, some wondered if all the Commissioners would even use a computer.

I think it’s great that the SEC is reaching out through its Director of New Media to provide information to bloggers – and I also want to take the opportunity to thank John Heine, in the SEC’s Office of Public Affairs (I guess you call that ‘old media’?) who is always helpful to me, e.g. in finding information on SEC’s website and answering other questions.

Others scheduled to be on the SEC bloggers call included: Bill Cara (CaraCommunity), Christian Gross, David Janowski (Investment News), Michele Leder (Footnoted.org), Cate Long (ShopYield.com), Francine McKenna (Re: The Auditors) - who, by the way, recently interviewed FEI President & CEO Jim Abel on FEI's list of the Top 10 Challenges for 2009 - and Todd Sullivan (ValuePlays).

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4 comments:

Broc Romanek said...

Yes, John Heine is the best! Even when everyone else changes down in OPA, John is a rock.

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Financial Projections said...

John is great. Great post thank you.

olsonsfoodemporium said...

This won't have effect in reality, that's exactly what I think.