Welcome to “The Age of Transparency.”
UPDATED: 5:50 pm to add AICPA comments
The Securities and Exchange Commission has officially adopted a rule mandating XBRL filings beginning in 2009.
With this rule, the SEC is effectively mandating that all public companies, beginning with large cap filers, submit their SEC reports in Interactive Data format, specifically in XBRL. XBRL software, an evolution of XML, the code the Internet was built upon, makes it much easier to collect, manage and share financial data and information, basically ‘bar-coding’ financial data.
Some perspective, from Sunir Kapoor, a board member of XBRL US, an organization dedicated to advancing the understanding and use of XBRL standards, and chief executive officer of UBmatrix, Inc., a leading provider of ‘SEC-ready’ XBRL information exchange solutions:
Interactive Data or XBRL is bringing a revolution to the transparency of public financial information. Such democratization of information can only lead to a more informed public and investment community. This is good news for investors, for analysts and for the financial stability and transparency on Wall Street. This is one of the most important changes in financial reporting since the Securities Act of 1934.
This announcement ushers in the Age of Transparency. This rule is just one of many XBRL initiatives taking place today to provide transparency from the security to the company to the market. This rule, combined with SEC rules requiring XBRL in the areas of Nationally Recognized Statistical Ratings Organizations’ ratings, Mutual Fund disclosures and other XBRL activities in the areas of Corporate Actions and Executive Compensation will lead to more transparent and efficient financial markets.
Use of such technology not only increases public company transparency, it will also improve the efficiency and reduce the costs of reporting for those companies. I think we can expect to see even more adoption of such technologies by US agencies in the next administration as President-elect Obama has been a champion of similar transparency initiatives in the Senate, including the ‘Obama-Coburn Transparency Act’ and the ‘Strengthening Transparency and Accountability in Federal Spending Act of 2008,’ which pushed for a web search engine for federal spending.
More comment from Diane Mueller, member of the XBRL International Steering Committee, chair of the XBRL Working Groups on Rendering and Software Interoperability, and vice president of XBRL development at JustSystems, the largest independent software vendor in Japan.
The U.S. Securities and Exchange Commission mandate of XBRL is great news! It’s a triumph for SEC Chairman Christopher Cox, who played a pivotal role in ensuring the modernization of IT infrastructure of the EDGAR filing system based on XBRL — an initiative that may be his most lasting legacy and a final feather in his cap.
And, of course, the SEC’s XBRL mandate is great news for the financial community at large. XBRL holds the promise of revolutionizing business reporting on a global scale, dramatically improving the relationship between people, processes, accounting standards, and financial information.
Continued at JustSystems here.
The SEC should be issuing a release on this new rule later today (or tomorrow), which will be available here: http://www.sec.gov/news/press.shtml.
And, from Barry Melancon, AICPA President and CEO:
We are grateful to SEC Chairman Chris Cox for his great leadership with this proposal to enhance transparency in U.S. financial markets through the use of interactive financial reporting data, or XBRL. The proposed rule set forth by the SEC to phase in use of XBRL will help investors and other users of financial information access data more efficiently.
The new rules will require companies to provide financial information using interactive data beginning with their quarterly June 2009 filings for the largest companies, and within three years for all public companies, according to the SEC.
The details of these rules are expected to be published in the Federal Register over the next few weeks. The AICPA is ready to assist members to help understand the requirements under this mandate and prepare for the use of XBRL.
A Webcast to explain the detailed requirements of the Rules will be held January 12th. This Webcast: XBRL – Transforming Financial Reporting will include a panel of experienced CPAs and SEC staff discussing the SEC requirements and lessons learned from the SEC XBRL Voluntary Program, as well as tips for implementing XBRL and creating XBRL documents. Webcast registration here.
The AICPA has summarized the Key Terms released in the SEC statement below:
Impacted Disclosures
XBRL data will be required, as an exhibit, with a company’s annual and quarterly reports, transition reports, and Securities Act registration statements. The tagged disclosures include companies’ primary financial statements (including balance sheet, income statement, statement of comprehensive income, statement of cash flows and statement of owners equity), footnote disclosures, and financial statement schedules.
Phase in
Three year phase-in schedule beginning with fiscal periods ending on or after June 15, 2009:
- Year 1 – rules apply only to domestic and foreign large accelerated filers that use U.S. GAAP and have a worldwide public float above $5 billion.
- Year 2 – all other domestic and foreign large accelerated filers using U.S. GAAP would be subject to interactive data reporting.
- 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.
Information required to be tagged
Primary financial statements, footnote disclosures and financial schedules will be required to be tagged. Tagging of other narrative disclosures will be optional under the rules.
Timing
Year 1 – footnotes and financial schedules “Block text” only, 30 day grace period for first submission of XBRL exhibit.
Year 2 and beyond – detail tags (individual facts) for footnotes and financial schedules, 30 day grace period for first submission of XBRL exhibit with detail tags for footnotes and schedules.
Liability
The rules will require that the interactive data provided to the Commission generally would be subject to a liability regime under the federal securities laws similar to that governing the voluntary program and would be phased out over a two year period for all issuers. Interactive data will be excluded from officer disclosure certifications.
