Corporate Alert: SEC Issues Order Re: Voluntary
On June 13, 2016, the SEC issued an order allowing companies to voluntarily file structured financial statement data in a format known as Inline XBRL that is embedded in the filed report, instead of including a tagged version of the financial statement data in a separate “instance” document (described below).
Operating companies are currently required to provide the financial statements that accompany their periodic and current reports in machine-readable format using eXtensible Business Reporting Language (XBRL) as an exhibit to such reports. However, today’s technology permits XBRL data to be embedded directly into a report filed in HTML through a format known as Inline XBRL. The SEC believes that Inline XBRL may decrease filing preparation costs, improve the quality of structured data and increase the use of XBRL data by investors and other market participants, and accordingly, will now permit voluntary use of Inline XBRL in periodic and current reports on a temporary basis.
The Interactive Data File (IDF) exhibit currently consists of an “instance document” (which represents the part of the IDF that contains the XBRL tags for the information contained in the corresponding data in the related filing) and other documents which contain contextual information about the XBRL tags. Companies typically prepare their financial statements in a word processing application, convert them to another format, such as HTML, and then create an XBRL exhibit by copying the financial statement information and tagging it in XBRL. The SEC believes that eliminating the need to create a separate instance document may reduce the incidence of re-keying errors, decrease the overall time required to comply with the XBRL data filing requirement, and better equip preparers to detect and correct XBRL data errors.
Any company that complies with the following conditions may omit the instance document from its IDF exhibit with Forms 6-K, 8-K, 10-Q, 10-K, 20-F and 40-F for reports due before March 30, 2020: (a) file the report in HTML format as an Inline XBRL document as prescribed in the EDGAR Filer Manual; (b) file the IDF as prescribed in the EDGAR Filer Manual for Inline XBRL filers as an exhibit to the Inline XBRL document; (c) use XBRL tags within the Inline XBRL document that reflect the same information in the corresponding data as the HTML format part of the official filing; (d) state in the exhibit index item referencing the IDF that the instance document does not appear in the IDF because its XBRL tags are embedded within the Inline XBRL document; and (e) not rely on the hardship exemptions in Rules 201 and 202 of Regulation S-T.
The SEC notes that XBRL data users may need to modify their software or algorithms to be able to extract the embedded XBRL data but believes that such adjustments will be minimal. Users will be able to view information about the reported XBRL data contained in embedded tags on the SEC’s website without the need to access a separate document (and the EDGAR system will also extract and make available the XBRL tags from an Inline XBRL document as a separate file). The SEC plans to make software for Inline XBRL extraction freely available, which may further mitigate potential effects on XBRL data users.
Currently, when there is a major technical error with XBRL data submitted in an exhibit, the EDGAR validation system causes the exhibit to be removed from the submission, but the submission as a whole is not suspended (and the filing is therefore available through the EDGAR system). However, the EDGAR validation system will suspend an Inline XBRL filing that contains a major technical error in embedded XBRL data, which would require the filing to be revised before it could be accepted by EDGAR. Tools to submit test filings will be available to identify and correct any technical errors prior to EDGAR filing, limiting the need for filing suspensions.