SEC approves Inline XBRL for tagged financial data
The Securities and Exchange Commission voted Thursday to allow Inline XBRL as an amendment to its requirements for companies and funds to file their financials in eXtensible Business Reporting Language.
The amendments aim to improve the quality and accessibility of XBRL data. Inline XBRL involves embedding XBRL data directly into the filing so disclosure documents are easier to read by both computers and human beings. The SEC has been pilot testing iXBRL technology after proposing a rule over a year ago to require companies to use the technology in their operating company financial statement information and mutual fund risk/return summaries (see Inline XBRL gains traction, even without SEC mandate). The SEC began mandating the use of older XBRL technology in 2009. The data-tagging technology is supposed to make financial statements and filings easier for investors and analysts to compare across companies and industries. However, users have complained that the data quality is sometimes poor and the technology is difficult to use. Inline XBRL promises to make the filings more accessible and readable.
The amendments, which will go into effect in phases, require the use of Inline XBRL for financial statement information and risk/return summaries. Inline XBRL has the potential to benefit investors and other market participants while decreasing, over time, the cost of preparing information for submission to the Commission. The amendments also eliminate the requirements for operating companies and funds to post XBRL data on their websites.
“The amendments are part of the Commission’s continued efforts to modernize reporting and to improve the accessibility and usefulness of disclosures to investors, including our Main Street investors,” said SEC Chairman Jay Clayton in a statement. “The Commission will continue to monitor industry practices and market developments in disclosure technologies and ensure our rules adapt with the times. The amendments reflect the Commission’s effort to use developments in structured disclosure technology to lower costs borne by filers and investors.”
Operating companies that are currently required to submit financial statement information in XBRL will be required, on a phased basis, to transition to Inline XBRL. Large accelerated filers that use U.S. GAAP will be required to comply starting with fiscal periods ending on or after June 15, 2019. Accelerated filers that use U.S. GAAP will be required to comply beginning with fiscal periods ending on or after June 15, 2020. All other filers will be required to comply beginning with fiscal periods ending on or after June 15, 2021. Filers will be required to comply beginning with their first Form 10-Q filed for a fiscal period ending on or after the applicable compliance date.
There is also a phase-in for use of Inline XBRL by funds. Funds that are currently required to submit risk/return summary information in XBRL will be required, on a phased basis, to transition to Inline XBRL. The amendments also eliminate the 15 business day filing period for risk/return summary XBRL data, so that the data will be more timely available to the public. Large fund groups (with net assets of $1 billion or more as of the end of their most recent fiscal year) will be required to comply two years after the effective date of the amendments. All other funds will be required to comply three years after the effective date of the amendments.
The requirement for operating companies and funds to post XBRL data on their websites will be eliminated upon the effective date of the amendments.
“This decision by the SEC underscores their commitment to improving data quality and accessibility,” said Mike Starr, vice president of governmental and regulatory affairs with Workiva, a provider of XBRL filing technology. “The sooner filers adopt Inline XBRL, the sooner they can begin realizing the many benefits, such as more efficiencies, better access to contextual insights, and easier compliance. By getting ahead of the SEC’s implementation timeline, early adopters will be able to remove any doubt around the consistency of XBRL and HTML disclosures.”
The American Institute of CPAs also praised the SEC’s vote to require use of iXBRL format for the submission of operating company financial statement information and fund risk/return summary information. “As a longstanding advocate for the application of data standards for the reporting of business information, the AICPA applauds the SEC for adopting this rule. It is further proof of the Commission’s intent to advance its technology capabilities to keep up with the evolution of these standards,” said AICPA President and CEO Barry C. Melancon in a statement. “The iXBRL specification is used by millions of companies around the world to report their financial information. Based on discussions with companies implementing and using iXBRL, we believe that the use of iXBRL by filers will both enable enhanced capabilities for users of financial information and provide efficiencies for preparers. We wholeheartedly support the continuing effort to improve the quality of information disclosed and allow for the information to be collected in the most timely and cost effective manner possible, while increasing the utility of XBRL data. As the SEC has observed, ‘by facilitating the preparation and review of XBRL data, iXBRL can decrease the overall time and cost required by filers to comply with the existing XBRL requirements.’ The SEC’s action also furthers U.S. alignment with global efforts, which include the European Securities and Markets Authority’s issuance of a final draft standard requiring the use of iXBRL by issuers in the European Union by 2020.”
Among the potential benefits of Inline XBRL technology cited by the SEC are that financial statement preparers will get more control over the presentation of XBRL disclosures within an HTML filing. iXBRL is expected to reduce the likelihood of inconsistencies between HTML and XBRL filings and improve the quality of XBRL data. It enhances the usability of structured disclosures for investors through greater accessibility and transparency of the data and enhanced capabilities for data users, who would no longer have to view the XBRL data separately from the text of the documents.
In addition, tools like the open source Inline XBRL Viewer can be used to review and analyze the XBRL data more efficiently. For fund investors, the benefits of Inline XBRL are expected to be enhanced by the more timely availability of risk/return summary XBRL data due to the elimination of the 15 business day XBRL filing period. For funds, the amendments also will facilitate efficiencies in the filing process by allowing for concurrent submission of XBRL data files with some post-effective amendment filings.