Staff Observations From Review of Interactive Data Financial Statements (from November 1, 2010)
The staff in the Commission's Division of Risk, Strategy and Financial Innovation has completed a review of the Interactive Data Financial Statement submissions under the Commission's rules relating to interactive data for financial reporting. Overall, the filings indicate that filers devoted significant effort to consider their responsibilities under this program, comply with the new rules and provide high-quality submissions.
We performed the reviews on the population of filings submitted during June — August 2010, which includes the first group of mandated detailed tagged submissions and the initial filings from the companies in the second phase-in group. The staff's reviews were conducted using data analysis tools to survey the entire population of filings and data points, and where appropriate to review details of specific filings and tags on a targeted basis.
We have identified certain areas where there were common issues with the filings. As companies continue through the phase-in of the interactive data requirements, with the ongoing introduction of detailed tagging of notes to the financial statements and the phase-out of the limited liability provisions, we encourage the review of future filings to ensure they are prepared consistently with the themes of our observations. We believe this will increase the overall quality of the interactive data submissions and the usability of the data.
The observations included below represent the most common and significant issues from the filings analyzed and do not reflect all issues identified. Over time, the staff intends to evaluate the interactive data filed with the Commission and publish findings. It is our expectation that the issues identified below can be addressed in the next series of interactive data filings and that future reviews and observations will focus elsewhere. The observations represent the views of the staff in the Division of Risk, Strategy and Financial Innovation. They are not rules, regulations, or statements of the Securities and Exchange Commission. Further, the Commission has neither approved nor disapproved them.
One of the fundamental requirements of the interactive data rules is to have the same data reflected in both the interactive data file and the traditional format financial statement filing. Data entered into the interactive data file with the incorrect positive/negative value gives the wrong value to users of the tagged data and does not comply with Rule 405 of Regulation S-T. We noted filers using negative values to render brackets around numbers similar to their traditional format financial statement filing. Amounts must not be entered with negative values in an interactive filing for the sole purpose of forcing the amounts to render with brackets. (Edgar Filer Manual (EFM) 6.11.6) Filers should be aware that formatting amounts with or without brackets may be controlled by negating labels in the Interactive Data Financial Statements.
We further noted that filers were creating extensions with balance attributes that were not consistent with similar elements in the US GAAP taxonomy. Filers should select a balance attribute (or create a definition if the element does not have a balance attribute as required by the EDGAR Filer Manual) using the same conventions as currently used in the US GAAP Taxonomy, which generally allows amounts to be entered with a positive value.
Observation: We have noted many occurrences of filers incorrectly entering negative values within their Interactive Data Financial Statement submissions. In the U.S. GAAP taxonomy, most elements are designed to be entered with positive values.
Rule: EFM 6.6.30 States that a preparer should invert the sign of a numeric fact whose element has an xbrli:balance value that is inconsistent with the reporting concept being reported.
Remarks: If an element describes a one-way financial reporting concept (e.g. cost of goods sold, treasury stock, or dividends paid) the amount should be entered with a positive value regardless of how that amount may be displayed in the traditional format filing. Filers should pay particular attention to elements used to detail tag footnotes where the element describes a loss or accumulated expense.
If an element describes a two-way financial reporting concept which may have either positive or negative values (e.g., net income (loss), gain (loss) on investments, or increase (decrease) in accounts payable or Retained Earnings/Accumulated Deficit) filers should look to the element's definition, balance attribute and standard label to determine whether the amount should be entered with a positive or negative value.
For example, the following elements would be entered with positive values:
- Dividends paid in cash or stock,
- Common or preferred stock issued,
- Common or preferred stock repurchased,
- Treasury stock, beginning and ending balances,
- Treasury stock acquired,
- Treasury stock reissued,
- Treasury stock retired,
- Accumulated depreciation and amortization,
- Accumulated other-than-temporary impairments,
- Allowance for doubtful accounts,
- Amortization of pension costs,
- Available-for-sale securities in a continuous loss position, and,
- Available-for-sale securities, gross unrealized losses.
Extending for an element where an existing US GAAP Taxonomy element is appropriate
Filers should concentrate more effort in the area of finding existing USGAAP elements so as to avoid creating custom elements. This area is critical to the usability of the data and filers should concentrate more effort on element selection (mapping) than any other part of the submission. On an overall basis, we observed that the extension rate is higher than appropriate particularly for the notes to the financial statements. While this issue is related to the continued development and improvement of the US GAAP taxonomy, we noted submissions where an existing US GAAP Taxonomy element would have been more appropriate than the extension used by the filer. While not an all inclusive list, we identified the following categories of extensions where filers should concentrate more effort to ensure the use of extensions is appropriate under the rules and other guidance.
1. Observation: Extending where an existing US GAAP Taxonomy element is appropriate. We noted cases of extensions where appropriate elements exist but filers did not identify the appropriate element, perhaps due to insufficient or incomplete searching.
Rule: EFM 6.8.4 States that "wherever possible, registrants should assign a standard and other labels for an element defined in a standard taxonomy schema in preference to declaring a new element in a company schema."
Remarks: Defining a new, company-specific element has many consequences, not only for all users of the Interactive Data Financial Statements but also for the filer's ability to reuse the elements and data structures created in subsequent reporting periods and reduce its future reporting effort.
We have noted cases of extensions where, for a range of reasons, filers extended a concept rather than conducting a complete search of element definitions for an appropriate match. It should be noted that a search of the labels or names of elements is not sufficient; filers need to read the element definition to determine if it is appropriate match for their financial reporting concept.
Filers should select elements after a thorough search of the complete US GAAP taxonomy. Searches should not be constrained by any particular entry point of the taxonomy. Once again, reading the definition of the element is a critical part of this process. When viewing the US GAAP taxonomy on the SEC website, filers should select the "All taxonomies" view (not one of the specific industry entry points) and select the appropriate element after careful consideration of the elements' standard definition and all other attributes of the element. Also, filers should be aware that inadvertently misspelling search terms or using search terms that differ from the standard definition may produce unintended search results, and search results may include elements unique to specific industries which may not be appropriate for the filer.
Filers should consider that elements related to any particular face financial statement, such as the cash flow statement, may be located within another face financial statement section, such as the income statement, or within one of the "Disclosures" sections of the standard taxonomy. For example, searching just in the Income Statement for interest expense would not identify elements related to interest expense in the Debt note. Filers should ensure that the element search function in their tagging tool is not constrained by entry points, financial statements or note disclosure.
2. Observation: Extending because of relatively minor addition(s) to or deletion(s) from the US GAAP taxonomy standard definition. We noted that some filers had made extensions for relatively minor changes to the standard element's definition.
Rule: EFM 6.6.24 states that "(i)f an element used in numeric facts representing amounts in one or more periods has a definition, then the scope of that definition must include the amounts reported for that line item in the corresponding official HTML/ASCII document."
Additionally, EFM 6.6.25 states that "(a)n element must not be used in numeric facts representing amounts of a line item in different periods if it has a definition that explicitly excludes one or more of the amounts in the corresponding official HTML/ASCII document."
Remarks: Preparers should not base their choice of an element simply on minor, immaterial differences in definitions. Filers should confirm that they are in compliance with sections 6.6.24 and 6.6.25 of the EFM. By complying with these sections of the EFM, filers will ensure that extensions are not being made for nonmaterial items and thus creating unnecessary extensions.
3. Observation: Extending because of the context of an element.
Filers are encouraged to follow the new guidance in Frequently Asked Question E.19 reproduced below.
Guidance: Q: What context period should be used for an event that occurred during the second quarter for a 12/31 fiscal year end registrant?
A: For an element with period type 'instant', if the disclosure includes the actual date, then use the date on which the event occurred. If the disclosure mentions that the event occurred in the month of May, then use the last day of the month, e.g. 5/31. If the disclosure only mentions that it occurred in the second quarter, then use the second quarter reporting end date of 6/30. For an element with period type 'duration', if the disclosure mentions that the event occurred in the month of May, then use the duration period 5/1 to 5/31. If the disclosure only mentions that it occurred in the second quarter, then use the second quarter period of 4/1 to 6/30.
Remarks: This is new guidance for filers and was issued in September 2010. It serves to assist filers with the determination of the correct context of an element. Before creating an extended element because of a context issue, filers should consider this guidance.
4. Observation: Extending elements, Axis, Domains or Members to ensure that the Interactive Data Financial Statement renders in a particular fashion.
Guidance: Compliance and Disclosure Interpretation 130.08 (Regulation S-T):
Question: Must an Interactive Data File that complies with the requirements of Rule 405 of Regulation S-T appear identical to the traditional format financial statements when displayed by a viewer on the Commission's website?
Answer: No. There is no such requirement. [May 29, 2009]
Remarks: There is no requirement to have the Interactive Data Financial Statement appear the same as the traditional format financial statement. We recommend that filers spend time on ensuring the Interactive Data Financial Statement complies with the SEC rules and the EDGAR Filer Manual rather than focus on achieving a particular formatting result. Attempts to achieve a particular formatting result can be time consuming, are not required, and could lead to a lower quality submission. For further guidance filers can look to Frequently Asked Questions, Compliance and Disclosure Interpretations and Staff Observations in preparation of their interactive data financial statements.
Observations on Axis and Member use
Classes of Stock
We noted that a number of filers had not used the "Statement Class of Stock Axis" to declare classes of stock in the financial statements and common shares outstanding in the Document and Entity Information. Some filers used line item extensions and others used deprecated elements to tag classes of stock. Filers should not use deprecated elements in their interactive data filings. Filers must tag facts that are specific to distinct classes of stock using domain members on the "Statement Class of Stock Axis." (EFM 6.6.10) Many "generic" stock class domain members appear in the US GAAP Taxonomy (for example, Common Class A Member), and filers may also create new domain members to refer to specific classes as needed. We suggest filers utilize the pre-defined domain members to the extent they are applicable.
Please note that facts in an instance that apply to all classes of stock should NOT be tagged using a domain member on the "Statement Class of Stock Axis. " (EFM 6.6.9)
Observations on Consolidated Registrant with Subsidiaries
We have noted some diversity in practice in the tagging of subsidiaries in the data we have received from filers. We have identified cases where the "Legal Entity Axis" has been used for purposes other than to tag information about the consolidated entity and its subsidiaries. We remind filers of the following points:
Consolidated Entity Facts:
For facts that apply only to the Consolidated Entity, do not use the LegalEntityAxis.
Not using this axis means all the facts in an instance relate to the consolidated entity. (EFM 6.6.5).
Parent Company Facts:
Use the domain member element "Parent Company Member" for facts that apply only to the parent holding company, corporate headquarters, or similar legal entity not associated with any specific subsidiary (EFM 6.6.7).
The parent company member should not be used as the default for the consolidated entity.
Create a separate domain member element for each subsidiary. Typically, the element name for subsidiary ABCD would be "ABCDMember" and appear on the "Legal Entity Axis". (EFM 6.6.5).
Note that there is no restriction on using company-specific or period-specific information in the member name. (FAQ E.20)
Note that members created for an entity with subsidiaries apply collectively to all subsidiaries of that entity.
Facts that apply only to eliminations between subsidiaries must have a Consolidation Elimination Member on the Legal Entity Axis. (EFM 6.6.8)
Observation on US GAAP modeling of Axis and Members
We have also noted circumstances where filers have not used the modeling of elements currently published in the US GAAP Taxonomy. We suggest filers utilize the pre-defined table structures included in the taxonomy, and use the related line item elements and domain members to the extent they are applicable for their specific circumstances. (FAQ E.16)
Observation on Tagging completeness — Parenthetical Amounts
We noted that in certain cases filers were either not tagging parenthetical data or they were tagging the amounts incorrectly. Filers should include the parenthetical amounts in the label of the element and not neglect to tag the parenthetical amounts. For example, the line item label for accounts receivable on the balance sheet, may include information about the allowance for accounts receivable as parenthetical data. These amounts should be tagged and presented directly after the balance sheet in accordance with the Edgar Filer Manual (EFM 6.7.12). Filers should also be aware that the amounts presented in the parenthetical data may differ for the years reported and each amount, for each year, should be tagged separately.