Speech by SEC Staff:
Division Statement before the Commission Open Meeting
Legal Branch Chief, Division of Corporation Finance
U.S. Securities and Exchange Commission
May 14, 2008
Good morning. Today we are recommending that the Commission publish a release that would propose amendments requiring companies to provide to the Commission financial statements in interactive data format using eXtensible Business Reporting Language, or XBRL. The proposed rules would apply to domestic and foreign companies using U.S. GAAP and, eventually, to foreign private issuers using International Financial Reporting Standards as issued by the International Accounting Standards Board.
Interactive data would be required with a company's annual and quarterly reports, transition reports, and Securities Act registration statements, and on its corporate web site, if it maintains one. The disclosure in interactive data format would supplement, but not replace or change, disclosure using the traditional electronic filing formats in ASCII or HTML.
More specifically, the proposed rules would require that companies provide to the Commission a new exhibit with their financial statements, including the footnotes and schedules to the financial statements, in interactive data format. To create the interactive data files, companies would be required to define, or "tag," their financial statements using elements and labels from the appropriate standard list of tags.
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 also would be tagged in each filer's first year, but in block text only. After the first year of such tagging, a filer also would be required to tag the detailed disclosures within the footnotes and schedules.
We recommend proposing a three year phase-in schedule.
In year 1, the proposed 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 we estimate 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.
If the proposed rules are adopted this fall, we recommend that the initial group of approximately 500 companies be subject to interactive data reporting beginning with fiscal periods ending on or after December 15, 2008. This would apply to annual and quarterly reports, as well as registration statements containing financial statements for such fiscal periods. After adoption, the Commission could monitor the rules and development of interactive data reporting, and revisit the deadlines as appropriate.
Interactive data would be required to be provided to the Commission, and posted on company websites, at the same time as the related report or registration statement, with two exceptions. A 30 day grace period would be permitted for the first interactive data exhibit of each filer, and also for the first interactive data exhibit that is required to include the footnotes and schedules tagged in detail. Filers that do not provide or post required interactive data on the date required would be deemed not current with their Exchange Act reports and, as a result, would not be eligible to use short form registration and would not be deemed to have available adequate current public information for purposes of the resale exemption safe harbor provided by Rule 144. The proposed rules reflect our effort to help assure reliability of the data while not imposing undue burdens on companies. Data in the interactive data file submitted to us would be subject to liability similar to that of the voluntary program and, as a result, would be subject to only limited liability.
We recommend that companies that are not required to provide interactive data until a later time have the option to do so earlier.
Finally, we recommend that the voluntary program be modified to exclude non-investment company participation but continue to permit investment companies to participate.
The proposal would provide a 60 day public comment period.
Thank you. We would be happy to answer any questions that you have.