Here is the relevant portion of Special Counsel’s Mark Green’s statement at the open meeting on the final rule for an XBRL mandate:

“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 but, in a change from the amendments proposed, the limited liability provision has been streamlined and would be phased out over a two-year period for each company.”

The final rule for the voluntary filing program states:

” The XBRL exhibits will be publicly available but will be considered furnished rather than filed. Although XBRL exhibits will be required to accurately reflect the information that appears in the corresponding part of the official filing, the purpose of submitting XBRL data is to test the related format and technology and, as a result, investors and others should continue to rely only on the official version of a filing and not rely on the XBRL data in making investment decisions.”

Peter Wallison addressed the difference between furnished and filed statements in his dissent from the Progress Report of the Pozen Committee:

“Under the Securities Exchange Act of 1934, companies are absolutely liable for false or misleading material filed with the SEC. However, in the case of material that is merely furnished to the SEC, liability only attaches if it can be shown that the material was intentionally false or misleading. As many readers know, companies face less legal exposure for furnished as opposed to filed information, unless the information was intentionally wrong or misleading. Accordingly, the Committee seems to have adopted the idea of furnishing rather than filing XBRL financial statements because of its concern about the possible cost of auditor assurance. It seems to have reasoned that, if XBRL financial statements were furnished rather than filed, the reduced liability would permit companies to dispense with auditor assurance entirely, and thus to avoid these potential costs.”

So the crucial difference would appear to be that between absolute liability for information that is filed, and the requirement to prove an intention to mislead for information that is merely furnished.

Bob Schneider

Could you explain me, what is limited liability protection given to the companies by SEC to companies filing their Xbrlised returns?