A major milestone in the SEC’s XBRL mandate will be achieved in August. It will be the first time that all companies with a 12/31 fiscal year-end date will be required to submit XBRL exhibits with their second quarter 10-Q. While all Large Accelerated Filers (LAF) companies were required to submit XBRL exhibits after June 15, 2010, all remaining filers, including smaller reporting companies will now also be required to begin submitting these exhibits.

The Securities and Exchange Commission’s XBRL mandate grouped all public companies into three groups, or tiers, based on their filing status. The first tier, Large Accelerated Filers (LAF) with a public float over $5 Billion (approx. 500 companies) were first required to begin submitting XBRL exhibits back in 2009. In 2010, all remaining LAFs were phased into the XBRL mandate (approx. 1,000 companies). This year, approximately 7,000 companies will begin submitting XBRL exhibits. Each of these groups will be addressing a new aspect of the rules.

Tier Three: All non-LAF companies are in this group. For the first twelve months after June 15, 2011, these companies are required to tag all line items in their primary financial statements and “block” tag their footnotes and schedules. Ideally, in preparation for the XBRL requirements with their second quarter 10-Q filing in late August, they have already completed their selection of their tags that accurately reflect the accounting concepts behind each line item in their primary financial statements, and went through a “practice run” with their last 10-Q filing in May. This would give them a good idea as to the impact that this additional requirement will have on their filings. It is important to remember that these companies will still have to file their documents in the HTML or ASCII format, and that they will have to allow for more time to create the XBRL format. Therefore, they will have to put “pencils down” earlier than they may have been accustomed to in the past.

Tier Two: LAF companies that have a public float under $5 Billion fall into this category, and they began submitting XBRL exhibits last year in 2010. As of June 15, 2011, they are now required to begin tagging their footnotes and schedules on a detailed level. Besides tagging their primary financial statements, they will also be required to tag:

• All Accounting policies in the Significant Accounting Policies Footnote
• Each table within each footnote as a separate block of text
• Within each footnote, each amount (i.e. monetary value, percentage, and number) separately

This additional tagging requirement will substantially increase the number of tags required in the XBRL exhibits and the amount of time required to create them. Companies required to submit these detailed tagged XBRL exhibits will need to know just how much additional time is required to create them with the additional tags. On average, the jump in the number of tags from the first year is 150 tags to 900.

Tier One: The LAF companies that have been submitting XBRL exhibits since 2009, and began tagging their footnotes and schedules on a detailed level last year, will now lose their limited liability protection for filings after June 15, 2011. The SEC rules allowed this limited liability protection for 24 months after a registrant was phased into the XBRL mandate. This clause in the rules provided protection against federal securities laws if the XBRL exhibits did not comply with the XBRL rules, as long as it was deemed that the company did not deliberately attempt to mislead the public. Unfortunately, this is quite vague, and these companies should discuss this with their Auditors and Legal counsel.

So while the SEC’s XBRL mandate has a multi-year phase-in of the requirements; at this point all companies that have SEC filing requirements are now required to submit XBRL exhibits when they are filing new financials.

by Gary Purnhagen

The IFRS Foundation is accepting comments on an exposure draft of the IFRS Taxonomy 2011 interim release reflecting disclosures that are commonly reported by entities in their IFRS financial statements. The tags are intended to supplement the 2011 IFRS Taxonomy to enhance the comparability of financial information, consistent with IFRSs and with the XBRL architecture of the IFRS Taxonomy.

The Foundation has heard from constituents who are concerned that the current IFRS taxonomy may be challenging to use because it contains so few tags when compared with the U.S. GAAP Taxonomy. The IFRS taxonomy contains some 2,550 elements while the GAAP taxonomy contains about 13,000.

The key difference is that GAAP is more prescriptive, so there are more specific requirements that can be described by more detailed, more precisely defined tags. IFRS is based more on principles than prescriptive requirements, so it’s simply not as straightforward to establish precise tags for every conceivable way companies might elect to report something.

The interim release attempts to address this problem by establishing additional tags for common practice concepts. The Foundation’s XBRL team studied the financial statements of about 200 companies that report under IFRS in countries and industries throughout the world, identifying disclosures that are most common among those companies. The tags in the interim release reflect those most commonly reported practices.

These 300 additional tags do not represent IFRS requirements, but they do represent the disclosures that are most common among companies that report under IFRS. When these tags are finalized, entities will be able to apply the tags to line items in their primary financial statements and to notes and accounting policies using text blocks. They will require fewer entity-specific tags, which will reduce divergence in reporting practice, which in turn will improve the comparability of all IFRS financial information.

While some perceived there are architectural differences between GAAP and IFRS taxonomies, in truth the only differences lie in the underlying accounting rules. And even those differences are narrowing as the International Accounting Standards Board and the Financial Accounting Standards Board seek to converge the two different sets of accounting standards. If an XBRL preparer is moving from one accounting standard to another, the same XBRL software can be utilized.

The IFRS taxonomy is continuously updated to reflect changes in accounting standards as they are released by the IASB. This assures companies referring to the taxonomy can be confident they reflect the latest IFRSs as they are issued and become requirements for IFRS filers. This is important given how dispersed IFRS filers and XBRL filers are around the globe. To date, some 120 countries have adopted IFRS, and about 25 of those countries are now using or implementing the IFRS taxonomy for XBRL filings.

It will be important for the IFRS Foundation to receive broad feedback to the taxonomy’s interim release to assure it accurately reflects the reporting practices most common among IFRS filers. This is the only way to assure the greatest comparability possible, which is essentially if XBRL is to truly become a useful reporting platform.

by Olivier Servais