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