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SEC Issues XBRL Guidance
Practical Law Legal Update 5-573-7865 (Approx. 4 pages)
SEC Issues XBRL Guidance
by Practical Law Corporate & Securities
| Published on 09 Jul 2014 • USA (National/Federal) |
The SEC issued guidance relating to its eXtensible Business Reporting Language (XBRL) requirements.
On July 7, 2014, the SEC released the following relating to its eXtensible Business Reporting Language (XBRL) requirements:
- Staff observations by the SEC's Division of Economic and Risk Analysis following a review of the quality of XBRL exhibits submitted by issuers.
- A sample letter by the SEC's Division of Corporation Finance sent to certain public companies regarding their failure to comply with the XBRL requirement to include calculation relationships for certain line item elements in financial statements and related footnotes.
Staff Observations
The staff observations follow a review by the SEC's Division of Economic and Risk Analysis of the quality of XBRL exhibits submitted from 2009 through October 2013 by issuers complying with the requirement to file financial statement information in an XBRL format. A key aspect of the assessment focused on the use of custom tags to describe elements in the financial statements. Custom tags are tags created by the filer as opposed to standard tags selected from the XBRL US GAAP taxonomy. Custom tags are meant to be used only when the standard taxonomy does not provide a tag for the necessary financial element. Using custom tags can reduce comparability of financial information across companies.
The staff saw a steady decline in custom tag use by large accelerated filers during and after the rule's phase-in period. This finding was consistent with both improvements in the taxonomy and filers' selections of financial elements. However, this trend was not observed among smaller filers, who instead:
- Accounted for 96% of filers with high custom tag rates (those whose custom tags equalled more than 50% of their total line item tags).
- Had an average custom tag rate almost twice that of larger filers, despite having simpler financial statements that should be easier to standardize.
- Often created custom tags instead of selecting an available standard tag.
The staff also observed a strong correlation between third-party provider selection and exhibits with high custom tag rates. Of the smaller filers with a high custom tag rate, 64% were served by the same third-party providers. In addition, of these providers, one third party provider accounted for 33% of all filers with a high custom tag rate. This suggests that high custom tag rates may be determined by the reporting tool or service used rather than by the unique reporting requirements of a filer or available taxonomy.
The staff stated that it plans to continue monitoring the use of custom tags and may issue further guidance or take other actions depending on its observations.
Sample Letter
The sample letter is a form of letter that the Division of Corporation Finance recently sent to certain public companies regarding their Form 10-Q reports and their failure to comply with the XBRL requirement to include calculation relationships for certain line item elements in financial statements and related footnotes. The letter:
- Reminds issuers that acceptance of a filing by EDGAR does not mean a filing is complete or in compliance with SEC requirements.
- Requests that the issuer take necessary steps to ensure it is including all required calculation relationships in its XBRL exhibits.
For more information on XBRL reporting, see Practice Note, XBRL Reporting Requirements.