It's 2011. Do you know where your interactive data is? If you're one of the thousands of companies that have to submit their first financial reports tagged in XBRL to this summer, you ought to be preparing for that task now.
For those who need a reminder, a Securities and Exchange Commission rule that took effect in 2009 phased in a requirement for public companies and foreign private issuers that use U.S. GAAP to submit financials to the Commission tagged in interactive data, or eXtensible Business Reporting Language. The 500 largest issuers were required to submit their first XBRL-tagged filings in 2009. Another 1,200 large filers began tagging their reports last June. All other filers, including smaller reporting companies, must start submitting XBRL-tagged financials beginning with their periodic reports for fiscal years ending on or after June 15, 2011. That's estimated to be between 8,000 and 10,000 companies, says Emily Huang, co-founder and vice president of business technology at Rivet Software.
Those "wave three" companies should be educating themselves on the rule and the lingo associated with XBRL using the various free resources widely available, such as those on the SEC Website or the myriad Webinar offerings out there. They also need to decide whether they'll do the tagging in-house or hire a third-party vendor to help, so they can plan accordingly. Either way, “companies really need to build XBRL tagging into their internal financial reporting and close processes,” says Brian Aratani, Rivet's VP of Compliance Services. That means allowing additional time for the creation and review of the XBRL exhibit and any last-minute updates to their financials, which would need to be reflected in those exhibits. Even if they outsource the creation of XBRL files to a third party, Huang reminds that it's the companies that are ultimately responsibility for compliance with the rule.
Companies should focus on selecting the appropriate tags, especially within their footnotes. “A lot of companies focus on the rendering and making the XBRL look good when it's viewed on the SEC Website, and they lose sight of whether they've tagged appropriately,” says Aratani. If they haven't already, he says companies should prepare by tagging their existing quarterly filings. That work won't be wasted, since many of the tags companies use are the same from period to period.
During their first year under the rule, companies only have to block tag the footnotes to their financial statements. During the second year, they have to detail tag the accounting policies and information in their footnotes and tables. That can be more complicated and take longer than tagging the face financials. Issuers may at least want to reconsider some their footnote disclosure to see if they can make minor adjustments that could make that task less cumbersome, Aratani says. For instance, issuers might disclose the same number different ways in different places—rounded to thousands in the financials, but rounded to the millions in their footnotes, which requires two different tags. By disclosing them the same way throughout their filing, the same tag can be used.
The good news is that XBRL newbies have the major benefit of being able to learn from their predecessors. “They can look at their peer companies and benefit from being able to do some comparisons,” says Aratani. That goes for companies that have to detail tag their footnotes for the first time this year.
As a reminder, the Financial Accounting Foundation published the updated 2011 version of the U.S. GAAP Financial Reporting Taxonomy, but it can't be relied upon until it's approved by the Securities and Exchange Commission. Companies should make sure they're ready to switch to the updated version when it's available, says Huang.