The Securities and Exchange Commission will require companies to integrate their digital and static financial statement data into a single filing beginning in 2019 for the largest entities.
The SEC has adopted amendments to its requirements for companies to report their financial statement data under eXtensible Business Reporting Language, or XBRL, with a goal of improving both the quality of data and the accessibility of it to investors. Under the amendments, companies will no longer be required to submit their XBRL data separate from their document filing, nor post their XBRL filings on their websites.
Instead, companies will be required to use “inline XBRL,” which involves embedding XBRL data into a document, so that one document can be read by both humans and machines. Companies will continue to use the U.S. GAAP Taxonomy to select the tags necessary to tag each piece of financial statement data, but the tags will be embedded into a standard document so that rendering under both versions will be identical. Inline XBRL has been permitted since 2016.
SEC Chairman Jay Clayton said the move to inline XBRL represents a modernization of reporting and a move to improve the accessibility and usefulness of information to investors. “The commission will continue to monitor industry practices and market developments in disclosure technologies and ensure our rules adapt with the times,” he said in a statement.
Beset by persistent errors, the XBRL filing process has been slow to attract use by analysts and investors, prompting calls for its abandonment. Companies have been required for roughly a decade to submit their financial statement data via XBRL in a separate, unaudited filing.
The Financial Accounting Standards Board, which is responsible for maintaining and updating the GAAP Taxonomy, has taken steps over the years to make the taxonomy easier to navigate. The goal has been to improve the tagging process, which would drive more consistent reporting. The SEC has issued a smattering of guidance over the years to try to drive better reporting, but the move to inline XBRL is the first substantial change to the XBRL filing requirement since it was adopted as mandatory in 2009.
Under the newest amendments to the XBRL filing requirements, large accelerated filers must begin filing using inline XBRL in their first fiscal periods ending on or after June 15, 2019, whether that means an annual filing or a quarterly filing, depending on any given company’s fiscal year. Accelerated filers will follow a year later, with periods beginning on or after June 15, 2020. All other filers then follow a year after that, in 2021.
The SEC says the move to inline XBRL is expected ultimately to reduce the time and effort necessary to file by eliminating duplication. The SEC also expects the move to reduce the likelihood of inconsistencies between XBRL and HTML filings, which should improve the quality of data. For data users, inline XBRL is expected to make structured disclosures more usable and accessible because they can view all data via one source.
Mike Starr, vice president of governmental and regulatory affairs with Workiva and a former staffer at the SEC who helped move companies into XBRL, said the SEC’s decision to move to inline XBRL reflects a commitment to improving data quality and accessibility. Companies might even consider becoming early adopters, he said. “The sooner filers adopt Inline XBRL, the sooner they can begin realizing the many benefits, such as more efficiencies, better access to contextual insights, and easier compliance,” he said.