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10 June 2008
[Federal Register: June 10, 2008 (Volume 73, Number 112)]
[Proposed Rules]
[Page 32793-32832]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10jn08-13]
[[Page 32793]]
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Part II
Securities and Exchange Commission
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17 CFR Parts 229, 230, 232, 239, 240, and 249
Interactive Data To Improve Financial Reporting; Proposed Rule
[[Page 32794]]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 229, 230, 232, 239, 240 and 249
[Release Nos. 33-8924; 34-57896; 39-2455; IC-28293; File No. S7-11-08]
RIN 3235-AJ71
Interactive Data To Improve Financial Reporting
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rule.
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SUMMARY: We are proposing rules requiring companies to provide
financial statement information in a form that would improve its
usefulness to investors. Under the proposed rules, financial statement
information could be downloaded directly into spreadsheets, analyzed in
a variety of ways using commercial off-the-shelf software, and used
within investment models in other software formats. The rules would
apply to domestic and foreign public companies that prepare their
financial statements in accordance with generally accepted accounting
principles as used in the United States (U.S. GAAP), and foreign
private issuers that prepare their financial statements using
International Financial Reporting Standards (IFRS) as promulgated by
the International Accounting Standards Board (IASB). Companies would
provide their financial statements to the Commission and on their
corporate Web sites in interactive data format using the eXtensible
Business Reporting Language (XBRL). The interactive data would be
provided as an exhibit to periodic reports and registration statements,
as well as to transition reports for a change in fiscal year. The
proposed rules are intended not only to make financial information
easier for investors to analyze, but also to assist in automating
regulatory filings and business information processing. Interactive
data has the potential to increase the speed, accuracy, and usability
of financial disclosure, and eventually reduce costs.
DATES: Comments should be received on or before August 1, 2008.
ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://
www.sec.gov/rules/proposed.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number S7-11-08 on the subject line; or
Use the Federal eRulemaking Portal (http://
www.regulations.gov). Follow the instructions for submitting comments.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number S7-11-08. This file number
should be included on the subject line if e-mail is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
Internet Web site (http://www.sec.gov/rules/proposed.shtml). Comments
are also available for public inspection and copying in the
Commission's Public Reference Room, 100 F Street, NE., Washington, DC
20549, on official business days between the hours of 10 a.m. and 3
p.m. All comments received will be posted without change; we do not
edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly.
FOR FURTHER INFORMATION CONTACT: James C. Lopez, Legal Branch Chief,
Division of Corporation Finance at (202) 551-3790; Mark W. Green,
Senior Special Counsel (Regulatory Policy), Division of Corporation
Finance at (202) 551-3430; Jeffrey W. Naumann, Assistant Director,
Office of Interactive Disclosure at (202) 551-5352; or Melanie
Jacobsen, Office of the Chief Accountant at (202) 551-5300, U.S.
Securities and Exchange Commission, 100 F Street, NE., Washington, DC
20549-3628.
SUPPLEMENTARY INFORMATION: We propose to add Rules 405 and 406 to
Regulation S-T,\1\ and revise Item 601 \2\ of Regulation S-K,\3\ Rules
11,\4\ 201,\5\ 202,\6\ 305,\7\ 401,\8\ and 402 \9\ of Regulation S-T,
Rule 144 \10\ under the Securities Act of 1933 (Securities Act),\11\
and Rules 13a-14 \12\ and 15d-14 \13\ under the Securities Exchange Act
of 1934 (Exchange Act).\14\ We also propose to revise Forms S-3,\15\ S-
8,\16\ and F-3 \17\ under the Securities Act and Forms 20-F \18\ and 6-
K \19\ under the Exchange Act.
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\1\ 17 CFR 232.10 et seq.
\2\ 17 CFR 229.601.
\3\ 17 CFR 229.10. et seq.
\4\ 17 CFR 232.11.
\5\ 17 CFR 232.201.
\6\ 17 CFR 232.202.
\7\ 17 CFR 232.305.
\8\ 17 CFR 232.401.
\9\ 17 CFR 232.402.
\10\ 17 CFR 230.144.
\11\ 15 U.S.C. 77a et seq.
\12\ 17 CFR 240.13a-14.
\13\ 17 CFR 240.15d-14.
\14\ 15 U.S.C. 78a et seq.
\15\ 17 CFR 239.13.
\16\ 17 CFR 239.16b.
\17\ 17 CFR 239.33.
\18\ 17 CFR 249.220f.
\19\ 17 CFR 249.306.
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Table of Contents
I. Introduction and Background
A. Introduction
B. Current Filing Technology and Interactive Data
C. The Commission's Multiyear Evaluation of Interactive Data and
Overview of Proposed Rules
II. Discussion of the Proposed Amendments
A. Submission of Financial Information Using Interactive Data
B. Phase-In Under the Proposed Rules
1. Overview
2. Companies and Filings Covered by the Proposed Rules and
Phase-In
3. Documents and Information Covered by the Proposed Rules
a. Financial Statements and Financial Statement Schedules
b. Registration Statements Covered by the Proposed Rules
4. Initial Filing Grace Period
5. Web Site Posting of Interactive Data
C. Accuracy and Reliability of Interactive Data
1. Voluntary Program
2. Use of Technology To Detect Errors
3. Integration of Interactive Data and Business Information
Processing
4. Continued Traditional Format and Interactive Data Cautionary
Disclosure
D. Required Items
1. Data Tags
2. Regulation S-T and the EDGAR Filer Manual
E. Consequences of Non-Compliance and Hardship Exemption
III. General Request for Comments
IV. Paperwork Reduction Act
V. Cost-Benefit Analysis
VI. Consideration of Burden on Competition and Promotion of
Efficiency, Competition and Capital Formation
VII. Initial Regulatory Flexibility Act Analysis
VIII. Small Business Regulatory Enforcement Fairness Act
IX. Statutory Authority and Text of Proposed Amendments
I. Introduction and Background
A. Introduction
Over the last several decades, developments in technology and
electronic data communication have significantly decreased the time and
cost of filing disclosure documents with us. Technological developments
also have facilitated greater transparency in the form of easier access
to, and analysis of, financial reporting and disclosures. Most notably,
in 1993 we began to require electronic filing on our Electronic Data
Gathering, Analysis and
[[Page 32795]]
Retrieval System (EDGAR).\20\ Since then, widespread use of the
Internet has vastly decreased the time and expense of accessing
disclosure filed with us.
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\20\ In 1993, we began to require domestic issuers to file most
documents electronically. Release No. 33-6977 (Feb. 23, 1993) [58 FR
14628]. Electronic filing began with a pilot program in 1984.
Release No. 33-6539 (June 27, 1984) [49 FR 28044].
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We continue to update our filing standards and systems as
technologies improve. These developments assist us in our goal to
promote efficient and transparent capital markets. For example, since
2003 we have required electronic filing of certain ownership reports
\21\ filed on Forms 3,\22\ 4,\23\ and 5 \24\ in a format that provides
interactive data, and recently we adopted similar rules governing the
filing of Form D.\25\ In addition, recently we have encouraged, and in
some cases required, public reporting companies and mutual funds to
provide disclosures and communicate with investors using the
Internet.\26\ Now, as part of our continuing efforts to assist filers
as well as investors who use Commission disclosures, we propose to
require that financial statements be provided in a format that makes
the information they contain interactive.
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\21\ Release No. 33-8230 (May 7, 2003) [68 FR 25788 and 37044
(correction)] (required electronic filing of ownership reports) and
Release No. 33-8891 (Feb. 6, 2008) [73 FR 10592] (required
electronic filing of Form D [17 CFR 239.500]).
\22\ 17 CFR 249.103 and 274.202.
\23\ 17 CFR 249.104 and 274.203.
\24\ 17 CFR 249.105.
\25\ 17 CFR 239.500.
\26\ See, e.g., Release No. 34-56135 (July 26, 2007) [72 FR
42222]; Release No. 34-55146 (Jan. 22, 2007) [72 FR 4148]; Release
No. 34-52056 (July 19, 2005) [70 FR 44722]; Release No. 33-8861
(November 21, 2007) [72 FR 67790]; and Release No. 34-57172 (Jan.
18, 2008) [73 FR 4450].
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Our proposal builds on our voluntary filer program, started in
2005,\27\ that allowed us to evaluate the merits of interactive data.
The voluntary program allows companies to submit financial statements
on a supplemental basis in interactive format as exhibits to specified
filings under the Exchange Act and the Investment Company Act of 1940
(Investment Company Act).\28\ Companies that participate in the program
still are required to file their financial statements in American
Standard Code for Information Interchange (ASCII) or HyperText Markup
Language (HTML).\29\
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\27\ Release No. 33-8529 (Feb. 3, 2005) [70 FR 6556].
\28\ 15 U.S.C. 80a-1 et seq.
\29\ HTML is a standardized language commonly used to present
text and other information on Web sites.
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In 2007, we extended the program to enable mutual funds voluntarily
to submit in interactive data format supplemental information contained
in the risk/return summary section of their prospectuses.\30\ Over 75
companies have participated in the voluntary program. These companies
span a wide range of industries and company characteristics, and have a
total public float of over $2 trillion.
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\30\ Release No. 33-8823 (July 11, 2007) [72 FR 39290].
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Financial reporting based on interactive data would create new ways
for investors, analysts, and others to retrieve and use financial
information in documents filed with us. For example, users of financial
information could download it directly into spreadsheets, analyze it
using commercial off-the-shelf software, or use it within investment
models in other software formats. Through interactive data, what is
currently static, text-based information can be dynamically searched
and analyzed, facilitating the comparison of financial and business
performance across companies, reporting periods, and industries.
Interactive data also could provide a significant opportunity to
automate regulatory filings and business information processing, with
the potential to increase the speed, accuracy, and usability of
financial disclosure. Such automation could eventually reduce costs. A
company that uses a standardized interactive data format at earlier
stages of its reporting cycle could reduce the need for repetitive data
entry and, therefore, the likelihood of human error. In this way,
interactive data may improve the quality of information while reducing
its cost.
Also, to the extent investors currently are required to pay for
access to annual or quarterly report disclosure that has been extracted
and reformatted into an interactive data format by third-party sources,
the availability of interactive data in Commission filings could allow
investors to avoid additional costs associated with third party
sources.
We believe that requiring issuers to file their financial
statements using interactive data format would enable investors,
analysts, and the Commission staff to capture and analyze that
information more quickly and at less cost than is possible using the
same financial information provided in a static format. Any investor
with a computer would have the ability to acquire and download
interactive financial data that have generally been available only to
large institutional users. The proposed interactive data requirements
would not change what is currently reported, but would add a
requirement to include financial statements in a new format as an
exhibit. Thus, the proposal to require that filers provide financial
statements using interactive data will not alter the disclosure or
formatting standards of periodic reports, registration statements,\31\
or transition reports,\32\ which would continue to be available as they
are today for those who prefer to view the traditional text-based
document.
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\31\ Although registration statements can be filed under federal
securities laws other than the Securities Act, we use the term
``registration statement'' in this release only to refer to those
filed under the Securities Act unless we expressly state otherwise.
\32\ Transition reports generally must be filed when an issuer
changes its fiscal closing date. The transition report covers the
resulting transition period between the closing date of its most
recent fiscal year and the opening date of its new fiscal year. Rule
13a-10 [17 CFR 240.13a-10]; Rule 15d-10 [17 CFR 240.15d-10]. Unless
otherwise stated, when we refer to Exchange Act reports, periodic
reports, or ``reports,'' we mean quarterly and annual periodic
reports as well as transition reports.
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Throughout this release, we solicit comment on many issues
concerning the use of interactive data, including specifically whether
financial information in interactive data format should be required as
exhibits to Securities Act registration statements and Exchange Act
periodic and transition reports filed with us. We are seeking comment
from investors, registrants, accountants, analysts and any other
parties or individuals who may be affected by the use of interactive
disclosure in Commission filings, and any other members of the public.
B. Current Filing Technology and Interactive Data
Companies filing electronically are required to file their
registration statements, quarterly and annual reports, and transition
reports in ASCII or HTML format.\33\ Also, to a limited degree, our
electronic filing system uses other formats for internal processing and
document-type identification. For example, our system uses eXtensible
Markup Language (XML) to process reports of beneficial ownership of
equity securities on Forms 3, 4, and 5 under section 16(a) of the
Exchange Act.\34\
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\33\ Rule 301 under Regulation S-T [17 CFR 232.301] requires
electronic filings to comply with the EDGAR Filer Manual, and
Section 5.1 of the Filer Manual requires that electronic filings be
in ASCII or HTML format. Rule 104 under Regulation S-T [17 CFR
232.104] permits filers to submit voluntarily as an adjunct to their
official filings in ASCII or HTML unofficial PDF copies of filed
documents. Unless otherwise stated, we refer to filings in ASCII or
HTML as traditional format filings.
\34\ 15 U.S.C. 78p(a).
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[[Page 32796]]
Electronic formats such as HTML, XML, and XBRL are open standards
\35\ that define or ``tag'' data using standard definitions. The tags
establish a consistent structure of identity and context. This
consistent structure can be recognized and processed by a variety of
different software applications. In the case of HTML, the standardized
tags enable Web browsers to present Web sites' embedded text and
information in predictable format. In the case of XBRL, software
applications, such as databases, financial reporting systems, and
spreadsheets, recognize and process tagged financial information.
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\35\ The term ``open standard'' is generally applied to
technological specifications that are widely available to the
public, royalty-free, at minimal or no cost.
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XBRL was derived from the XML standard. It was developed and
continues to be supported by XBRL International, a collaborative
consortium of approximately 550 organizations representing many
elements of the financial reporting community worldwide in more than 20
jurisdictions, national and regional. XBRL U.S., the international
organization's U.S. jurisdiction representative, is a non-profit
organization that includes companies, public accounting firms, software
developers, filing agents, data aggregators, stock exchanges,
regulators, financial services companies, and industry
associations.\36\ In 2006, the Commission contracted with XBRL U.S. to
develop the standard list of tags necessary for financial reporting in
interactive format consistent with U.S. GAAP and Commission
regulations.
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\36\ XBRL U.S. supports efforts to promote interactive financial
and business data specific to the U.S., including U.S. GAAP.
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Financial reporting in interactive format requires a standard list
of tags. These tags are similar to definitions in an ordinary financial
dictionary, and they cover a variety of financial concepts that can be
read and understood by software applications. For financial statements
prepared in accordance with U.S. GAAP, a filer would use the list of
tags for U.S. financial statement reporting.\37\ This list of tags
contains descriptive labels, definitions, authoritative references to
U.S. GAAP and Commission regulations where applicable, and other
elements, all of which provide the contextual information necessary for
interactive data \38\ to be recognized and processed by software.\39\
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\37\ Unless stated otherwise, when we refer to the ``list of
tags for U.S. financial statement reporting'' we mean the
interactive data taxonomy as approved by XBRL U.S. that is based on
U.S. GAAP, Commission regulations, and common financial reporting
practices used in the preparation of financial statements in the
U.S.
\38\ The proposed rules would define the interactive data
necessary to create human-readable disclosure as the ``interactive
data file,'' which would be required with every interactive data
submission. The EDGAR Filer Manual would identify any necessary
supporting files.
\39\ For example, contextual information would identify the
entity to which it relates, usually by using the filer's CIK number.
A hypothetical filer converting its traditional electronic
disclosure of $1,000,000 of net sales would have to create
interactive data that identify what the 1,000,000 represents, net
sales, and the currency in which it is disclosed, dollars. The
contextual information would include other information as necessary;
for example, whether it relates to an annual report or quarterly
report, the financial reporting period, continuing or discontinued
operations, or actual, restated, forecast, pro forma or other type
of disclosure.
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Applying data tags to financial statements is accomplished using
commercially available software that guides a preparer in mapping
information in the financial statements to the appropriate tags in the
standard list. Each element in the standard list of tags has a standard
label. A company can therefore match the standard labels to each
caption in its financial statements. Occasionally, because filers have
considerable flexibility in how financial information is reported under
U.S. reporting standards, it is possible that a company may wish to use
a non-standard financial statement line item that is not included in
the standard list of tags.\40\ In this situation, a company would
create a company-specific element, called an extension.
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\40\ In other cases, without a relevant and appropriate tag in
the list of tags, a company would be required to create an extension
in order to provide interactive data that appears the same as the
corresponding portion of traditional format filing.
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For example, what a company identifies in its traditional format
financial statements as ``operating revenues'' may be associated with
an element that has ``net revenues'' as the standard label. In this
situation, a company would need to change, or extend, the standard
label to become ``operating revenues'' when tagging that disclosure
with the element.\41\
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\41\ Unless otherwise stated, extensions, whether relating to an
element or a label, are not part of the standard list of tags.
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A company may choose to tag its own financial statements using
commercially available software, or it may choose instead to outsource
the tagging process. In the event a company relies upon a service
provider to tag the company's financial statements, the company would
want to carefully review the tagging done by the service provider in
order to make sure that the tagged financial statements are accurate
and consistent with the information the company presents in its
traditional format filing.
Similarly, to create interactive data-formatted financial
statements prepared in accordance with IFRS as issued by the IASB, a
filer would use the IFRS list of tags.\42\ The IFRS list of tags
contains descriptive labels, authoritative references to IFRS where
applicable, and other elements and concepts that provide the contextual
information necessary for interactive data to be recognized and
processed by software. The International Accounting Standards Committee
Foundation (IASCF) has developed the IFRS list of tags.\43\ To create
interactive data using the IFRS list of tags, an issuer generally would
need to follow the same mapping, extension and tagging process as would
a company that uses the list of tags for U.S. financial statement
reporting. As further discussed below, the IASCF is collaborating with
XBRL U.S. and other parties to align practices designed to develop the
IFRS list of tags. This collaboration involves the development of the
appropriate scope for the IFRS list of tags' content and technology
architecture.\44\
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\42\ Unless stated otherwise, when we refer to the ``IFRS list
of tags'' we mean the list of tags for financial statements prepared
in accordance with IFRS as issued by the IASB.
\43\ See http://www.iasb.org/xbrl/index.html. The IASCF released
the 2008 taxonomy (list of tags) on March 31, 2008. See IASB Press
Release, The IASC Foundation publishes IFRS Taxonomy 2008, (March
31, 2008).
\44\ As previously noted, in 2006 we contracted with XBRL U.S.
to develop the standard tags necessary for financial reporting in
interactive format consistent with U.S. GAAP and Commission
regulations. That contract has been completed.
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Because financial statements in interactive data format, referred
to as the interactive data file,\45\ are intended to be processed by
software applications, the unprocessed data is not readable. Thus,
viewers are necessary to convert the interactive data file to human
readable format. Some viewers are similar to Web browsers used to read
HTML files.
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\45\ See note 40 above.
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The Commission's Web site currently provides links to four viewers
that allow the public to easily read company disclosures filed using
interactive data.\46\ These viewers demonstrate the capability of
downloading interactive data into software such as Microsoft Excel as
well as into other applications that are widely available on the
Internet. In addition, we are aware of other applications under
development that may provide additional and advanced functionality.
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\46\ See viewers available at http://www.sec.gov/xbrl.
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[[Page 32797]]
C. The Commission's Multiyear Evaluation of Interactive Data and
Overview of Proposed Rules
In 2004, we began assessing the benefits of interactive data and
its potential for improving the timeliness and accuracy of financial
disclosure and analysis of Commission filings.\47\ As part of this
evaluation, we adopted rules in 2005 permitting filers, on a voluntary
basis, to provide financial disclosure in interactive data format as an
exhibit to certain filings on our electronic filing system. The
voluntary program has been based on an earlier version of the list of
tags for U.S. financial statement reporting, which does not include a
full array of standard elements for financial statement footnotes and
schedules. After more than two years of increasing participation, over
75 companies have chosen to provide interactive data financial
reporting.\48\
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\47\ See Press Release No. 2004-97 (July 22, 2004).
\48\ A viewer for the voluntary program is available at http://
www.sec.gov/spotlight/xbrl/xbrlwebapp.shtml. This viewer, one of
several funded by the Commission to demonstrate interactive data,
maintains a running total of companies and filers submitting data as
part of the voluntary program. As of April 17, 2008, 78 companies
had submitted 350 interactive data reports.
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During this time, we have kept informed of technology advances and
other interactive data developments. We note that several U.S. and
foreign regulators have begun to incorporate interactive data into
their financial reporting systems. The Federal Deposit Insurance
Corporation (FDIC), the Federal Reserve, and the Office of the
Comptroller of the Currency (OCC) require the use of XBRL.\49\ As of
2006, approximately 8,200 U.S. financial institutions were using XBRL
to submit quarterly reports to banking regulators.\50\ Countries that
have required or instituted voluntary or pilot programs for XBRL
financial reporting include Australia, Belgium, Canada, China, Denmark,
France, Germany, Ireland, Israel, Japan, Korea, Luxembourg, the
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Thailand
and the United Kingdom.\51\
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\49\ Since 2005, the FDIC, Federal Reserve, and the OCC have
required the insured institutions that they oversee to file their
quarterly Consolidated Reports of Condition and Income (called Call
Reports) in interactive data format using XBRL. Call Reports, which
include data about an institution's balance sheet and income
statement, are used by these federal agencies to assess the
financial health and risk profile of the financial institution.
\50\ See Improved Business Process Through XBRL: A Use Case for
Business Reporting, available at http://www.xbrl.org/us/us/
FFIEC%20White%20Paper%2002Feb2006.pdf.
\51\ See XBRL International Progress Report (November 2007),
available at http:// www.xbrl.org/ProgressReports/2007--11--XBRL--
Progress--Report.pdf.
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We also have kept informed of relevant advances and developments by
hosting roundtables on the topic of interactive data financial
reporting,\52\ creating the Commission's Office of Interactive
Disclosure,\53\ and meeting with international securities regulators to
discuss, among other items, timetables for implementation of
interactive data initiatives for financial reporting.\54\ Also, staff
of the Commission have attended meetings of the Advisory Committee on
Improvements to Financial Reporting (CIFiR) in which the committee
discussed proposals for financial reporting using interactive data.\55\
We also have reviewed written statements and public comments received
by CIFiR on its XBRL developed proposal.\56\
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\52\ See materials available at http://www.sec.gov/spotlight/
xbrl/xbrl-meetings.shtml.
\53\ See Press Release No. 2007-213 (October 9, 2007).
\54\ See Press Release No. 2007-227 (November 9, 2007).
\55\ For example, CIFiR conducted an open meeting on March 14,
2008 in which it heard reactions from an invited panel of
participants to CIFiR's developed proposal regarding required filing
of financial information using interactive data. An archived webcast
of the meeting is available at http://sec.gov/about/offices/oca/
cifir.shtml. The March 14, 2008 panelists presented their views and
engaged with CIFiR members regarding issues relating to requiring
interactive data tagged financial statements, including tag list and
technological developments, implications for large and small public
companies, needs of investors, necessity of assurance and
verification of such tagged financial statements, and legal
implications arising from such tagging. Also, CIFiR has provided to
the Commission an interim progress report that contains a developed
proposal that the Commission, over the long term, require the filing
of financial information using interactive data once specified
conditions are satisfied. See Progress Report of the Advisory
Committee on Improvements to the Financial Reporting to the United
States Securities and Exchange Commission (Feb. 14, 2008) (Progress
Report), available at http://www.sec.gov/about/offices/oca/acifr/
acifr-pr-021408-final.pdf. CIFiR's developed proposal is discussed
more fully in Part II.C.2 below.
\56\ The XBRL developed proposal appears in chapter 4 of the
Progress Report. Written statements of panelists at the March 14,
2008 meeting and public comments received on the Progress Report are
available at http://sec.gov/comments/265-24/265-24.shtml.
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Building on our experience monitoring the voluntary program, and
our participation in the other initiatives described above, we are now
proposing rules to require financial reporting using interactive data.
The proposed rules would apply to domestic and foreign public companies
that prepare their financial statements in accordance with U.S. GAAP,
and foreign private issuers \57\ that prepare their financial
statements in accordance with IFRS as issued by the IASB. Interactive
data would be required to be provided on a company's Web site \58\ and
with the filer's Securities Act registration statements,\59\ annual
reports, quarterly reports if applicable,\60\ and transition
reports.\61\ We believe this has the potential to provide advantages
for the investing public by making financial data more accessible,
timely, inexpensive and easier to analyze.
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\57\ Exchange Act Rule 3b-4(c) [17 CFR 240.3b-4(c)] defines
``foreign private issuer'' as a foreign issuer other than a foreign
government that either has 50 percent or less of its outstanding
voting securities held of record by U.S. residents or, if more than
50 percent of its outstanding voting securities are held by U.S.
residents, about which none of the following is true: (1) A majority
of its executive officers or directors are U.S. citizens or
residents; (2) more than 50 percent of its assets are located in the
U.S.; or (3) the issuer's business is administered principally in
the U.S.
\58\ The proposed Web site posting requirement would apply only
to the extent a filer already maintains a corporate Web site.
\59\ Interactive data would be required as an exhibit to a
Securities Act registration statement that contains financial
statements, such as a Form S-1 [17 CFR 239.11] used in connection
with an initial public offering. Interactive data would not be
required as an exhibit to a Securities Act registration statement
that does not contain financial statements, such as a Form S-3 filed
by an issuer that is eligible to and does incorporate by reference
all required financial statements from its periodic reports.
\60\ Foreign private issuers filing on Form 10-Q would be
required to provide financial statements in quarterly reports using
interactive data.
\61\ The proposed rules would not include any investment company
that is registered under the Investment Company Act or any
``business development company,'' as defined in Section 2(a)(48) of
that Act [15 U.S.C. 80a-2(a)(48)]. Business development companies
are a category of closed-end investment companies that are not
required to register under that Act. The proposed rules also would
not include any entity that reports under the Exchange Act and
prepares its financial statements in accordance with Article 6 of
Regulation S-X [17 CFR 210.6-01 et seq.]. The proposed rules would
not apply to these entities because the standard list of tags for
investment management is not yet fully developed.
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By enabling filers to further automate their financial processes,
interactive data may eventually help filers improve the speed at which
they generate financial information, while reducing the cost of filing
and potentially increasing the accuracy of the data. For example, with
standardized interactive data tags, registration statements and
periodic reports may require less time for information gathering and
review. Also, standardized interactive data tagging may enhance the
ability of an issuer's in-house financial professionals to identify and
correct errors in the issuer's registration statements and periodic
reports filed in traditional electronic format. Filers also may gain
benefits not directly related to public financial disclosures. For
example, filers that use interactive data may be able to consolidate
enterprise financial
[[Page 32798]]
information more quickly and potentially more reliably across operating
units with different accounting systems. However, we recognize that at
the outset, filers would most likely prepare their interactive data as
an additional step after their financial statements have been prepared.
The principal elements of the proposal are as follows:
Domestic and foreign large accelerated filers \62\ that
use U.S. GAAP and have a worldwide public common equity float above $5
billion \63\ as of the end of their most recently completed second
fiscal quarter would provide to the Commission a new exhibit.\64\ The
exhibit would contain their financial statements,\65\ and any
applicable financial statement schedules in interactive data format.
The requirement would apply beginning with fiscal periods ending on or
after December 15, 2008.\66\
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\62\ Exchange Act Rule 12b-2 [17 CFR 240.12b-2] generally
defines ``large accelerated filer'' as an issuer that has common
equity held by unaffiliated persons with a value of at least $700
million, has been subject to the Exchange Act's periodic reporting
requirements for at least 12 months, has filed at least one annual
report, and is not eligible to use the disclosure requirements
available to smaller reporting companies for its periodic reports.
\63\ As of the end of 2006, the $5 billion cutoff would
establish a category of approximately 500 filers.
\64\ The exhibit would be required with such filers'
registration statements, quarterly, if applicable, and annual
reports, and transition reports.
\65\ When we refer to financial statements, we mean the face of
the financial statements and accompanying footnotes. The face of the
financial statements refers to the statement of financial position
(balance sheet), income statement, statement of comprehensive
income, statement of cash flows, and statement of owners' equity, as
required by Commission regulations. References to the financial
statements as required for interactive data reporting include any
required schedules to the financial statements, unless we expressly
state otherwise.
\66\ The proposed schedule is premised on the rules being
adopted this fall in time for affected filers to implement this
schedule, and could be adjusted depending on when the Commission
adopts any final rules.
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All other domestic and foreign large accelerated filers
using U.S. GAAP would be subject to the same interactive data reporting
requirements the following year, beginning with fiscal periods ending
on or after December 15, 2009.
All remaining filers using U.S. GAAP, including smaller
reporting companies,\67\ and all foreign private issuers that prepare
their financial statements in accordance with IFRS as issued by the
IASB,\68\ would be subject to the same interactive data reporting
requirements beginning with fiscal periods ending on or after December
15, 2010.\69\
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\67\ Item 10(f)(1) of Regulation S-K [17 CFR 229.10(f)(1)], Rule
405 under the Securities Act [17 CFR 230.405] and Rule 12b-2 under
the Exchange Act [17 CFR 240.12b-2] define the term ``smaller
reporting company,'' in general, as a company that has common equity
securities held by non-affiliates with a market value of less than
$75 million or, if that value cannot be calculated, had less than
$50 million in revenue in the prior fiscal year.
\68\ The proposed rules would not require foreign private
issuers that prepare their financial statements in accordance with a
variation of IFRS as issued by the IASB to provide interactive data.
\69\ We do not propose to require foreign private issuers to
provide in interactive data format interim financial information
contained in Form 6-K or any financial information prepared in
accordance with non-U.S.GAAP that must be reconciled to U.S. GAAP in
the foreign private issuer's Exchange Act reports.
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Filers providing financial statements in interactive data
format would be required to use the most recent and appropriate list of
tags released by XBRL U.S. or the IASCF as required by the EDGAR Filer
Manual. Filers also would be required to tag a limited number of
document and entity identifier elements, such as the form type, company
name, and public float. As with interactive data for the financial
statements, these document and entity identifier elements would be
formatted using the appropriate list of tags as required by the EDGAR
Filer Manual.\70\
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\70\ The appropriate list of tags for document and entity
identifier elements would be a list released by XBRL U.S., but would
not be specific to U.S. GAAP or IFRS as issued by the IASB and would
be required to be used by all issuers required to submit interactive
data regardless of whether reporting in U.S. GAAP or IFRS as issued
by the IASB.
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A filer required to provide financial statements in
interactive data format to the Commission also would be required to
post those financial statements in interactive data format on its
corporate Web site on the same day it filed or was required to file the
related registration statement or report with the Commission, whichever
is earlier.\71\
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\71\ The day the registration statement or report is submitted
electronically to the Commission may not be the business day on
which it was deemed officially filed. For example, a filing
submitted after 5:30 p.m. generally is not deemed officially filed
until the following business day. Under the proposed rules, the Web
posting would be required to be posted at any time on the same day
that the related registration statement or report is deemed
officially filed or required to be filed, whichever is earlier.
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The proposed rules would not alter the requirements to
provide financial statements and any required financial statement
schedules with the traditional format filings.\72\
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\72\ When we established the voluntary program, we stated in the
adopting release that the interactive data submission would be
supplemental to filings and not replace the required traditional
electronic format of the financial information it contains. We also
said that volunteers would be required to continue to file their
traditional electronic filings. See Part II.D of Release No. 33-8529
(Feb. 3, 2005) [70 FR 6556, 6559].
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Financial statements in interactive data format would be
provided as exhibits identified in Item 601(b) of Regulation S-K and
Form 20-F.
Financial statement footnotes and financial statement
schedules initially would be tagged individually as a block of text.
After a year of such tagging, a filer also would be required to tag the
detailed disclosures within the footnotes and schedules.
Viewable interactive data as displayed through software
available on the Commission's Web site, and to the extent identical in
all material respects to the corresponding portion of the traditional
format filing, would be subject to all the same liability provisions of
the federal securities laws as the corresponding data in the
traditional format part of the official filing.
Data in the interactive data file submitted to us
generally would be subject to the federal securities laws in a manner
similar to that of the voluntary program and, as a result, would be
[cir] Excluded from the officer certification requirements under
Rules 13a-14 and 15d-14 of the Exchange Act; \73\
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\73\ 17 CFR 240.13a-14 and 17 CFR 240.15d-14.
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[cir] Deemed not filed for purposes of specified liability
provisions; and
[cir] Protected from liability for failure to comply with the
proposed tagging and related requirements if the interactive data file
either
[ballot] Met the requirements; or
[ballot] Failed to meet those requirements, but the failure
occurred despite the issuer's good faith and reasonable effort, and the
issuer corrected the failure as soon as reasonably practicable after
becoming aware of it.
The proposed rules would require the financial information
and document and entity identifier elements to be tagged according to
Regulation S-T and the EDGAR Filer Manual.\74\
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\74\ Proposed Rule 405 of Regulation S-T would directly set
forth the basic tagging requirements and indirectly set forth the
rest of the tagging requirements through the requirement to comply
with the EDGAR Filer Manual. Consistent with proposed Rule 405, the
Filer Manual would contain the technical tagging requirements.
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The initial interactive data exhibit of a filer would be
required within 30 days of the earlier of the due date or filing date
of the related report or registration statement, as applicable. In year
two, a filer would have a similar 30 day grace period for its first
interactive data exhibit that includes detailed tagging of its
footnotes and schedules. All other interactive data exhibits would be
required at the same time as the rest of the related report or
registration statement.
[[Page 32799]]
Filers that do not provide or post required interactive
data on the date required would be deemed not current with their
Exchange Act reports and, as a result, would not be eligible to use the
short forms S-3, F-3, or S-8, or elect under Form S-4 or F-4 to provide
information at a level prescribed by Form S-3 or F-3. Similarly, such
filers would not be deemed to have available adequate current public
information for purposes of the resale exemption safe harbor provided
by Rule 144.\75\ A filer that was deemed not current solely as a result
of not providing an interactive data exhibit when required would be
deemed current and timely upon providing the interactive data.
Therefore it would regain the ability to incorporate by reference,
short form registration statement eligibility, and current status for
purposes of determining adequate current public information under Rule
144. As such, it would not lose its status as having ``timely'' filed
its Exchange Act reports solely as a result of the delay in providing
interactive data.
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\75\ 17 CFR 230.144.
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Although we have not proposed at this time to require
interactive data for executive compensation disclosure because a
definitive list of tags for this purpose is not yet completed, we are
soliciting comment on the usefulness to investors and others of such
interactive data, as well as the extent of the related costs and
associated questions.
We anticipate that if the proposed rules become effective,
companies that are not required to provide interactive data until a
later time would have the option to do so earlier.
We also anticipate that the voluntary program would be
modified, if the proposed rules are adopted, to permit investment
companies to participate, but to exclude non-investment company
participation. As a result, the voluntary program would continue for
the financial statements of investment companies that are registered
under the Investment Company Act, and business development companies
and other entities that report under the Exchange Act and prepare their
financial statements in accordance with Article 6 of Regulation S-X.
The voluntary program also would continue for the risk/return summary
section of mutual fund prospectuses.\76\
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\76\ See Release No. 33-8823 (July 11, 2007) [72 FR 39290]. On
May 21, 2008, the Commission voted to propose rules that would
require interactive data for the risk/return summary section of
mutual fund prospectuses. See Press Release No. 2008-94 (May 21,
2008).
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II. Discussion of the Proposed Amendments
A. Submission of Financial Information Using Interactive Data
For several years XBRL U.S. and its related entities have developed
and refined the list of tags to classify and define financial
information in accordance with U.S. financial reporting practices and
Commission regulations.\77\ Many investors, auditors, accountants, and
others, including companies that have been providing interactive data
disclosure in the voluntary program, have helped in this process.
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\77\ See Press Release No. 2006-158 (Sept. 25, 2006).
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Interactive data financial statements using the list of tags for
U.S. financial statement reporting have been submitted voluntarily to
us by over 75 companies, some of which have done so since the start of
the voluntary program approximately three years ago. The list of tags
for U.S. financial statement reporting has improved significantly since
the original version available for the voluntary program.\78\ During
this period, there has been a growing development of software products
for users of interactive data, as well as of applications to assist
companies to tag their financial statements using interactive data.\79\
The growing number of software applications available to preparers and
consumers is helping make interactive data increasingly useful to both
institutional and retail investors, as well as to other participants in
the U.S. and global capital markets. On this basis, we believe
interactive data, and in particular the XBRL standard, have become
widespread and that the updated list of tags for U.S. financial
statement reporting is now sufficiently advanced to require that U.S.
GAAP-reporting companies provide their interactive financial statements
in interactive data format.\80\
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\78\ When we adopted the voluntary program, the list of tags for
U.S. GAAP financial statement reporting contained approximately
4,000 data elements. The list of tags released on April 28, 2008
contains approximately 13,000 data elements, with the most
significant additions relating to the development of elements for
standard U.S. GAAP footnote disclosure.
\79\ See Press Release No. 2007-253 (Dec. 5, 2007).
\80\ As previously noted in Part I.C, however, the proposed
rules would not apply to investment companies registered under the
Investment Company Act and other entities. See footnote 61 above.
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With respect to the list of tags for IFRS financial reporting, the
IASCF has, over several years, developed a list of tags designed to
classify and define financial information in accordance with
international accounting standards as promulgated by the IASB. Over the
course of the past year, the IASCF has worked to strengthen the
development of its list of tags by forming an XBRL Advisory Committee
and an XBRL Quality Reporting Team, both consisting of international
representatives from investors, auditors, accountants, regulators and
others. On March 31, 2008, the IASCF published a near final version of
the list of tags for IFRS financial reporting,\81\ which is subject to
public comment through May 30, 2008.\82\ In addition, the IASCF is
collaborating with XBRL U.S. and other parties to align practices
designed to develop the IFRS list of tags. This collaboration involves
the development of the appropriate scope for the IFRS list of tags'
content and technology architecture. On this basis, we believe that the
updated IFRS list of tags will be sufficiently advanced to require that
foreign private issuers that prepare their financial statements in
accordance with IFRS as issued by the IASB provide their financial
statements in interactive data format under the phase-in schedule we
are proposing.
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\81\ Unless stated otherwise, when we refer to the ``list of
tags for IFRS financial reporting'' we mean the interactive data
taxonomy that is based on IFRS as issued by the IASB.
\82\ See Press Release, The IASC Foundation publishes IFRS
Taxonomy 2008 (March 31, 2008), available at http://www.iasb.org/
News/Press+Releases/
The+IASC+Foundation+publishes+IFRS+Taxonomy+2008.htm.
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As discussed in more detail below, our proposed rules would set
forth a phase-in period beginning with domestic and foreign large
accelerated U.S. GAAP filers with a worldwide public common equity
float above $5 billion as of the end of their most recently completed
second fiscal quarter. These large accelerated filers would be subject
to the proposed rules beginning with their Securities Act registration
statements, periodic reports, and transition reports that contain
financial statements for fiscal periods ending on or after December 15,
2008. Although it would not be required, we encourage other U.S. GAAP
filers to provide financial information in interactive data format
during the phase-in period. We also encourage foreign private issuers
that prepare their financial statements in accordance with IFRS as
issued by the IASB to provide financial information in interactive data
format during the phase-in period. In each instance, these filers'
voluntary interactive data submissions would be under the proposed
rules instead of the existing rules of the voluntary program.
[[Page 32800]]
We are proposing that filers be required to provide the same
information in interactive data format that companies have been
providing in the voluntary program,\83\ together with the following
items: The footnotes to the financial statements; any applicable
schedules to the financial statements; financial statements for
Securities Act registration statements; and document and entity
identifier tags, such as company name and public float. As was the case
in the voluntary program, the proposed requirement for interactive data
reporting is intended to be disclosure neutral. We do not intend the
rules to result in companies providing more, less, or different
disclosure for a given disclosure item depending upon the format
whether ASCII, HTML, or XBRL.
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\83\ Unlike the voluntary program, unless otherwise stated, an
interactive data file would be required to be provided with the
traditional format filing to which it relates. Companies would not
be permitted to provide the interactive data file with a Form 8-K or
6-K.
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We propose to continue requiring the existing electronic formats
now used in filings because we believe it is necessary to monitor the
usefulness of interactive data reporting to investors and the cost and
ease of providing interactive data before attempting further
integration of the interactive data format. However, the proposed rules
would treat viewable interactive data as displayed through software
available on the Commission's Web site, and interactive data
generally,\84\ as part of the official filing, instead of a supplement
as is the case in the voluntary program. Further evaluation will be
useful with respect to the availability of inexpensive, sophisticated
interactive data viewers. Currently there are many software providers
and financial printers that are developing interactive data viewers. We
anticipate that these will become widely available and increasingly
useful to investors.
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\84\ As further discussed below in Part II.C, interactive data
generally would be deemed not filed for purposes of specified
liability provisions.
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We expect that the open standard feature of XBRL format will
facilitate the development of applications and software, and that some
of these applications may be made available to the public for free or
at a relatively low cost. The expected continued improvement in this
software would give the public increasingly useful ways to view and
analyze company financial information. After evaluating the use of the
new interactive data technologies, software, and lists of tags, we may
consider proposing rules to eliminate financial statement reporting in
ASCII or HTML format. Or we may consider proposing rules to require a
filing format that integrates ASCII or HTML with XBRL.
We believe XBRL is the appropriate interactive data format with
which to supplement ASCII and HTML. Our experience with the voluntary
program and feedback from company, audit, and software communities
point to XBRL as the appropriate open standard for the purposes of this
rule. As a derivative of the XML standard, XBRL data would be
compatible with a wide range of open source and proprietary XBRL
software applications. As discussed above, many XBRL-related products
exist for analysts, investors, public and private companies, and others
to more easily create and compare financial data; still others are in
development, and that process would likely be hastened by public
company reporting using interactive data. Comments on our 2004 concept
release and proposed rules in 2004 and 2007 generally supported
interactive data and XBRL in particular.\85\ Several other factors
support our views regarding XBRL's broad and growing acceptance,
internationally as well as in the U.S. For example, as noted above, in
addition to the use of XBRL by other U.S. agencies,\86\ several foreign
securities regulators have adopted voluntary or required XBRL financial
reporting.\87\ We understand that several U.S. public and private
companies use XBRL in connection with financial reporting or
analysis.\88\
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\85\ Release No. 33-8497 (Sept. 27, 2004) [69 FR 59111] (Concept
Release); Release No. 33-8496 (Oct. 1, 2004) [69 FR 59098]; Release
No. 33-8781 (Feb. 12, 2007) [72 FR 6676]. See, e.g., letter from
Deloitte & Touche LLP regarding the Adopting Release and letter from
PR Newswire Association LLC regarding the Concept Release. We also
note that participants in the voluntary program provided positive
feedback with respect to possible required use of XBRL. For example,
the vast majority of voluntary program participants that submitted
responses and views to a questionnaire answered in the affirmative
to the question ``Based on your experience to date, do you think it
would be advisable for the Commission to continue to explore the
feasibility and desirability of the use of interactive data on a
more widespread and, possibly, mandated basis?'' See question V.f in
the Interactive Data Voluntary Program Questionnaire available at
http://www.sec.gov/cgi-bin/XBRL--Questionnaire.
\86\ See note 49 above. Also we note CIFiR's support of XBRL as
referenced above in Part B.2
\87\ For example, such countries include Canada, China, Israel,
Japan, Korea and Thailand.
\88\ Whenever we seek comment in this release, we request that
commenters distinguish in their responses, as appropriate, between
the proposed requirements applicable to U.S. GAAP filers and those
applicable to foreign private issuers that prepare their financial
statements in accordance with IFRS as issued by the IASB, regardless
of whether our question distinguishes between or references one or
both of these types of issuers.
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Request for Comment:
Should we adopt rules that require each filer's financial
statements to be provided in interactive data format? If we do so,
should we include a phase-in period or temporary exception for detailed
tagging of the financial statement footnotes? Should schedules to the
financial statements be tagged? What are the principal factors that
should be considered in making these decisions? Is it useful to users
of financial information to continue to have, in addition to
interactive data, duplicate, human-readable financial statements in
ASCII or HTML format?
What opportunities exist to improve the display of
financial statements prepared using interactive data? For example, if
the technology is sufficiently developed, should we propose rules to
encourage or require a format that embeds interactive data tags in HTML
so that the entire set of financial statements can be viewed in a
browser? How should these affect any continued requirement to file
ASCII- or HTML-formatted financial statements? What obstacles exist to
making such improvements in the display of XBRL information?
Is it appropriate to require public companies to provide
interactive data using XBRL? Alternatively, in place of such a
requirement, should the Commission instead wait to see whether
interactive data reporting by public companies is voluntarily adopted?
Without a requirement, would the development of products for producing
and using interactive data from private and public companies meet the
needs of investors, analysts, and others who seek interactive data?
Would a large percentage of public companies provide interactive data
voluntarily, and following the same standard, if not required to do so?
If we do not adopt the proposed rules and instead wait to
see whether companies on their own expand their use of interactive
data, would such data be less comparable among companies? Is there a
``network effect,'' such that interactive data would not be useful
unless many or all filers provide their financial statements using
interactive data? Would the development of software for retail
investors to obtain and make use of such data be slowed without a
requirement that companies provide interactive data?
What advantages are there to investors having the company
responsible for preparing financial information in interactive data
format, as opposed to a model in which third parties independently
prepare the
[[Page 32801]]
information in interactive format and charge a fee for it?
Do commenters agree that compared to reports using ASCII
and HTML, interactive data would require less manually-transferred
data? If so, do commenters believe that the proposed rules would result
in less human error and therefore contribute to reduced costs?
If we require interactive data reporting and the proposed
rules result in more effective and efficient financial reporting with
reduced human error and cost, would fees charged by financial printers
or other service providers be likely reduced to reflect such lower
costs?
If we adopt rules requiring interactive data financial
reporting, is the XBRL standard the one that we should use? Are any
other standards becoming more widely used or otherwise superior to
XBRL? What would the advantages of any such other standards be over
XBRL?
Is the XBRL format for interactive data sufficiently
developed to require its use at this time with regard to both U.S. GAAP
and IFRS as issued by the IASB? If not, what indicators should we use
to determine when it has become sufficiently developed to require its
use?
Are vendors likely to develop and make commercially
available software applications or Internet products that will be able
to deliver the functionality of interactive data to retail investors?
How important is it that many different types of viewers
with varying levels of sophistication and functionality be available to
investors? In addition to the free viewer provided on the SEC Web site,
are there likely to be other such products available at low or no cost?
If we require interactive data financial reporting, what
are the principal challenges facing the eventual integration of such
reporting with the current filing formats, ASCII and HTML, so that
filing in all three formats would no longer be necessary?
B. Phase-In Under the Proposed Rules
1. Overview
The proposed rules initially would require interactive data
reporting only by domestic and foreign large accelerated filers that
use U.S. GAAP and have a worldwide public common equity float above $5
billion as of the end of their most recently completed second fiscal
quarter.\89\ If the rules are adopted by this fall, we anticipate that
the first required submissions would be for periods ending on or after
December 15, 2008. For calendar year companies, this would first apply
to their December 31, 2008 annual reports filed on Form 10-K or 20-F
and any Securities Act registration statement that contains financial
statements for a period ended on or after December 15, 2008.\90\ We are
sensitive to concerns that undue expense and burden should not
accompany the adoption of required interactive data financial
reporting. We therefore propose a 30-day grace period for each filer's
initial interactive data submission, and a 30-day grace period in year
two of each filer's interactive data reporting when its footnotes and
schedules initially would be required to be tagged in detail.\91\
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\89\ This would amount to approximately 500 companies. We
propose the end of the most recently completed second fiscal quarter
because that date is consistent with when a filer is required to
determine its status as an accelerated and large accelerated filer.
\90\ For companies with a September 30 fiscal year end, the
requirement would first apply to their December 31, 2008 quarterly
report filed on Form 10-Q and any Securities Act registration
statement that contains financial statements for a period ended on
or after December 15, 2008.
\91\ We discuss more fully at Part II.C liability related to
required submissions of interactive data in general and the
continuation of some of the limitations on liability used in the
voluntary program in particular.
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Filers under the proposed rules would be required to convert their
financial statements into an interactive data file using the list of
tags for U.S. financial statement reporting or the IFRS list of tags,
in either case as approved for use by the Commission. The submission
also would be required to include any supporting files as prescribed by
the EDGAR Filer Manual. Interactive data would be required for the
entirety of the financial statements, although tagging of the footnotes
and schedules by increasing level of detail would be phased in the
following year. We are not proposing at this time that filers be
required to provide interactive data for their Management's Discussion
and Analysis, executive compensation, or other financial, statistical
or narrative disclosure. We solicit comment, however, on the
advisability of permissible optional interactive data for financial
disclosures that are not part of the current lists of tags for U.S.
GAAP financial statement reporting and IFRS financial reporting.
We also solicit comment on the usefulness to investors of
interactive data of executive compensation and the burden such
reporting would have on companies. For example, we solicit comment on
whether the scope of interactive data available on the Executive
Compensation Reader, which we posted on our Web site on December 21,
2007, \92\ would be an appropriate level of executive compensation
data. Our requests for comment regarding interactive data and executive
compensation follow up and expand on previous requests in 2006.\93\ We
also note substantial interest in interactive disclosure of executive
compensation, for example a draft list of tags for executive
compensation that has been made available for public comment \94\ and
financial Web pages that link to our Executive Compensation Reader to
provide streamlined Internet viewers of executive compensation. We ask
detailed questions at the end of Part II.B.3.a.\95\
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\92\ See Press Release No. 2007-268 (Dec. 21, 2007).
\93\ Release No. 33-8655 (Jan. 27, 2006). Two commenters
addressed this series of questions. One commenter supported tagging
executive compensation disclosure using XBRL; the other commenter
believed it would not be helpful.
\94\ See ``Broadridge Releases Draft XBRL Proxy Statement
Taxonomy for Public Comment,'' Reuters December 4, 2007.
\95\ See Part II.B.3.a, below.
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The following tables identify the registration statements and
periodic reports that would be required to include interactive data
according to the company's filing status.\96\
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\96\ Transition reports that contain financial statements of the
type and for the periods specified also would be required to be
submitted in interactive data format under the proposed rules. Note
that these dates apply to the initial required interactive data
disclosure and that detailed tagging of the financial statement
footnotes and schedules would not be required for an additional
year, as described below in section II.B.3.a.
Domestic and Foreign Large Accelerated Registration statements
Filers Using U.S. GAAP with Worldwide containing financial
Public Common Equity Float above $5 statements for a period ending
Billion as of the End of Their Most on or after December 15, 2008,
Recently Completed Second Fiscal Form 10-Q \97\ for quarterly
Quarter. periods or Form 10-K \98\ or
20-F \99\ for annual periods
ending on or after December
15, 2008.
All Other Large Accelerated Filers Registration statements
Using U.S. GAAP. containing financial
statements for a period ending
on or after December 15, 2009,
Form 10-Q for quarterly
periods or Form 10-K or 20-F
for annual periods ending on
or after December 15, 2009.
[[Page 32802]]
All Remaining Filers Using U.S. GAAP... Registration statements
containing financial
statements for a period ending
on or after December 15, 2010,
Form 10-Q for quarterly
periods or Form 10-K or 20-F
for annual periods ending on
or after December 15, 2010.
Foreign Private Issuers with Financial Registration statements
Statements Prepared in Accordance with containing financial
IFRS as Issued By the IASB. statements for a period ending
on or after December 15, 2010
or Form 20-F for annual
periods ending on or after
December 15, 2010.
2. Companies and Filings Covered by Proposed Rules and Phase-In
The proposed rules would cover all companies reporting in either
U.S. GAAP, including smaller reporting companies and foreign private
issuers that report in U.S. GAAP or, in the case of foreign private
issuers, in accordance with IFRS as issued by the IASB.\100\ The
proposed phase-in would require domestic and foreign large accelerated
filers that report in U.S. GAAP and meet the minimum worldwide common
equity float of greater than $5 billion to provide their initial
interactive data submissions in year one of the phase-in period
discussed above. All other U.S. GAAP filers that meet the definition of
large accelerated filer would be required to provide their initial
interactive data submissions in year two of the phase-in period. All
remaining U.S. GAAP filers, including smaller reporting companies and
companies not previously subject to periodic reporting requirements,
would be required to provide their initial interactive data submissions
in year three of the phase-in period.
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\97\ 17 CFR 249.308a.
\98\ 17 CFR 249.310.
\99\ 17 CFR 249.220f.
\100\ As noted in Part I.C, however, the proposed rules would
not apply to investment companies registered under the Investment
Company Act, business development companies, or other entities that
report under the Exchange Act and prepare their financial statements
in accordance with Article 6 of Regulation S-X.
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Foreign private issuers that prepare their financial statements in
accordance with IFRS as issued by the IASB would be required to provide
their initial interactive data submissions in year three of the phase-
in period.
The additional phase-in time for all but the largest accelerated
filers is intended to permit companies to plan and implement their data
tagging with the benefit of the experience of year one filers. It also
is intended to enable us to monitor implementation and, if necessary,
make appropriate adjustments during the phase-in period. In the case of
IFRS filers, the phase-in also would provide the necessary time for
development and testing of the list of tags for IFRS financial
reporting.
Our multiyear experience with the voluntary program has helped us
understand the extent to which a filer would incur additional costs to
create and submit its existing financial disclosures in interactive
data format. Based on that experience, we believe that the process of
converting a filer's existing ASCII or HTML financial statements into
interactive data would not impose a significant burden or cost. The
voluntary program clearly demonstrated that companies can, if they
choose, tag their financial statements using currently available
software without need of outside services or consultants;
alternatively, they could rely on financial printers, consultants, and
software companies for assistance, although they would retain ultimate
responsibility for both their financial statements and their tagged
data. As discussed in more detail in the cost-benefit analysis
below,1\101\ we believe that modest first-year costs for a company
would decrease in subsequent periods, particularly once footnote
tagging is implemented. We also believe that these costs would be
justified by interactive data's benefits. As with domestic registrants,
we believe foreign private issuers that report in U.S. GAAP or prepare
their financial statements in accordance with IFRS as issued by the
IASB would be able to comply with the rules without incurring
significant costs.
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\101\ See Part V.
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We expect that smaller companies, which generally are
disproportionately affected by regulatory costs, also would be able to
provide their reports in interactive data format without undue effort
or expense. While interactive data reporting involves changes in
reporting procedures mostly in the initial reporting periods, we expect
that these changes would provide efficiencies in future periods. As a
result, there may be potential net savings to the filer, particularly
if interactive data become integrated into the filer's financial
reporting process. While we recognize that requiring interactive data
financial reporting would likely result in start-up expenses for
smaller companies, these expenses may be substantially lower than those
of larger filers, given that smaller filers tend to have simpler
financial statements than larger companies, with fewer elements and
disclosures to tag. In addition, we expect that both software and
third-party services will be available to help meet the needs of
smaller filers. We also intend that the third year phase-in for smaller
reporting companies would permit them to learn from the experience of
the earlier filers. It would also give them a longer period of time
across which to spread first-year data tagging costs.
As noted above,\102\ CIFiR has issued a Progress Report that
contains a developed proposal that the Commission phase in the
requirement that companies file financial statements using interactive
data after the satisfaction of specified preconditions relating to:
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\102\ See Part I.C above.
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Successful testing of the list of tags for U.S. financial
statement reporting;
The capacity of reporting companies to file interactive
data using the new list of tags for U.S. financial statement reporting;
and
The ability of the Commission's electronic filing system
to provide an accurate human-readable version of the interactive
data.\103\
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\103\ We are giving careful consideration to CIFiR's developed
proposal. We believe that the factors they cite as preconditions
will occur before the start of a requirement to provide interactive
data. We expect to consider the factors in connection with
determining whether to adopt the proposed interactive data
submission requirements with regard to companies that prepare their
financial statements in accordance with U.S. GAAP. We also expect to
consider the same factors for companies that prepare their financial
statements in accordance with IFRS as issued by the IASB.
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The Progress Report's developed proposal recommends that we phase
in financial statements using interactive data by requiring the largest
500 domestic registrants,\104\ as determined by the value of shares
held by unaffiliated persons, to furnish (rather than file) interactive
data for the face of their financial statements and, in block-tagged
form,\105\ the footnotes to the financial statements. The Progress
Report's developed proposal also
[[Page 32803]]
recommends that, one year after we impose this requirement on the first
group of registrants, we impose the same requirement on the remaining
domestic registrants that fall within the definition of ``large
accelerated filer.'' Finally, the Progress Report's developed proposal
recommends that, once the specified conditions have been satisfied and
the second phase-in period has been implemented, we evaluate whether
and when to require that the domestic large accelerated filers file
rather than furnish financial statements in interactive data format, as
well as the inclusion of all other reporting companies.
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\104\ The developed proposal does not address foreign companies.
We do not believe that whether a U.S. GAAP reporting company is
domestic or foreign should determine the applicability of the
proposed rules, and therefore foreign companies using U.S. GAAP
would be included in the phase-in schedule along with their domestic
counterparts. As noted, foreign private issuers that prepare their
financial statements in accordance with IFRS as issued by the IASB
also are included in the proposal, although they would not be phased
in until year three.
\105\ By ``block'' text we mean that the entire footnote or
other discrete item, such as a schedule or table, would be tagged as
an individual element.
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We have carefully considered the Committee's thoughtful developed
proposal, including the recommended phase-in of 500 initial companies
and delayed consideration of non-accelerated and other filers until
after two years. We propose a phase-in schedule similar to the one for
which the Committee calls.\106\ However, instead of waiting until after
the second year to determine whether to propose extending the
applicability of the rules to all filers, the proposed rules would
establish a phase-in for the remaining companies' required interactive
data submissions that would begin in the third year. Based on
participants' experience with the voluntary program and our
consultations with filers, software providers and filing
intermediaries, we believe the proposed rules would accelerate the
improvement and availability of inexpensive software. This, in turn,
would generate more options and assistance for non-accelerated filers,
smaller reporting companies, and foreign private issuers so that they
could become proficient in the use of interactive data without undue
burden.
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\106\ As previously noted, the proposed worldwide public float
cutoff of $5 billion would result in approximately 500 companies
subject to the proposed rules in year one.
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Although including a larger number of filers in the initial phase-
in might increase the overall commercial and analytical value of the
interactive data, which in turn would likely increase the supply of
software for analyzing and presenting interactive data to analysts and
investors, we believe the establishment of a firm schedule for all U.S.
GAAP- and IFRS-reporting companies to file their financial statements
using interactive data would serve nearly as well to stimulate the
further development of interactive data-related software and services
while also affording most companies additional time to learn from the
experience of others.
We also believe that concurrently adopting a phase-in for non-
accelerated filers, smaller reporting companies, and foreign private
issuers using IFRS as issued by the IASB would establish an appropriate
and measured timeline, which we would be able to monitor and, if
necessary, reconsider during the first two years of the phase-in.
Request for Comment:
Is the proposed schedule for implementation of interactive
data tagging appropriate?
Should we delay the first required interactive data
submissions until the second half of 2009 or later? What benefits would
there be to advancing or delaying implementation of the proposed rules?
How much lead time do large accelerated filers need to familiarize
themselves with interactive data and the process of mapping financial
statements using the list of tags for U.S. financial statement
reporting or IFRS financial reporting?
Should the initial submission required by the proposed
rules be a periodic report? If so, should it be a Form 10-Q for
domestic issuers? \107\ Would this be an easier report for companies to
prepare, or would it be best for companies to begin providing
interactive data with respect to the fiscal year end financial
statements?
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\107\ We note that when the Commission adoped the electronic
filing requirements, the first required electronic filing was a Form
10-Q rather than a registration statement or Form 10-K. Release No.
33-6977 (Feb. 23, 1993) [58 FR 14628].
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Instead of a cut-off using a worldwide public common
equity float of $5 billion at the end of the issuer's most recently
completed second fiscal quarter, would an initial phase-in including
all large accelerated filers or large accelerated filers with a smaller
public float better accomplish the goals outlined in the release? If we
use a public float, should it be $5 billion or some other amount lower
or higher than the proposed cut-off, such as $3 billion or $10 billion?
Would some other cut-off, or some other schedule be preferable? Would
it be better to measure the public float as of a time other than the
end of the issuer's most recently completed second fiscal quarter and,
if so, when?
Would the initial phase-in include enough companies to
encourage potential vendors of interactive data products and services
to invest in the development and marketing of new and improved products
and services? If not, how would such a level affect the markets for
both filer and investor products and services?
Should the phase-in schedules differ as between U.S. GAAP
non-accelerated and smaller reporting companies and foreign private
issuers that prepare their financial statements in accordance with IFRS
as issued by the IASB?
Is the proposed third-year phase-in approach for companies
other than large accelerated filers necessary or sufficient for them to
familiarize themselves with interactive data and the process of mapping
financial statements using the list of tags for U.S. financial
statement reporting or IFRS financial reporting?
Is the proposed third-year phase-in sufficient for smaller
reporting companies and foreign private issuers to allocate the
necessary resources and meet the proposed requirements, or would a more
delayed schedule be appropriate?
Should smaller reporting companies and foreign private
issuers reporting in U.S. GAAP be subject to the proposed rules at all?
Should compliance with the proposed rules be solely voluntary for
smaller reporting companies or foreign private issuers reporting in
U.S. GAAP?
Would requiring interactive data from foreign private
issuers reporting in U.S. GAAP create a disincentive for these issuers
to use U.S. GAAP in preparing their financial statements? Is this
offset by the proposed requirement that foreign private issuers
reporting in IFRS as issued by the IASB use interactive data within
three years? Should the requirements extend only to foreign private
issuers reporting in U.S. GAAP that file on domestic forms?
Should foreign private issuers that prepare their
financial statements in accordance with IFRS as issued by the IASB be
subject to the new rules, as proposed? Should the proposed rules also
apply to foreign private issuers that prepare their financial
statements in their local GAAP and reconcile to U.S. GAAP for Exchange
Act reporting purposes if their home jurisdictions have developed
interactive data reporting programs? Would the proposed rules' current
exclusion of such issuers create a disincentive for foreign private
issuers to use IFRS as issued by the IASB for their Exchange Act
reporting?
Are there extra burdens that foreign private issuers
reporting in U.S. GAAP or IFRS as issued by the IASB would incur under
the proposed rules? Do any such burdens necessitate a one year or other
delay in the proposed phase-in requirement as and when it otherwise
would apply to them?
Do foreign private issuers using foreign filing agents
have comparable or
[[Page 32804]]
sufficient access to interactive data software and support services?
Should the proposed new rules apply to a Canadian issuer's
financial statements prepared in accordance with U.S. GAAP and filed
with the Commission under cover of Form 40-F? \108\ Should the proposed
new rules apply to a Canadian issuer's registered offering on Form F-9
\109\ or F-10, or any other forms available under the
Multijurisdictional Disclosure System? \110\
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\108\ 17 CFR 249.240f. Certain Canadian foreign private issuers
file registration statements and annual reports under the
Multijurisdictional Disclosure System, which permits eligible
Canadian companies to use their disclosure documents prepared in
accordance with Canadian requirements in filings with the
Commission.
\109\ 17 CFR 239.39.
\110\ 17 CFR 239.40.
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Should we permit or require foreign private issuers filing
their annual financial statements using U.S. GAAP also to provide in
interactive data format any interim financial information that they
furnish on Form 6-K? If so, what factors should we consider in
determining whether to require or permit such submissions? Should such
a requirement be phased in? What are the answers to these questions if
the foreign private issuer uses IFRS as issued by the IASB?
Should investment companies registered under the
Investment Company Act, business development companies or other
entities that report under the Exchange Act and prepare their financial
statements in accordance with Article 6 of Regulation S-X be subject to
the proposed rules? Is the current investment management list of tags
sufficiently developed for required use by these companies?
The Commission recently proposed to accelerate the filing
deadline for annual reports filed on Form 20-F by foreign private
issuers under the Exchange Act by shortening the filing deadline from 6
months to within 90 days after the foreign private issuer's fiscal
year-end in the case of large accelerated and accelerated filers, and
to within 120 days after a foreign private issuer's fiscal year-end for
all other issuers, after a two-year transition period.\111\ In light of
this rule proposal, should we lengthen the proposed phase-in deadlines
for foreign private issuers, for example, by one year if the issuer is
not a large accelerated filer?
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\111\ Release No. 33-8900 (Feb. 29, 2008) [73 FR 13404].
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3. Documents and Information Covered by the Proposed Rules
a. Financial Statements and Financial Statement Schedules
The proposed rules would require interactive data tagging of a
filer's complete financial statements and any required financial
statement schedules.\112\ As with the voluntary program, the proposed
rules would require companies to provide the interactive data in an
exhibit. Interactive data would be required for all periods included in
the filer's financial statements. The proposed rules would not,
however, require interactive data submissions for other financial
statements that may be required of filers, including those provided
pursuant to Rules 3-05, 3-09, 3-10, 3-14, and 3-16 of Regulation S-
X.\113\
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\112\ As previously noted, proposed Rule 405 of Regulation S-T
would directly set forth the basic tagging requirements and
indirectly set forth the rest of the tagging requirements through
the requirement to comply with the EDGAR Filer Manual. Consistent
with proposed Rule 405, the EDGAR Filer Manual would contain the
detailed tagging requirements.
\113\ 17 CFR 210.3-05, 17 CFR 210.3-09, 17 CFR 210.3-10, 17 CFR
210.3-14, 17 CFR 210.3-16.
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As with the voluntary program, the proposed rules would require
that the line item descriptions and amounts presented on the face of
the financial statements in the traditional format filing be the same
as in the interactive data format. Also, the rules would prohibit
partial presentation of face financial statements in interactive data
format. For example, excluding comparative financial information for
prior periods would not be permitted. Unlike the voluntary program, our
proposed rules require companies using U.S. GAAP or foreign private
issuers using IFRS as issued by the IASB to provide tagged data for the
footnotes and schedules to the financial statements. At the time of our
adopting release for the voluntary program in 2005, we stated that we
recognized technical issues made it difficult to tag the notes to the
financial statements. We did, however, provide volunteers with the
option of tagging the notes to the financial statements.\114\ Since the
time of the adopting release, the necessary list of tags has been
completed and the available software has advanced sufficiently to
require that the financial statement footnotes and schedules be
included in the proposed rules.
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\114\ See section II.E. of Securities Act Release No. 8529
(February 3, 2005) [70 FR 6556, 6559].
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The voluntary program adopting release recommended that if
participants voluntarily provided footnotes in interactive data format,
then they should provide enough detail so that the tagging would be of
practical value to users. The release stated that a single tag for the
entire group of footnotes in a filing would cover too much information
to be useful to the user. We still believe that one tag for the entire
group of footnotes would be confusing and provide little benefit.
Tagging each footnote separately, however, would allow users the
ability to compare footnote disclosure between periods and across
filers while minimizing the burden on preparers. We are therefore
proposing that the footnote disclosures in the traditional format
filing be the same as in the interactive data format. This would be
accomplished by tagging the footnotes using four different levels of
detail:
(i) Each complete footnote tagged as a single block of text;
(ii) Each significant accounting policy within the significant
accounting policies footnote tagged as a single block of text;
(iii) Each table within each footnote tagged as a separate block of
text; and
(iv) Within each footnote, each amount (i.e., monetary value,
percentage, and number) separately tagged and each narrative disclosure
required to be disclosed by U.S. GAAP (or IFRS as issued by the IASB,
if applicable), and Commission regulations separately tagged.
To allow filers time to become familiar with tagging footnotes, we
are proposing that in each filer's first year of interactive data
reporting only level (i) would be required. All four levels would be
required starting one year from the filer's initial required submission
in interactive data. In year two, when a filer would first be required
to tag its footnotes and schedules using multiple levels of detail, the
filer would be given an additional 30 days beyond the due date or
filing date of its report or registration statement to file the
interactive data exhibit. Subsequent interactive data exhibits using
all of the levels would be required at the same time as the rest of the
related report or registration statement. We believe the one-time 30-
day grace period would help a filer comply with the more detailed
tagging requirements.
We propose requiring these various levels of detailed tagging for
the financial statement footnotes after considering the range of needs
of investors, analysts, and other consumers of financial information.
We believe the block-text tagging required under levels (i) through
(iii) would satisfy the need of those who desire disclosures within the
context of an entire footnote or an entire table. The detail tagging of
[[Page 32805]]
individual amounts and narrative disclosures within the footnotes
required under level (iv) would satisfy the need of those who desire to
analyze specific pieces of information or data.
The requirement that in the second year a filer tag separate each
amount within a footnote (i.e., monetary value, percentage, and number)
and each narrative disclosure required to be disclosed by U.S. GAAP (or
IFRS as issued by the IASB, if applicable), and Commission regulations
should not affect a filer's decisions regarding what to disclose in its
traditional format filing. We are aware of questions as to whether the
contextual information or data elements chosen from the standard list
of tags could potentially reveal information that the rest of the
related registration statement or periodic report would not otherwise
make known. However, we do not believe that the contextual information
or data elements chosen should provide any additional substantive
disclosure.
To clarify the intent of the rules, we propose to include an
instruction to proposed Rule 405 of Regulation S-T stating that the
rules require a disclosure format, but do not change substantive
disclosure requirements. The rules also would state clearly that the
information in interactive data format should not be more or less than
the information in the ASCII or HTML part of the related registration
statement or report.
In connection with their annual and transition reporting on Forms
10-K or 20-F, filers may be required under existing financial reporting
requirements to include certain supplementary financial statement
schedules with their financial statements. The form and content of
these schedules are governed by Article 12 of Regulation S-X.\115\ The
list of tags for U.S. financial statement reporting enables companies
to tag individual facts in these financial statement schedules, or to
block tag each entire schedule.
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\115\ See Rules 5-04 and 7-05 of Regulation S-X and Items 17 and
18 of Form 20-F.
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We propose that filers also be required to include with their
interactive data any financial statement schedules prescribed by
Article 12 of Regulation S-X. These financial statement schedules would
be tagged using two different levels of detail; only the first level
would be required in the first year. Both levels would be required
starting one year from the filer's initial required submission in
interactive data format. Similar in concept to the tagging approach
proposed for the financial statement footnotes, the required levels of
detail would be: (i) Each complete financial statement schedule tagged
as a block of text; and (ii) each amount (i.e., monetary value,
percentage, and number) separately tagged and each narrative disclosure
required to be disclosed by Commission regulations separately tagged.
A filer may revise its previously filed financial statements for a
variety of reasons, such as the retrospective application of a new
accounting principle or the correction of an error. Our proposed rules
would require a filer to provide revised interactive data at the same
time it files the revised financial statements with the traditional
format filing.\116\ Under the proposed rules, filers also would be
required to provide interactive data for transition reports on Forms
10-Q, 10-K, or 20-F.
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\116\ Revised interactive data would be required so that the
financial information would be the same in both the traditional
format filing and the interactive data file. If the financial
statements are not revised in connection with an amended
registration statement, periodic report, or transition report, the
exhibit index would indicate that the interactive data file was
already provided.
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Request for Comment:
Are the proposed four levels of detail appropriate for
footnote tagging? What alternative footnote disclosure items or
criteria do commenters recommend we establish for tagging footnotes?
Why would those be more appropriate than what we propose?
Should we require all four levels for footnotes in the
first year instead of using the phase-in approach for the more detailed
tagging? Should detailed tagging of a filer's footnotes and schedules
not be required until more than one year after its initial interactive
data submission, for example, in year three or four?
Are the proposed two levels of detail appropriate for
financial statement schedule tagging? If not, what alternatives would
be more appropriate?
Should we require both levels for financial statement
schedules in the first year instead of using the phase-in approach for
more detailed tagging?
Is the most detailed level of tagging too prescriptive, or
is it too broad? Would it help to achieve comparability among filers?
Would it impose an unnecessary burden on filers in preparing their XBRL
data compared to the potential benefit to consumers of data? What
problems or obstacles may be encountered in applying the proposed
requirement?
Would the most detailed level of tagging result in the
creation of a high number of company-specific extensions? If so, would
the additional effort needed to create new extensions diminish once a
filer has tagged at this level of detail? Should the tagging
requirement instead be only to require detailed tagging to the extent a
standard tag already exists in the standard list of tags?
Does the proposed rule provide adequate and effective
guidance on how to tag information in the footnotes to the financial
statements? For example, would it be feasible for companies to identify
the narrative disclosure required by U.S. GAAP or IFRS as issued by the
IASB that needs to be tagged separately? Should it be more principles-
based? If so, what should those principles be?
Do the standards we propose for tagging provide clear
enough guidance for preparers so that we can expect to achieve
consistency among filers?
Should schedules to the financial statements be omitted
from our proposed rule? If so, why?
What additional costs and burdens would there be with
detailed tagging of the financial statement footnotes and financial
statement schedules as opposed to ``block'' tagging?
Would investors and other users of tagged data benefit
from the tagging of individual amounts (i.e., monetary values,
percentages, and numbers) and narrative disclosures within each
footnote together with block text?
Should we require that filers reporting in U.S. GAAP, or
in IFRS as issued by the IASB, tag their document and entity \117\
information? Would this information be useful in interactive data
format?
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\117\ See footnote 70 above.
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Is it reasonable to expect that requiring interactive
data-formatted financial statements in general or footnotes in
particular will not change the discretionary content that companies
provide in the traditional format filing? Would the availability of
tagged data possibly cause competitive pressures on filers to choose to
make more disclosures that are permissible, encouraged, or otherwise
not required by Commission regulations? Alternatively, might the
availability of tagged data possibly cause filers to choose to curtail
such disclosures? What types of disclosures would those be?
Should transition reports not be subject to the proposed
rules? If not, why not?
Would users of financial information find tagged financial
statement schedules useful for analytical purposes?
Should the proposed rules require interactive data
submissions for a filer's
[[Page 32806]]
financial information provided under Forms 8-K and 6-K, such as
earnings releases or interim financial information? If so, what level
of tagging detail would be appropriate, and would a reasonable grace
period from the date of the Form 8-K or 6-K to the deadline for
interactive data (e.g., one, three, or five days) address concerns that
filers require additional time to provide interactive data for such
financial information? Does financial information provided under Form
8-K or 6-K, such as earnings releases, present additional burdens
compared to other forms that would warrant excluding them from the
proposed rules?
Should the proposed rules require interactive data
submissions for other financial statements that may be provided by
filers, including those provided pursuant to Rules 3-05, 3-09, 3-10, 3-
14 and 3-16 of Regulation S-X? If so, how should a requirement be
phased in?
Should we provide an opportunity for non-investment
company issuers to submit voluntarily interactive data format
information other than that which they would be required to submit as
interactive data? If so, should we permit such interactive data format
information to be subject to provisions governing the proposed required
filing of interactive data? Should we instead permit such interactive
data format information to be submitted under a modified voluntary
program that would apply to such information in a manner similar to the
way it applies to XBRL-Related Documents under the current voluntary
program?
Should we require or permit interactive data submissions
for executive compensation? Would interactive data of executive
compensation be useful to investors? Approximately how much additional
cost would interactive reporting of executive compensation require of
companies?
If we were to require or permit interactive data for
executive compensation, should all narrative and numerical disclosure
required in the traditional electronic filing \118\ be required in
interactive data format? If we were to require only a subset of the
required disclosure, what subset should be required? For example, would
it be appropriate to required tagging of only the Summary Compensation
Table and other tables as applicable? Would it present an accurate
picture of the compensation? How should an interactive data requirement
for executive compensation treat the footnotes and narrative
disclosure?
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\118\ See Item 402 of Regulation S-K, 17 CFR 229.402.
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If we were to require or permit interactive data for
executive compensation, should we require the same data provided by the
Executive Compensation Reader currently available on our Web site?
\119\
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\119\ The Executive Compensation Reader displays the Summary
Compensation Table disclosure of 500 large companies that followed
the new executive compensation rules in reporting 2006 compensation
information in their proxy statements filed with the Commission. By
using the reader, an investor can view amounts included in the
Summary Compensation Table Stock Awards and Option Awards columns
based on either the full grant date fair value of the awards granted
during the fiscal year, or the compensation cost of awards
recognized for financial statement reporting purposes with respect
to the fiscal year, and recalculate the Total Compensation column
accordingly.
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If we were to require or permit interactive data for
executive compensation, should the interactive data be filed with the
proxy statement, which often contains the executive compensation
disclosure, or as an amendment to the Form 10-K, which often
incorporates the executive compensation disclosure by reference? \120\
Would it diminish significantly the value to investors if interactive
data for executive compensation were not required to be submitted
until, for example, 30 or 45 days after it was required to be submitted
in traditional format? If there were such a 30- or 45-day delay in the
requirement, would it be advisable to permit the delayed submission to
be made in an exhibit to a Form 8-K or to an amendment on Form 10-K?
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\120\ General Instruction G.3. to Form 10-K.
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How should a requirement to provide interactive data for
executive compensation apply to foreign private issuers? \121\
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\121\ Item 6.B of Form 20-F.
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Should we require or permit interactive data submissions
for other financial, statistical or narrative disclosure, such as
beneficial ownership of management and five percent or greater
shareholders or tabular disclosure of contractual obligations? \122\
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\122\ 17 CFR 229.403, 17 CFR 229.303(a)(5).
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b. Registration Statements Covered by the Proposed Rules
We are proposing that, subject to the phase-in period described
above, all registration statements filed under the Securities Act,
including initial public offerings, be required to include interactive
data when financial statements are included directly in the
registration statement, rather than being incorporated by reference.
This would include all periods included in the registration statement
as required by Regulation S-X and our rules. We believe analysts,
investors, the public, and others would benefit from the enhanced
ability of interactive data to locate and compare financial data
included in registration statements. Under the proposed rules,
interactive data would be required for the acquiring company, the
filer, but not for the company being acquired, in the context of a
business combination. The additional burden of configuring disclosure
from traditional electronic format into interactive data format in the
context of a registered offering is not anticipated to significantly
add to the time or expense of companies filing registration
statements.\123\
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\123\ As noted above, if an amended registration statement is
filed that does not involve any change in the financial statements,
the interactive data exhibit would not be required to be re-filed.
The exhibit index would simply note that the exhibit had already
been filed.
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Request for Comment:
Should registration statement financial information be
subject to the new rules, as proposed? In particular, should
registrants making initial public offerings in year three (and later
years) of the phase-in period be required to provide interactive data
if, as would be typical, they were not already required to file
periodic reports subject to the requirement to submit an interactive
data exhibit? \124\ Should we permit rather than require interactive
data to be provided in initial public offerings or other registration
statements?
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\124\ An issuer might already be required to submit periodic
reports subject to the requirement to submit an interactive data
exhibit without ever having made an initial public offering
registered under the Securities Act. An issuer could be in that
position, even during year one of the phase-in, for example, if the
issuer became publicly held as a result of the type of spin-off
Staff Legal Bulletin No. 4 (Sept. 16, 1997) describes as not
requiring registration under the Securities Act.
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If we require interactive data, should the proposed rules
apply to registration statement financial information based on the size
of the registrant (for example, distinguishing between large
accelerated filers and smaller reporting companies)?
Should the proposed rules require filers to include
interactive data with respect to all filings of the registration
statement when the registration statement is filed multiple times due
to amendments? If not, which filings of the registration statement
should be subject to the interactive data submission requirement?
Should we, for example, limit the Securities Act filings that would
require interactive data to those that contain a preliminary prospectus
that is circulated? \125\ Should the
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proposed rules apply to a final prospectus supplement filed under
Securities Act Rule 424? \126\ If we require interactive data with
filings that do not currently include exhibits, such as final
prospectuses, should we require that the interactive data be provided
as schedules or exhibits? Once interactive data are provided with a
registration statement, should we limit the requirement to provide
interactive data for amendments to only the amendments that reflect
substantive changes from or additions to the financial information?
Would revising interactive data that previously were provided in
connection with a registration to reflect changes to the registration
statement involve much burden?
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\125\ The instruction to Item 501(b)(3) of Regulation S-K [17
CFR 229.501(b)(3)] addresses disclosure requirements applicable to
specified circulated preliminary prospectuses.
\126\ 17 CFR 230.424. Currently, Rule 424 prospectuses do not
have a provision for exhibits, so additional EDGAR programming would
be needed.
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Should interactive data be required only in connection
with initial public offering registration statements under the
Securities Act, rather than, as proposed, all Securities Act
registration statements?
In a registration statement on Form S-4 or F-4, or proxy
statement relating to a proposed merger, should interactive data be
required for the company being acquired as well as the acquiring
company? Should interactive data of the company being acquired be
required only if that company already is subject to interactive data
reporting under the proposed rules?
Should we also require interactive data to be provided in
connection with Exchange Act registration statements on Form 10 and
Form 20-F?
4. Initial Filing Grace Period
As noted above, interactive data would be required at the same time
as the rest of the filing to which it relates. Each company's initial
interactive data submission, however, would be permitted as an
amendment to a registration statement within 30 days of the date of
filing or as an amendment to Form 10-K, 20-F, or 10-Q within 30 days of
the due date for filing of the rest of the related report. In addition,
as discussed above in Part II.B.3.a, in year two when a filer would
first be required to tag its footnotes and schedules using all levels
of detail, the interactive data exhibit would be required within 30
days of the due date or filing date of the related report or
registration statement, as applicable.
Currently in the voluntary program, filers may provide the
interactive data at the time of filing or at any later time, without a
deadline.\127\ We believe that, consistent with our view regarding the
value of widespread market use of the interactive data, companies
should be required to provide the interactive data at the time the
registration statement or report is required to be filed. We do not
believe this timing requirement would place undue pressure on filers.
We believe, for example, based on our experience with the voluntary
program, that the time period for the quarterly or annual report is
sufficient for filers to convert their ASCII or HTML financial
statements into interactive data format.
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\127\ The voluntary program permits filers to provide the
initial and any such restated financial information in interactive
data format using Form 8-K. The proposed rules, however, would
require that interactive data be provided as an exhibit to the
filing itself, including any restated Forms 10-K, 10-Q, or 20-F.
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Request for Comment:
Should we permit interactive data information to be
provided later than the related filing for the first year, rather than
just the first filing? Should we provide a grace period for the first
filing as to which the issuer is required to tag financial statement
footnotes in detail? Is a grace period not needed?
Should any grace period either for the first filing or for
subsequent filings be for fewer or more than 30 days, such as five, 20
or 45 days? What would the impact of a grace period be on the
usefulness of interactive data?
5. Web Site Posting of Interactive Data
We believe interactive data, consistent with our proposed rules,
should be easily accessible for all investors and other market
participants. As such disclosure becomes more widely available,
advances in interactive data software, online viewers, search engines
and other Web tools may in turn facilitate access and usability of the
data. Encouraging widespread accessibility to filers' financial
information furthers our mission to promote fair, orderly, and
efficient markets, and facilitate capital formation. We believe Web
site availability of the interactive data would encourage its
widespread dissemination, thereby contributing to lower access costs
for users. We therefore propose that each filer covered by the proposed
rules be required to provide the same interactive data on its corporate
Web site, if it has one, that would be required to be provided to the
Commission on the earlier of the day it filed or was required to file
the related registration statement or report, as applicable.\128\
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\128\ Proposed Rule 405 would contain the Web site posting
requirement. We also propose to provide, however, that Web site
posting of the interactive data would not be required until the end
of any applicable grace period that would apply to the submission of
the interactive data to the Commission. Similarly, we propose to
provide that Web site posting of the interactive data would not be
required before submission of the interactive data when submission
of the data is delayed in accordance with and during the term of any
applicable hardship exemption provided under Rule 201 or 202 as
proposed to be revised. Proposed revisions to Rules 201 and 202 are
more fully discussed below in Part II.E.
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We believe access to the interactive data on corporate Web sites
would enable search engines and other data aggregators to more quickly
and cheaply aggregate the data and make them available to investors
because the data would be available directly from the filer, instead of
through third-party sources that may charge a fee. To help further our
goals of decreasing user cost and increasing availability, we do not
propose to allow companies to comply with the Web posting requirement
by including a hyperlink to the documents available electronically on
the Commission's Web site.
We believe this requirement would be consistent with the increasing
role that corporate Web sites perform in supplementing the information
filed electronically with the Commission by delivering financial and
other disclosure directly to investors. For example, we note that since
2003 issuers with corporate Web sites have been required to post on
their Web sites beneficial ownership reports filed with respect to
their securities on Forms 3, 4, and 5 under Section 16(a) of the
Exchange Act.\129\ We also note that many companies provide on their
Web sites access to their periodic reports, proxy statements, and other
Commission filings.\130\ This proposal would expand such Web site
posting by requiring companies with Web sites to post their interactive
data as well.\131\
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\129\ Section 16(a)(4)(C) [15 U.S.C. 78p(a)(4)(C)], Rule 16a-
3(k) [17 CFR 240.16a-3(k)].
\130\ Companies filing registration statements and accelerated
filers and large accelerated filers in their periodic reports are
required to disclose whether or not they make available free of
charge on or through their Web site, if they have one, their annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, and amendments to those reports. Companies that do not
make their reports available in that manner also must disclose the
reasons they do not do so and whether they voluntarily provide
electronic or paper copies of their filings free of charge upon
request. See Item 101(e) of Regulation S-K.
\131\ As further discussed in Part II.E, we propose that a
company that failed to post its interactive data as required would
be deemed ineligible to use short form registration Forms S-3, S-8,
and F-3 and would be deemed not to have adequate public information
available for purposes of Rule 144(c)(1) unless and until it posted.
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