On June 28, 2018, the Securities and Exchange Commission (the “SEC") adopted a final rule, Inline XBRL Filing of Tagged Data, which substantially alters requirements related to the use of the eXentsible Business Reporting Language (“XBRL") format in operating companies' financial statement information and funds' risk/return summary information. The rule was published in the Federal Register on August 16, 2018, available here, and will be effective on September 17, 2018.
XBRL is a standard for tagging business and financial reports that is intended to increase the transparency and accessibility of business information by using a uniform, machine-readable format. SEC rules adopted in 2009 required companies to provide the information from certain registration statements and periodic reports in XBRL format by submitting Interactive Data Files (the machine-readable computer code that presents information in XBRL format) to the SEC as exhibits and posting them on corporate websites. Similar rules were adopted for the risk/return summary information required of funds. The SEC's new rules will substantially change the requirements in this area. The changes are intended to make this information both human- and computer-readable, to increase its usefulness, timeliness and accuracy, and, over time, to lower the preparation costs for submitting the data to the SEC.
A summary of the significant changes is set forth below and the full text of the SEC's adopting release is available here.
New Requirement to Embed XBRL Data
Format Requirement Changes. Once the new requirements take effect (see phase-in schedule below), XBRL data will no longer be filed as a separate exhibit to an operating company's financial statement information or a fund's risk/return summary information filed in HTML on EDGAR. Instead, XBRL data will be “Inline"—that is, embedded or tagged with financial statement information in HTML wherever it appears. To see an example of what this will look like, filers may look to the Inline XBRL filings made by Lennar Corporation and Workiva Inc., two companies that have voluntarily moved forward with Inline XBRL. For Inline XBRL filings, the bar at the top of the browser window has a number of different viewing and filtering options for users.
Filers should note that this change does not entirely eliminate the use of Interactive Data Files. Currently, Interactive Data Files consist of: (1) an instance document (usually listed as the “XBRL Instance Document" in an EDGAR filing index) containing the XBRL tags, and (2) one or more other documents (beginning with “XBRL Taxonomy Extension" in an EDGAR filing index) containing contextual information about those XBRL tags. Under the final rule, the instance document will no longer be filed as an exhibit, but will instead be submitted as Inline XBRL. The other documents containing contextual information about the XBRL will still be filed as exhibits.
Compliance Deadlines. While the final rule, and the associated amendments to Rule 405 of Regulation S-T and other relevant rules, have an effective date of September 17, 2018, the requirement to use Inline XBRL will be phased in over the next three years according to each filer's relevant category. Operating companies will need to provide Inline XBRL in their first Form 10-Q for a fiscal period that ends on or after the applicable compliance date, as summarized below:
|Large accelerated filers with GAAP financials||June 15, 2019|
|Accelerated filers with GAAP financials||June 15, 2020|
|All other filers||June 15, 2021|
For funds subject to risk/return summary XBRL requirements, these requirements apply to any initial registration statement or post-effective amendment annually updating an effective registration statement that becomes effective on or after the date that is either two years or three years after the effective date of the final rule (depending on the size of the fund).
Early Adoption. Filers may opt to begin using Inline XBRL prior to the applicable compliance deadline. While the EDGAR system is equipped to accept submissions in XBRL for certain forms, the SEC expects that it will not be capable of accepting all forms until approximately March 2019. Until such time as a filer begins to use Inline XBRL (either as a result of voluntary early adoption or compliance with the mandatory applicable deadline), the filer must continue to submit the entire Interactive Data File as an exhibit to its filings.
New Risks. Filers should be aware that the use of Inline XBRL poses the new risk that validation errors related to XBRL will result in an entire filing being rejected from EDGAR instead of only an exhibit. For its first filing complying with the new rules, filers should allocate sufficient time before their filing deadline to both test the submission with EDGAR and to correct any potential errors.
Interactive Data Files on Websites
Posting Requirement Removed. The requirement to post Interactive Data Files for financial statement information and for risk/return summary information on a filer's website will cease to exist once the amendments to Rule 405 of Regulation S-T go into effect on September 17, 2018.
Impact on Past Postings Not Addressed. It is not entirely clear what the rule's impact is on prior Interactive Data Files posted to corporate websites. The pre-amendment version of Rule 405(g) of Regulation S-T requires companies to keep Interactive Data Files posted for at least 12 months. The provisions regarding posting of Interactive Data Files to company websites will be completely eliminated by the amendments to Rule 405 of Regulation S-T, and the release states that the posting requirements for Interactive Data File financial statement information “and related provisions will be eliminated." However, the final rule does not explicitly address prior postings of Interactive Data Files.
In the absence of guidance from the SEC, it would be prudent to simply leave the Interactive Data Files already posted on the corporate website through each files' applicable 12-month period. Note that, for many companies, these Interactive Data Files are traditionally kept up on the website well beyond the 12-month requirement. Given that maintenance of this portion of a corporate website is often handled by a third party (e.g., Equisolve), filers may find that leaving the files posted may also be the easiest approach.
Technical Revisions to Cover Pages
The cover pages for various SEC forms, including annual reports on Form 10-K and quarterly reports on Form 10-Q, will be modified by the final rule to eliminate references to “posting" Interactive Data Files. These changes will also go into effect on September 17, 2018.
The revision will read as follows:
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Filers should note that the timing of this change will coincide with the cover page change prompted by the change to the definition of “Smaller Reporting Company," as further described in our blog post here.
15-Business Day XBRL Filing Period for Funds. The final rule eliminates the 15-business day XBRL filing period for fund risk/return summaries. Funds will now be required to file XBRL either concurrently with certain filings or within a shorter timeframe, as detailed in the adopting release.
Voluntary Program for Submitting Financial Statement Information Interactive Data. The final rule also eliminates a voluntary program that permitted investment companies and certain other entities to submit XBRL form financial information voluntarily as exhibits to Investment Company Act filings or periodic reports. The elimination goes into effect as of the effective date of the final rule.
For more information regarding these changes, particularly for funds, filers should review the adopting release.
What Did Not Change
The SEC noted in the adopting release that several requirements related to XBRL data remain in force. In particular, the SEC did not:
- change filer categories;
- impose additional XBRL validation requirements;
- change officer certification or auditor assurance requirements (though filers are permitted to include footnotes in their financial statements that discuss the auditor's involvement with the financial statement information XBRL data);
- change the timing for submitting financial statement information XBRL data; or
- change the scope of the disclosures subject to XBRL requirements.
Operating Company Implementation Timeline
The bullet points below summarize the relevant milestones leading up to implementation of Inline XBRL for operating companies:
- The Final Rule Becomes Effective September 17, 2018
- Company no longer required to post Interactive Data Files to website
- Company's SEC filing cover pages will change to reflect new wording
- Company will still be required to file its entire Interactive Data File as an exhibit to its applicable filings (unless it chooses to voluntarily adopt Inline XBRL early)
- First Form 10-Q filing for a fiscal period ending on or after June 15, 2019 (large accelerated filers using GAAP), June 15, 2020 (accelerated filers using GAAP), or June 15, 2021 (all other filers)
- Company's Form 10-Q will need to comply with Inline XBRL requirements
- Company no longer required to file its entire Interactive Data File as an exhibit to its applicable filings, but still required to file those portions of the Interactive Data File that contain contextual information about the XBRL embedded in the filing
Special thanks to Lauren Assaf in Orange County for her work in preparing this summary.
 Reference to a “fund" or “funds" mirrors the use in the adopting release, which includes open-end management investment companies, such as exchange-traded funds organized as open-end management investing companies.
 Under the Administrative Procedure Act, in most cases, a rule published by an agency such as the SEC will not be effective until 30 days after its publication in the Federal Register. 30 days from August 16, 2018 is Saturday, September 15, 2018. Where, like here, the date of effectiveness would fall on a weekend or holiday, the rule is effective as of the next Federal business day. See 1 C.F.R. § 18.17(b).