On June 28, the SEC adopted rule amendments that require operating companies to submit financial statements in a new reporting format – Inline XBRL. The requirements will be phased-in by company size from 2019 to 2021, as follows:
Tier 1: Large accelerated filers that use US GAAP (starting with fiscal periods ending on or after June 15, 2019)
Tier 2: Accelerated filers that use US GAAP (starting with fiscal periods ending on or after June 15, 2020)
Tier 3: All others – which includes all IFRS filers (starting with fiscal periods ending on or after June 15, 2021)
According to the SEC, filers will be required to comply beginning with their first Form 10-Q filed for a fiscal period ending on or after the applicable compliance date.
The SEC also adopted a final rule to change the Smaller Reporting Company definition from $75 million to $250 million (public float). This change will increase the number of companies that qualify as an SRC for the final phase-in group.
It was in 2009 that the SEC first mandated XBRL filings. In 2016, the SEC allowed Inline XBRL on a voluntary basis. The SEC has now mandated Inline XBRL going forward.
What is Inline XBRL?
Inline XBRL is a format which combines the traditional human-readable HTML financial statements with the computer-readable XBRL tagged data. With Inline XBRL, the XBRL tags are embedded directly into the HTML document. The result is when reading the traditional financial statements, a reader can click on a tagged item to see the XBRL information, and likewise, a consumer of the XBRL data can easily locate the source of the information in the traditional financials. The result is a single document that combines the benefits of both HTML and XBRL, and can be consumed by either a human or a machine.
To learn more about Inline XBRL and see samples, read the SEC’s highlights.
What does this mean for SEC filers?
With Inline XBRL, the amount of work to create and update the XBRL files is generally the same as the previous XBRL requirement, since the same items need to be tagged. However, the presentation of the XBRL data is significantly different. When viewing Inline XBRL, the XBRL rendering consists of the traditional HTML financials, which are pleasing to the eye, but with the ability to see all the XBRL information embedded into the traditional face financials and footnotes as well.
Also for SEC filers, using Inline XBRL means that instead of submitting the HTML document separately from the XBRL instance document, the two are combined into a single document that is submitted to the SEC. The HTML financials and the XBRL financials are providing the same information, so it makes sense that they be combined into one document.
The SEC has stepped up its efforts to modernize their EDGAR system. This requirement for mandating Inline XBRL is the next logical step for the SEC’s advancement in creating a more progressive way to provide and consume financial information.