SEC Adopts Proposed Rules Requiring Financial Statements to Be Filed in XBRL Format and Extends Timetable for Compliance

On December 17, 2008, the U.S. Securities and Exchange Commission (SEC) adopted rules that require companies to provide financial statement information in periodic reports and registration statements in an interactive data format using the eXtensible Business Reporting Language (XBRL). The SEC also extended the time for implementation that was set forth in the proposing release¹ by six months for the first group of filers. The rules are intended to eliminate manual data re-entry and make it easier and more cost-effective for analysts, investors, and others to search and analyze financial information across companies, reporting periods, and industries.

Revised Timetable for Compliance
The SEC extended the original timetable that was set out in the proposing release for the first group of filers as follows:

Phase 1 — June 15, 2009 (U.S. GAAP filers with a float of more than $5 billion)
In the first phase, domestic and foreign large accelerated filers that use U.S. GAAP and have a worldwide public common equity float of more than $5 billion will provide a new exhibit to their periodic reports, registration statements, and transition reports that contains their financial statements and financial schedules in the XBRL format. The requirement will apply beginning with the first 10-Q or annual report on Form 20-F or 40-F for fiscal periods ending on or after June 15, 2009. For calendar year companies, the requirement will apply to the Form 10-Q for the quarter ended June 30, 2009.

Where Can I Find More Information on XBRL?
The SEC adopted the rules in an open meeting and will issue the full text of the final rules in the near future, including additional information about the three-year phase-in of XBRL rules for Phase 1 filers, large accelerated U.S. GAAP filers below the $5 billion float threshold (Phase 2 filers) and all other U.S. GAAP filers, including smaller reporting companies (Phase 3 filers). For most companies, the first required XBRL filing will be as part of a Form 10-Q.

For more information on XBRL, including liability issues, please see our June 9, 2008 Legal News Alert: www.foley.com/publications/pub_detail.aspx?pubid=5086. Foley will provide a Legal News Alert on the SEC’s final XBRL rules once they are issued.

The Web site of XBRL International’s U.S. affiliate, www.xbrl.us, is a good resource on XBRL, the SEC’s requirements, and XBRL-enabled tools that companies may use to meet their reporting needs. Through this Web site, companies are directed to various applications and can see how data will look and be used.

Next Steps
Companies that are required under the new rules to file XBRL exhibits for the first phase-in period need to act now, if they have not done so already, to decide whether they will use outside vendors for preparing and filing their XBRL exhibits or whether they will use commercially available tagging software to perform this function themselves. Participants in the SEC’s voluntary XBRL program have indicated that preparing XBRL exhibits requires significant time, even if an issuer uses an outside vendor. Companies should prepare a practice XBRL exhibit using their last 10-Q in order to anticipate and minimize issues prior to preparing their mandatory XBRL exhibit.

¹ SEC Release Nos. 33-8924; 34-57896; File No. S7 – 11- 08 (see www.sec.gov/rules/proposed.shtml).

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and colleagues.

If you have any questions about this alert or would like to discuss the topic further, please contact your Foley attorney or any of the following individuals:

Linda Y. Kelso
Jacksonville, Florida
904.359.8713
[email protected]

Michael B. Kirwan
Jacksonville, Florida
904.633.8913
[email protected]         

John J. Wolfel
Jacksonville, Florida
904.359.8778
[email protected]