Out of the Clouds and Into Reality: XBRL for the Business User

Detailed XBRL Proposal Published by SEC

The SEC has publicly posted the detailed proposed ruling for an XBRL mandate. We'll start going through the ruling and will post what we find.

Folks, this is your last chance to influence the program. You can submit comments electronically via the SEC's  form, by sending an email to rule-comments@sec.gov (include File Number S7-11-08 in the subject line) or by using the Federal eRulemaking Portal.

You can also mail comments (in triplicate) to

Secretary, Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-1090

Be sure to include File Number S7-11-08 regardless which method you choose. The SEC requests that you only use one method.

XBRL Changes the Regulatory Playing Field

A nice article over at Data Storage Today on data mining, XBRL and the SEC. This is one of my favorite topics and worth keeping in mind as you move into data-driven reporting.

-- Ed Hodder

The X-Factor: Custom XBRL Tags

One of the major value props of XBRL is comparability. The ability, for the first time, to do automated comparisons on unambiguously accurate data. A few things have to be in place for that to become a reality including well trained mappers who understand tagging best practices as well as a relatively complete set of tags that everyone agrees with. Otherwise the "X" in XBRL, extensibility or the ability to create custom tags at will, gets out of control and limits comparability.

My recollection is that people were expecting about 10%-15% extension (or custom) tags in the voluntary filings. The fact is that the initial experience was over 30%*, more than double that expectation. Like the man said, "That's just too high!"

So the SEC spent a few million of our money to beef up the tag dictionaries. Did it work?

While only a handful of filings are available in EDGAR so far, the initial results are yes, we've seen a dramatic reduction in the number of extension elements by some companies providing data based on various beta versions of the new GAAP taxonomies. For instance, one company used the a beta version of the new GAAP taxonomy for their 2007 10-K. Compared with their 2006 10-K filing they reduced the number of custom elements by 40% (30.77%/18.57%).

Another company that just submitted their first XBRL used the new set and got under 8% extensions, one of the lowest percentages to date.

Now, extremely low percentages of custom tags is not a goal in itself. There has to be a balance between standardization and customization to accommodate financial reporting practices and that balance will be different for different companies. But there clearly was a problem that the new taxonomies appear to have addressed.

* Based on filings in the voluntary program from its inception in April of '05 through late October of '06. Just to head off the inevitable, you can remove the Microsoft filings and still end up over 25%, well over anyone's comfort level. (Microsoft went pretty deep into the Notes and had to create a large number of custom elements because the original taxonomies weren't really designed to go there.)

-- Ed Hodder

When Will You Have To Submit XBRL To the SEC?

We're getting a lot of questions about who has to file XBRL when. Some questions we can try to clarify now, others will have to wait until the SEC publishes the actual proposal. To determine when you have to start filing ask yourself the following questions:

Is your company a Large Accelerated filer?

• No: You'll start in year 3 of the phase in period so that means filings with reporting periods on or after 2010-12-15 will include XBRL.
• Yes: Keep going!

Does your company file using US GAAP?

• No: Year 3 (reporting periods on or after 2010-12-15).
• Yes: Getting closer!

Does your company have over $5 billion global float?

• No: Year 2 (reporting periods on or after 2009-12-15).
• Yes: You win!

If you answered yes to all of the questions above you're part of the first year mandate. So beginning with reporting periods on or after 2008-12-15 you need to include XBRL. There is a 30 day grace period on your first filing in year 1 (also for the first filing in year 2) then XBRL is submitted concurrently with your official filing as exhibits to your E1 or E2 document. For companies with calendar year end fiscal periods this means your 10-K filing goes first.   Otherwise it's the first report where the period closed on or after your mandated start date.

We need to wait for the proposal to find out exactly which form types are included. What we know now is that annual, quarterly, transition and registration statements with financials for the effected reporting periods are included. We don't believe Proxies are a part of this. We're waiting for clarification on form types like N-3, N-4 and N-6, earnings releases and which particular "S" types are included.

We're getting many questions about float: When is the cut off date to calculate it? Does it include debt? Watch for the published proposal next week (we'll definitely announce it here). It should contain those details. If the published proposal doesn't clear up these issues and you still have questions then write a comment letter to the SEC. There will be instructions for submitting comments in the proposal.

-- Ed Hodder

Block Tagging

Tagging, at a high level, is a way of defining the content that lives between the tags. How you define the content is, in part, driven by how granular you get. Tagging a name could be as simple as

<name>Mark Twain</name>

Or it could be more granular like

<name>
    <firstname>Mark</firstname>
    <lastname>Twain</lastname>
</name>

Much of the actually tagging we'll do for the SEC is very granular. In the financial statements we tag at the most granular level. Here is a number representing operating expenses.

<us-gaap:OperatingExpenses contextRef="Context1" unitRef="USD" decimals="INF">115890000</us-gaap:OperatingExpenses>

In the Notes there are some options. You could tag tabular data inside a Note just like you tag the financial statements. You could even pull out numbers that are embedded in the text and tag those separately.

However, the SEC is only asking you to identify the Note itself in the first year of mandated filing. So all of the content inside each Note in the filing goes inside a single tag. Tables and all. Each Note gets a separate tag. Below is an example (you can click on the graphic to see it full size). In year 2 of your mandated XBRL filings the SEC is asking for detailed Notes tagging although that hasn't been defined yet. We'll see what the proposal says.

-- Ed Hodder

SEC proposes XBRL mandate for Investment Management Companies

Jeff Phillips, Director of Marketing for Investment Services at Bowne, tuned in live to the SEC's webcast today about how the XBRL mandate will roll out to Investment Companies.

"Unless I'm misinterpreting what they said, I think Funds got a pass. Without having to really be ready until January 2010, they have time to look at multiple solutions and determine how to fit into workflow. It does not look any of them have the pressure of the accelerated filers. Here's what was said at today's meeting, written as it happened, I'll post on the full proposed mandate when it is released."

Notes on the SEC Open Meeting Call on XBRL for Investment Companies, 10 am  5/21

C. Cox

1) Mutual Funds special area of interest because popularity with investors

a) 88 million in funds, hold 86% of assets

b) 8000 funds to choose from (retail)

c) How can you be discriminating investor?

2) SEC has heard these are key Investor Concerns when making fund purchase decisions

a) Risks

b) Strategy and objectives

c) Fees and expenses

d) Perf information

3) Easy to find this info in summary prospectus but difficult to compare across funds

4) Have to rely on financial professionals who may have incentives to recommend certain items

5) Now XBRL improves ability to compare

a) Interactive data viewer on website allows to view and compare

b) Download into spreadsheets

c) Very helpful for ordinary investors

6) Thanks to

a) ICI,

b) XBRL International,

c) Buddy Donahue

d) Alberto Zapata,

e) Nash,

f) Div of Corp Finance,

g) General Counsel and

h) Office IT

Buddy Donahue

1) Recommendation builds on XBRL for public companies in financial statements

2) Use XBRL to file Risk Return summary in prospectus

a) Risks

b) Strategy and objectives

c) Fees and expenses

d) Perf information

3) Goals of recommendations

a) Transform information access for mutual fund investors

b) SEC goal to empower information for investors

c) Provide benefits for fund shoppers

4) Effort began in 2004

Alberto Zapata

1) Risk Return Recommendation

a) Require funds to provide Risk Return Summary using XBRL

b) Includes

i) Risks

ii) Strategy and objectives

iii) Fees and expenses

iv) Perf information

c) Initial registration statement and any post effective statement

d) Must maintain XBRL on Fund’s site

e) Would not replace traditional formats

f) Provide new exhibit in interactive data format with registration statement filings

g) Funds must tag risk return section with standard list of tags

h) Post effective amendment must be filed after traditional format is effective, but not later than 15 days after.

i) Automatic suspension of 485B immediate effectiveness if don’t file XBRL

2) Timing

a) Initial registration statements and annual updates will be required after Dec 2009

b) Voluntary program in effect till then

c) Suspended after that

d) Still voluntary for financial investment

3) Financial Statements Recommendation

a) Increased flexibility in financials ability to file only SOI in XBRL without other info in XBRL as part of voluntary program

Chairman Cox Questions:

C. Cox: Feedback on voluntary program, easy to tag or difficult to tag?

Respondent: At outset, Funds found difficult due to lack of software and lack of viewer. It has gotten much easier for filers and investors rapidly. Now they have a viewer and expecting a comparison guide on SEC.org. The infrastructure if happening faster than for reporting companies.

C. Cox: Do we have expectations for more products coming to market from interested software companies?

Respondent: Yes, fund accounting and mgmt software will have interactive reporting and filer and investor side will accelerate.

C. Cox: Put yourself in shoes of investor, what will process be like? How use interactive data?

B. Donahue: 8000 funds that you can sort according to strategy and objectives. Tools will be helpful for financial professionals as well as regular people.

David (tech guy): There is an opportunity to build additional tools for more precise analysis than before with greater timeliness.

C. Cox: What have we heard from fund complexes regarding preparing to implement?

Respondent: Funds are undertaking a broad set of activities. Some are building their own software, some are using filing agents, and others are planning on building into the back office. Funds are eager to hear SEC direction so can determine what resources to commit to it and they see XBRL in tandem with summary prospectus proposal.

Commissioner. Atkins Questions

Supports rule!

C. Atkins: How many tags?

Respondent: Current taxonomy only 750 tags. Don’t expect number to grow.

C. Atkins: What is entailed in updating ICI XBRL architecture to conform to SEC archiecture?

Respondent: There is a review is in place for conforming ICI list to make everything work consistently for final set of tags. It is not a significant effort.

C. Atkins: What is general timeline for final taxonomy?

Respondent: Finished by summer 2008.

C. Atkins: Does 12/31/2009 provide enough of a cushion?

Respondent: Yes

C. Atkins: Page 71 in recommendation covers the decrease in cost from first submission to subsequent, why is cost reduction so little?

Respondent: Initial experience of voluntary participants is that they got the software for free and subsequently they will have to pay for. The numbers are based on 6 observations and it is difficult to draw strong conclusions. Everyone agrees that the initial burdens for filing are not extreme.

C. Atkins: Where do things stand for updating books and records rule for advisors?

B. Donahue: Project is important and near and dear to my heart as a former Merrill Lynch employee. We’ve been working on it for last year. We have 11,000 advisor firms registered with 75% comprised of less than 25 employees. We will make a recommendation later this year.

C. Atkins: This should be a priority as well as a recommendation for soft dollar treatment on the buy side. Make it so! (Jeff’s editorial) Plus thanks to Nancy Morris as outgoing Secretary.

Commissioner Casey Questions

Thanks to

She supports it!

Her concerns are:

· Short time frame since voluntary program started. She is not sure that SEC has a good knowledge of costs impact for funds based on small sample.

· The analysis rests on assumptions about availability of third party software and she does not think they’ve taking into account how demand will affect cost of outside servicing.

· The committee has not taken into account the burden and impact of other regulatory requirements such as summary prospectus and what the impact for Funds will be if they have to deal with both

C. Casey: How concerned or confident are we of costs based on small sample size especially for smaller funds?

Respondent: There is a concern. The 6 responses represent 10 funds and about represent 26% of AUM.

C. Casey: How many funds chose third party software as opposed to internal effort or outside agent? Can we predict what will be the demand in these areas. 

Respondent: 1 developed internally in excess of $100,000. (Vanguard). We can’t predict.

C. Casey: Why is scalability a short term issue? How will public companies affect supply of services and software?

Respondent: We think 550 complexes is more relevant number than 8800. From a technical aspect, only 40% of funds are 12/31 year ends so only a % will conflict directly with busy time for corporate filers.

C. Casey: How many funds filed financial statements under voluntary program?

Respondent: Only 2. We hope to get a better response with SOI only and that is why we have added that to the voluntary program.

Vote

Yes!, recommendation approved

Meeting adjourned.

"Don't Panic" Webinar - Details on XBRL Mandate

Please join us Monday, May 19th for a webinar titled "Don't Panic: XBRL and Preparing for the SEC Mandate". Hear Ted F. Uehlinger, Office of Interactive Disclosure, U.S. Securities and Exchange Commission, Wayne Boston, Director of External Reporting, Southern Company, and our own Rob Blake, Senior Director of Interactive Services discuss:

• A summary of the proposed ruling
• Who needs to do what and when
• What one company subject to the mandate is doing to get ready

Read more details or register now.

-- Ed

Live Blogging from the SEC Open Meeting ("Let There Be Light" Edition)

Here we go...just over 8 years from the official "coming out" party of XBRL at the Morgan Stanley offices in New York City.  I remember the event well and in fact, after the session was over, a few of us zealots were hanging out munching on left-over food and said "You know, wouldn't it be cool for the SEC to one day use [read: mandate] this technology?"  Well, seems pretty clear to me that vision is about to become reality.  Buckle up and here we go!

[NOTE:  I'm live-blogging from the event so please excuse my fat fingers, typos and bad grammar; I'll clean it up l8r.]

11:38:  Vote time...and it's unanimous...the proposed ruling was approved.  It's now officially "game on" for XBRL at the SEC.  Will this end up being the XBRL shot "heard 'round the world"?  Only time will tell but what's for sure is that XBRL adoption just took a major step forward.  60-day comment period for the proposed ruling begins now so let the real fun begin!  [Meeting adjourned.]

11:35am:  Did Casey just ask about/allude to the Modernization project?  Okay, okay...she just referenced validation in a question that Corey is responding to but she's right on:  This ruling on getting more XBRL data into the SEC is only half the equation.  What's the big picture/plan timeframe on the internal systems at the SEC around XBRL?  Am I allowed to ask a question?  Dang...probably not...

11:30am:  Over the past 6 months I think the larger companies started "getting it" in terms of knowing their time was coming around XBRL submissions to the SEC.  Commissioner Casey's focus on the small/medium filers is a good one as these registrants have honestly been in a bit in denial (no, not the river...;o) around XBRL and therefore haven't participated in any significant numbers in the current voluntary filing.  Monitoring costs and whatnot is good but small/medium folks be ready...XBRL is quickly coming to a theater near you!

11:23am:  Let's talk about the notes/footnotes tagging for a second.  For year one of a registrants's XBRL filings, the SEC will require the statements to be tagged in detail but the notes/footnotes in "block" or summary tagging only.  No surprise here...trying to "ease" companies into the tagging of the narrative information.  But year two...wow...they are heating things up a bit.  A registrant's second year (and assumed beyond) XBRL filings will have the notes/footnotes provided in detail tagging, just like the financials.  That's a substantial workload increase for year two of XBRL creation over year one.  Technically a company could begin the detailed tagging process during year one and simply choose to only submit the summary tagging for the notes/footnotes to the SEC but still...watch out for year two!!!

11:16am:  Providing registrants extra time (30 days) to file their XBRL the first, and the first time the notes/footnotes are tagged in detail, is a good olive branch to help alleviate fears of those first 500 that will soon be putting in place an XBRL strategy.  Too bad about IFRS apparently not being "officially" brought into the timeline in year 3.  I'm not clear what the hesitation is on bringing XBRL IFRS in more quickly as there already is an IFRS taxonomy (set of tags) available and Reuters has filed twice to the SEC using it.

11:05am:  Wow...it's out...everyone can breathe now...in-person attendees are now all sitting back a bit more in their seats.  My read is that they have closely followed the recommendation of CiFR and bitten off just enough to take XBRL to the next level at the SEC.  Not that it was a surprise but I thought the SEC would be a bit more aggressive and pick off all large accelerated filers in year 1.  Looks like it's dinner on me...

10:58am:  Details as follows:
FILINGS:  Annual and quarterly, domestic and foreign filers...US GAAP at first...IFRS soon
WHERE:  Submitted to SEC and placed on corporate web site
HOW:  Supplemental, does not replace existing ASCII/HTML
          Filed as new exhibit
DATA:  First year is statements in details and notes in block tagging
WHO:  3 year phase in, Year 1:Large Accelerated Filers, both domestic and international, that use the US GAAP, and have a worldwide float in excess of US$5 Billion, Year 2:  Remaining large accelerated filers; Year 3:  All remaining filers, including small companies
START DATE:  For filings on/after 12/15/2008
WHEN:  At the same time save for two exceptions:  30-day grace on first filing
LEGAL LIABILITY:  Similar to current voluntary program, furnished not filed, limited '34 Act liabilities

10:49am:    This should be interesting...big question is how much will the SEC deviate from the CiFR recommendations on XBRL.

10:43am:  "Unflagging" support of XBRL by the Chairman is an understatement.  Man the guy has big shoulders and literally moved XBRL from infancy to reality at least from an external/PR standpoint, especially in the early days, almost single-handidly.

10:38am:  Lots of love to go around...mostly well deserved kudos...and again the tie-back to the fact that the SEC has considered data "tagging" for a long time...not as many people assume as only within the past 3-5 years around XBRL.  On to the detail already!

10:31am:  The tie-backs on the Chairman's opening comments to the original launch of EDGAR is not surprising and in fact is a key message to registrants:  We've been here before...we all survived...and we'll continue to survive in the land of an XBRL mandate.

10:27am:  It's off to the races at 10:26 for the start of XBRL on a path to mandate XBRL over a time period of three years.  The first juicy fact of the mandate timeline?  Interesting...I thought it would be two...

10:24am:  Anticipation of the arrival of the Chairman and Commissioners is building while I wonder if I have time to run to the Starbucks at Union Station to get a little more caffeine.  Hmm...tough call...but if you'd like to tune into the video, do it here.

10.12am:  Turnout for the in-person event is somewhat surprisingly low...only about 60 people here in person.  Although the videocast of the event obviously had an impact, nothing like slingin' comments from the cheap seats at the back of the room...=)

A Real Act of Sunshine

Bill Cara recently posted: "I'd like to see the average person access the SEC database with the use of computer bots so that a level playing field is possible." The SEC has an easy path toward providing that access in the form of RSS feeds.

Shortly after the voluntary program began, the SEC starting publishing an RSS feed of the XBRL filings coming into the system. Prior to that just a few of us EDGAR geeks could really see what was going on. But now you can subscribe to the feed and get daily updates on who is filing.

Things got a bit more interesting when the Financial Explorer was released. The Financial Explorer has a number of cool features but the one that applies here is the company specific RSS feed. Once you click through to a specific company there is an RSS button individualized for that issuer. You can subscribe to a feed that will alert you whenever that issuer submits XBRL data to the SEC! The issue with these feeds is that they are updated overnight and so are not in real time.

However, the SEC has provided XML feeds on both the Latest Filings page and on individual issuer pages. Both the latest filings feed and the individual company feed (not the XBRL version) are in real time today and would include XBRL submissions but you'd have to sniff them out. But investors can subscribe to their favorite companies and get immediate notification of a filing today without using a costly service.

We should not expect the SEC to provide the most sophisticated tools for either search or analysis of this information. It isn't their job and the capabilities they will develop will be for enforcement, not investment. But RSS provides significant capabilities in a simple way that can help the individual investor keep up with news and not fall too far behind the big guys in terms of access. Analysis is a different story for another day.

-- Ed Hodder

Out of the Clouds

Welcome to Bowne's blog on XBRL for the business user! Many of you have heard about XBRL. Some of you may have even looked into the technology a little bit. Well, it's about to take on new importance when the SEC proposes a rule to mandate XBRL filings on May 14th. I've personally been involved with XBRL since day 1 almost 10 years ago and I'm excited to be able to speak with you as the technology takes its next big step forward.

My goal is to help you explore the implications of this change and understand how it will impact finance and external reporting teams. Just like the move from paper to spreadsheet, the move from paper-based reporting to data-based reporting will open up new possibilities, require new skills and pose new challenges. The regulatory playing field is sure to evolve over time as XBRL is adopted and I want to help you prepare for and leverage this technology so you can bring value to your company.

Backed by a team of experts who will guest on this blog from time to time, I'll help you navigate these changes by focusing on real life issues rather than the technology itself (dimensions or tuples? who cares?). Please use the comments links or email me directly with any questions, comments or suggestions. Together we can make this the best, most relevant source of XBRL information for the business user by bringing it out of the clouds and into reality!

-- Rob