Ensuring accuracy of XBRL filings with SEC is gaining traction with the impending expiry of limited liability clause.
At present, the liability for inaccurate XBRL filings with SEC is limited for most of the companies. This limited liability window of 24 months will cease to exist soon (refer table below).
During the limited liability period, the filings are deemed as not filed for the purpose of Section 18 of Securities Exchange Act of 1934 (Liability for Misleading Statements) and Section 34 (b) of the Investment Company Act of 1940 (Falsification of records). Additionally, protection from liability is provided when a filing entity makes a “good faith effort” in filing the XBRL document and promptly files an amendment when a problem is noticed.
The limited liability provision expires on October 31, 2014 for all categories of filing entities and the liability provisions would be the same as that of other official filings made with SEC.
The table below provides the category of filing entity and the expiry dates of the limited liability clause:
|Category of filing entity||Filing XBRL since||Expiry of Limited Liability Clause|
|Large Accelerated Filer with greater than $5 billion public float||June, 30, 2009||June, 30, 2011|
|Large Accelerated Filer with less than or equal to $5 billion public float||June, 30, 2010||June, 30, 2012|
|All remaining filers using US GAAP and foreign filers using IFRS||June, 30, 2011||June, 30, 2013|
Example: A smaller reporting filer should have submitted its first interactive data (in a Form 10-Q) for the fiscal period ended June 30, 2011. This would have caused its limited liability to expire, for the filings of fiscal period ending June 30, 2013.
The limited liability clause is provided under Rule 406T by SEC. The rules can be accessed here: http://www.sec.gov/rules/final/2009/33-9002.pdf
After the expiry of limited liability clause, Rule 406T calls for a “good faith effort” by the filing entities to submit accurate interactive data with SEC. Hence, it is imperative that, the companies focus on the quality of XBRL services prior to filing with SEC.
SEC does not indicate any requirement of audit of XBRL document. However, XBRL documents will be validated by SEC and questioned upon expiry of the limited liability window.
In view of the above, we recommend reporting companies to focus on the quality of their reporting ahead of their June 2013 filings. The companies should review the tags used, validate the document for completeness and structure, independently, irrespective of whether the document is built in-house or outsourced to an XBRL service provider/ printers.
DataTracks US is part of DataTracks Services Limited (www.datatracksglobal.com), leader in preparation of financial statements in XBRL and iXBRL formats for filing with regulators worldwide. DataTracks Global prepares more than 12,000 XBRL statements per annum for filing with regulators such as SEC in United States, HMRC in the United Kingdom and MCA in India. DataTracks delivery centers are ISO 9001:2008 (Quality Management) and ISO 27001:2005 (Information Security) accredited.
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