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DataTracks Launches Inline XBRL Before SEC’s Mandate

Earlier last month the Securities and Exchange Commission (SEC) voted for Inline XBRL and also included the IFRS accounting standards in the EDGAR System. The new rule is likely to be made mandatory in early 2018. The primary objective of the ruling is to improve the quality of the structured XBRL data reported, and mandate XBRL for foreign issuers who use IFRS accounting standards; these foreign issuers had been earlier exempted from using XBRL as the acceptance of IFRS taxonomy was kept pending by the SEC. DataTracks welcomes SEC’s move towards Inline XBRL, a move that has been successfully implemented in the UK by HMRC, for tax filings for the past 5 years and more.

The Impact of Inline XBRL on Public Listed Companies

Publicly listed companies currently submit two sets of data to the SEC’s EDGAR system: one in XBRL (eXtensible Business Reporting Language), which is computer-readable, and one in HTML, which is human-readable. The introduction of Inline XBRL is poised to revolutionize this process by embedding XBRL tags directly within the HTML document. This change simplifies the entire filing process by eliminating the need to prepare two separate documents.

Benefits of Inline XBRL

Streamlined Process:

  • Single Document Preparation: Inline XBRL allows companies to prepare a single document that serves both computer and human readability purposes. This reduces the effort and time required to create separate HTML and XBRL files.
  • Enhanced Accuracy: Embedding XBRL tags within HTML minimizes the risk of discrepancies between the two formats, ensuring consistent and accurate data representation.

Impact on Filing Categories

The proposed new rule will directly affect all publicly listed companies across various filing categories. These include:

  • Quarterly and Annual Reports: 10-Q and 10-K
  • Foreign Private Issuer Reports: 20-F and 40-F
  • Registration Statements: S-1
  • Current Reports: 8-K
  • Other Reports Involving Financial Statements: 6-K and additional reports requiring XBRL tagging

Shift in Focus

Currently, many companies prioritize the HTML (EDGAR) instance over the XBRL instance because HTML is human-readable. However, the shift to Inline XBRL will change this dynamic:

  • Unified Reporting: With Inline XBRL, the focus will be on creating a single unified report that meets both human and machine readability requirements.
  • Improved Quality: Companies will need to ensure that their XBRL tagging is accurate and aligns perfectly with the HTML content.

Extension Tags and Quality

Firms are allowed to create extensions to the default XBRL tags provided by the SEC. However, this flexibility can lead to quality issues:

  • Appropriate Extension Tags: It’s crucial for companies to create appropriate extension tags rather than mapping data to random extensions. Proper extensions ensure that the financial data is accurately represented and compliant with regulatory standards.
  • Quality Hazards: Ignoring the need for correct extension tags can compromise the quality of XBRL tagging, leading to potential compliance issues and misinterpretation of financial data.

Key Considerations for Companies

To adapt to Inline XBRL and maintain high-quality financial disclosures, companies should consider the following:

  • Invest in Robust DMS: Use a Disclosure Management System (DMS) like DataTracks Rainbow, which supports Inline XBRL and automates the tagging process.
  • Training and Expertise: Ensure that your team is well-trained in XBRL tagging and understands the importance of creating appropriate extension tags.
  • Regular Audits: Conduct regular audits of your XBRL tags and extensions to ensure they meet SEC standards and accurately reflect your financial data.
  • Focus on Consistency: Strive for consistency between your HTML and XBRL data to enhance the accuracy and reliability of your financial disclosures.

“Though the introduction of Inline XBRL would not entirely eliminate this incorrect approach, it will raise the bar in terms of XBRL tagging quality and would be beneficial to investors who could now use a simple web browser to quickly review the XBRL tags”- said, Manager at DataTracks.

DataTracks deploys unique and robust internal measures to ensure high level accuracy in XBRL/Inline XBRL while simultaneously reducing costs, and passing the benefits to the end customer.

“Public listed companies do not have to wait for the mandate and can be well prepared with the nitty-gritty’s of Inline XBRL by voluntarily filing in the Inline XBRL format. Our team of 500+ financial experts specialized in US GAAP & IFRS accounting standards are ably prepared for facilitating a quick transformation”, said Suresh Illath, Chief Operating Officer at DataTracks.

US EDGAR & iXBRL Reports