Guest Author - Consuelo Herrera, CAMS, CFE
Since one of the major concerns for regulators is to re-gain public confidence, issuing financial statements and making information easily available to investors, this final ruling plays an important role not only for the investment community but also for accountants ready to apply these changes. Here is a summary of the final Rule regarding Interactive Data To Improve Financial Reporting issued by the Securities and Exchange Commission (SEC) on Tuesday, February 10, 2009.
The Securities and Exchange Commission is adopting rules requiring companies to provide financial statement information in a form that is intended to improve its usefulness to investors.
In this format, financial statement information could be downloaded directly into spreadsheets, analyzed in a variety of ways using commercial off-the-shelf software, and used within investment models in other software formats. The rules will apply to public companies and foreign private issuers that prepare their financial statements in accordance with U.S. generally accepted accounting principles (U.S. GAAP), and foreign private issuers that prepare their financial statements using International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Companies will provide their financial statements to the Commission and on their corporate Web sites in interactive data format using the eXtensible Business Reporting Language (XBRL). The interactive data will be provided as an exhibit to periodic and current reports and registration statements, as well as to transition reports for a change in fiscal year. The new rules are intended not only to make financial information easier for investors to analyze, but also to assist in automating regulatory filings and business information processing. Interactive data has the potential to increase the speed, accuracy and usability of financial disclosure, and eventually reduce costs.
DATES: Effective Date: April 13, 2009.
Justifications for Application
The SEC believes that access to the interactive data on corporate Web sites will enable search engines and other data aggregators to more quickly and cheaply aggregate the data and make them available to investors because the data will be available directly from the filer, instead of through third-party sources that may charge a fee. It could also transfer reliability costs of data availability to the public sector by reducing the likelihood that investors cannot access the data through the Commissionís Web site due to down-time for maintenance or to increased network traffic. The SEC also believes that availability of interactive data on corporate Web sites will make it easier and faster for investors to collect information on a particular filer if the interactive data is on the filerís Web site already, rather than if investors would be required to visit separately (for example, by hyperlink) and search the Commissionís Web site for information, particularly if the investor is already searching the issuerís Web site. To help further the SECís goals of decreasing user cost and increasing availability, they will not allow companies to comply with the Web posting requirement by including a hyperlink to the Commissionís Web site.
The SEC believes this requirement will be consistent with the increasing role that corporate Web sites perform in supplementing the information filed electronically with the Commission by delivering financial and other disclosure directly to investors. The SEC also believes that this requirement can provide an incentive for corporations to add favored requiring interactive data for initial public offering registration statements, other Securities Act registration statements or both.
Costs of Compliance
Based on estimates from the voluntary filer participant questionnaire results, the SEC estimates that interactive data filers would incur the following average:
ē Internal burden hours to tag the face financials: 125 hours for the first filing under the requirements; and 17 hours for each subsequent filing.
ē Out-of-pocket cost for software and filing agent services: $6,140 for each filing.
Based on qualitative assessments of time and modifications to the proposed level four detailed tagging requirements that eliminate required tagging of the narrative, the SEC estimates that interactive data filers would incur the following average internal burden hours:
O 7 hours to block tag for each filing made during the first year under the requirements;
O 70 hours to detail tag for the first filing made in the second year under the requirements; and
O 35 hours to detail tag for each subsequent filing.
O 1 hour to block tag for each filing made during the first year under the requirements;
O 7 hours to detail tag for the first filing made in the second year under the requirements; and
O 3.5 hours to detail tag for each subsequent filing.
O Web site Posting: 4 hours to post all interactive data submissions made during each year.
This final Rule opens opportunity for those accountants that are ready for this challenge.