[Federal Register Volume 73, Number 112 (Tuesday, June 10, 2008)]
[Proposed Rules]
[Pages 32794-32832]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-12596]
[[Page 32793]]
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Part II
Securities and Exchange Commission
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17 CFR Parts 229, 230, 232, 239, 240, and 249
Interactive Data To Improve Financial Reporting; Proposed Rule
Federal Register / Vol. 73 , No. 112 / Tuesday, June 10, 2008 /
Proposed Rules
[[Page 32794]]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 229, 230, 232, 239, 240 and 249
[Release Nos. 33-8924; 34-57896; 39-2455; IC-28293; File No. S7-11-08]
RIN 3235-AJ71
Interactive Data To Improve Financial Reporting
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rule.
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SUMMARY: We are proposing rules requiring companies to provide
financial statement information in a form that would improve its
usefulness to investors. Under the proposed rules, 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 would
apply to domestic and foreign public companies that prepare their
financial statements in accordance with generally accepted accounting
principles as used in the United States (U.S. GAAP), and foreign
private issuers that prepare their financial statements using
International Financial Reporting Standards (IFRS) as promulgated by
the International Accounting Standards Board (IASB). Companies would
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 would be
provided as an exhibit to periodic reports and registration statements,
as well as to transition reports for a change in fiscal year. The
proposed 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: Comments should be received on or before August 1, 2008.
ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/proposed.shtml); or
Send an e-mail to [email protected]. Please include
File Number S7-11-08 on the subject line; or
Use the Federal eRulemaking Portal (http://www.regulations.gov). Follow the instructions for submitting comments.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number S7-11-08. This file number
should be included on the subject line if e-mail is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
Internet Web site (http://www.sec.gov/rules/proposed.shtml). Comments
are also available for public inspection and copying in the
Commission's Public Reference Room, 100 F Street, NE., Washington, DC
20549, on official business days between the hours of 10 a.m. and 3
p.m. All comments received will be posted without change; we do not
edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly.
FOR FURTHER INFORMATION CONTACT: James C. Lopez, Legal Branch Chief,
Division of Corporation Finance at (202) 551-3790; Mark W. Green,
Senior Special Counsel (Regulatory Policy), Division of Corporation
Finance at (202) 551-3430; Jeffrey W. Naumann, Assistant Director,
Office of Interactive Disclosure at (202) 551-5352; or Melanie
Jacobsen, Office of the Chief Accountant at (202) 551-5300, U.S.
Securities and Exchange Commission, 100 F Street, NE., Washington, DC
20549-3628.
SUPPLEMENTARY INFORMATION: We propose to add Rules 405 and 406 to
Regulation S-T,\1\ and revise Item 601 \2\ of Regulation S-K,\3\ Rules
11,\4\ 201,\5\ 202,\6\ 305,\7\ 401,\8\ and 402 \9\ of Regulation S-T,
Rule 144 \10\ under the Securities Act of 1933 (Securities Act),\11\
and Rules 13a-14 \12\ and 15d-14 \13\ under the Securities Exchange Act
of 1934 (Exchange Act).\14\ We also propose to revise Forms S-3,\15\ S-
8,\16\ and F-3 \17\ under the Securities Act and Forms 20-F \18\ and 6-
K \19\ under the Exchange Act.
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\1\ 17 CFR 232.10 et seq.
\2\ 17 CFR 229.601.
\3\ 17 CFR 229.10. et seq.
\4\ 17 CFR 232.11.
\5\ 17 CFR 232.201.
\6\ 17 CFR 232.202.
\7\ 17 CFR 232.305.
\8\ 17 CFR 232.401.
\9\ 17 CFR 232.402.
\10\ 17 CFR 230.144.
\11\ 15 U.S.C. 77a et seq.
\12\ 17 CFR 240.13a-14.
\13\ 17 CFR 240.15d-14.
\14\ 15 U.S.C. 78a et seq.
\15\ 17 CFR 239.13.
\16\ 17 CFR 239.16b.
\17\ 17 CFR 239.33.
\18\ 17 CFR 249.220f.
\19\ 17 CFR 249.306.
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Table of Contents
I. Introduction and Background
A. Introduction
B. Current Filing Technology and Interactive Data
C. The Commission's Multiyear Evaluation of Interactive Data and
Overview of Proposed Rules
II. Discussion of the Proposed Amendments
A. Submission of Financial Information Using Interactive Data
B. Phase-In Under the Proposed Rules
1. Overview
2. Companies and Filings Covered by the Proposed Rules and
Phase-In
3. Documents and Information Covered by the Proposed Rules
a. Financial Statements and Financial Statement Schedules
b. Registration Statements Covered by the Proposed Rules
4. Initial Filing Grace Period
5. Web Site Posting of Interactive Data
C. Accuracy and Reliability of Interactive Data
1. Voluntary Program
2. Use of Technology To Detect Errors
3. Integration of Interactive Data and Business Information
Processing
4. Continued Traditional Format and Interactive Data Cautionary
Disclosure
D. Required Items
1. Data Tags
2. Regulation S-T and the EDGAR Filer Manual
E. Consequences of Non-Compliance and Hardship Exemption
III. General Request for Comments
IV. Paperwork Reduction Act
V. Cost-Benefit Analysis
VI. Consideration of Burden on Competition and Promotion of
Efficiency, Competition and Capital Formation
VII. Initial Regulatory Flexibility Act Analysis
VIII. Small Business Regulatory Enforcement Fairness Act
IX. Statutory Authority and Text of Proposed Amendments
I. Introduction and Background
A. Introduction
Over the last several decades, developments in technology and
electronic data communication have significantly decreased the time and
cost of filing disclosure documents with us. Technological developments
also have facilitated greater transparency in the form of easier access
to, and analysis of, financial reporting and disclosures. Most notably,
in 1993 we began to require electronic filing on our Electronic Data
Gathering, Analysis and
[[Page 32795]]
Retrieval System (EDGAR).\20\ Since then, widespread use of the
Internet has vastly decreased the time and expense of accessing
disclosure filed with us.
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\20\ In 1993, we began to require domestic issuers to file most
documents electronically. Release No. 33-6977 (Feb. 23, 1993) [58 FR
14628]. Electronic filing began with a pilot program in 1984.
Release No. 33-6539 (June 27, 1984) [49 FR 28044].
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We continue to update our filing standards and systems as
technologies improve. These developments assist us in our goal to
promote efficient and transparent capital markets. For example, since
2003 we have required electronic filing of certain ownership reports
\21\ filed on Forms 3,\22\ 4,\23\ and 5 \24\ in a format that provides
interactive data, and recently we adopted similar rules governing the
filing of Form D.\25\ In addition, recently we have encouraged, and in
some cases required, public reporting companies and mutual funds to
provide disclosures and communicate with investors using the
Internet.\26\ Now, as part of our continuing efforts to assist filers
as well as investors who use Commission disclosures, we propose to
require that financial statements be provided in a format that makes
the information they contain interactive.
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\21\ Release No. 33-8230 (May 7, 2003) [68 FR 25788 and 37044
(correction)] (required electronic filing of ownership reports) and
Release No. 33-8891 (Feb. 6, 2008) [73 FR 10592] (required
electronic filing of Form D [17 CFR 239.500]).
\22\ 17 CFR 249.103 and 274.202.
\23\ 17 CFR 249.104 and 274.203.
\24\ 17 CFR 249.105.
\25\ 17 CFR 239.500.
\26\ See, e.g., Release No. 34-56135 (July 26, 2007) [72 FR
42222]; Release No. 34-55146 (Jan. 22, 2007) [72 FR 4148]; Release
No. 34-52056 (July 19, 2005) [70 FR 44722]; Release No. 33-8861
(November 21, 2007) [72 FR 67790]; and Release No. 34-57172 (Jan.
18, 2008) [73 FR 4450].
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Our proposal builds on our voluntary filer program, started in
2005,\27\ that allowed us to evaluate the merits of interactive data.
The voluntary program allows companies to submit financial statements
on a supplemental basis in interactive format as exhibits to specified
filings under the Exchange Act and the Investment Company Act of 1940
(Investment Company Act).\28\ Companies that participate in the program
still are required to file their financial statements in American
Standard Code for Information Interchange (ASCII) or HyperText Markup
Language (HTML).\29\
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\27\ Release No. 33-8529 (Feb. 3, 2005) [70 FR 6556].
\28\ 15 U.S.C. 80a-1 et seq.
\29\ HTML is a standardized language commonly used to present
text and other information on Web sites.
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In 2007, we extended the program to enable mutual funds voluntarily
to submit in interactive data format supplemental information contained
in the risk/return summary section of their prospectuses.\30\ Over 75
companies have participated in the voluntary program. These companies
span a wide range of industries and company characteristics, and have a
total public float of over $2 trillion.
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\30\ Release No. 33-8823 (July 11, 2007) [72 FR 39290].
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Financial reporting based on interactive data would create new ways
for investors, analysts, and others to retrieve and use financial
information in documents filed with us. For example, users of financial
information could download it directly into spreadsheets, analyze it
using commercial off-the-shelf software, or use it within investment
models in other software formats. Through interactive data, what is
currently static, text-based information can be dynamically searched
and analyzed, facilitating the comparison of financial and business
performance across companies, reporting periods, and industries.
Interactive data also could provide a significant opportunity to
automate regulatory filings and business information processing, with
the potential to increase the speed, accuracy, and usability of
financial disclosure. Such automation could eventually reduce costs. A
company that uses a standardized interactive data format at earlier
stages of its reporting cycle could reduce the need for repetitive data
entry and, therefore, the likelihood of human error. In this way,
interactive data may improve the quality of information while reducing
its cost.
Also, to the extent investors currently are required to pay for
access to annual or quarterly report disclosure that has been extracted
and reformatted into an interactive data format by third-party sources,
the availability of interactive data in Commission filings could allow
investors to avoid additional costs associated with third party
sources.
We believe that requiring issuers to file their financial
statements using interactive data format would enable investors,
analysts, and the Commission staff to capture and analyze that
information more quickly and at less cost than is possible using the
same financial information provided in a static format. Any investor
with a computer would have the ability to acquire and download
interactive financial data that have generally been available only to
large institutional users. The proposed interactive data requirements
would not change what is currently reported, but would add a
requirement to include financial statements in a new format as an
exhibit. Thus, the proposal to require that filers provide financial
statements using interactive data will not alter the disclosure or
formatting standards of periodic reports, registration statements,\31\
or transition reports,\32\ which would continue to be available as they
are today for those who prefer to view the traditional text-based
document.
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\31\ Although registration statements can be filed under federal
securities laws other than the Securities Act, we use the term
``registration statement'' in this release only to refer to those
filed under the Securities Act unless we expressly state otherwise.
\32\ Transition reports generally must be filed when an issuer
changes its fiscal closing date. The transition report covers the
resulting transition period between the closing date of its most
recent fiscal year and the opening date of its new fiscal year. Rule
13a-10 [17 CFR 240.13a-10]; Rule 15d-10 [17 CFR 240.15d-10]. Unless
otherwise stated, when we refer to Exchange Act reports, periodic
reports, or ``reports,'' we mean quarterly and annual periodic
reports as well as transition reports.
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Throughout this release, we solicit comment on many issues
concerning the use of interactive data, including specifically whether
financial information in interactive data format should be required as
exhibits to Securities Act registration statements and Exchange Act
periodic and transition reports filed with us. We are seeking comment
from investors, registrants, accountants, analysts and any other
parties or individuals who may be affected by the use of interactive
disclosure in Commission filings, and any other members of the public.
B. Current Filing Technology and Interactive Data
Companies filing electronically are required to file their
registration statements, quarterly and annual reports, and transition
reports in ASCII or HTML format.\33\ Also, to a limited degree, our
electronic filing system uses other formats for internal processing and
document-type identification. For example, our system uses eXtensible
Markup Language (XML) to process reports of beneficial ownership of
equity securities on Forms 3, 4, and 5 under section 16(a) of the
Exchange Act.\34\
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\33\ Rule 301 under Regulation S-T [17 CFR 232.301] requires
electronic filings to comply with the EDGAR Filer Manual, and
Section 5.1 of the Filer Manual requires that electronic filings be
in ASCII or HTML format. Rule 104 under Regulation S-T [17 CFR
232.104] permits filers to submit voluntarily as an adjunct to their
official filings in ASCII or HTML unofficial PDF copies of filed
documents. Unless otherwise stated, we refer to filings in ASCII or
HTML as traditional format filings.
\34\ 15 U.S.C. 78p(a).
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Electronic formats such as HTML, XML, and XBRL are open standards
\35\ that define or ``tag'' data using standard definitions. The tags
establish a consistent structure of identity and context. This
consistent structure can be recognized and processed by a variety of
different software applications. In the case of HTML, the standardized
tags enable Web browsers to present Web sites' embedded text and
information in predictable format. In the case of XBRL, software
applications, such as databases, financial reporting systems, and
spreadsheets, recognize and process tagged financial information.
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\35\ The term ``open standard'' is generally applied to
technological specifications that are widely available to the
public, royalty-free, at minimal or no cost.
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XBRL was derived from the XML standard. It was developed and
continues to be supported by XBRL International, a collaborative
consortium of approximately 550 organizations representing many
elements of the financial reporting community worldwide in more than 20
jurisdictions, national and regional. XBRL U.S., the international
organization's U.S. jurisdiction representative, is a non-profit
organization that includes companies, public accounting firms, software
developers, filing agents, data aggregators, stock exchanges,
regulators, financial services companies, and industry
associations.\36\ In 2006, the Commission contracted with XBRL U.S. to
develop the standard list of tags necessary for financial reporting in
interactive format consistent with U.S. GAAP and Commission
regulations.
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\36\ XBRL U.S. supports efforts to promote interactive financial
and business data specific to the U.S., including U.S. GAAP.
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Financial reporting in interactive format requires a standard list
of tags. These tags are similar to definitions in an ordinary financial
dictionary, and they cover a variety of financial concepts that can be
read and understood by software applications. For financial statements
prepared in accordance with U.S. GAAP, a filer would use the list of
tags for U.S. financial statement reporting.\37\ This list of tags
contains descriptive labels, definitions, authoritative references to
U.S. GAAP and Commission regulations where applicable, and other
elements, all of which provide the contextual information necessary for
interactive data \38\ to be recognized and processed by software.\39\
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\37\ Unless stated otherwise, when we refer to the ``list of
tags for U.S. financial statement reporting'' we mean the
interactive data taxonomy as approved by XBRL U.S. that is based on
U.S. GAAP, Commission regulations, and common financial reporting
practices used in the preparation of financial statements in the
U.S.
\38\ The proposed rules would define the interactive data
necessary to create human-readable disclosure as the ``interactive
data file,'' which would be required with every interactive data
submission. The EDGAR Filer Manual would identify any necessary
supporting files.
\39\ For example, contextual information would identify the
entity to which it relates, usually by using the filer's CIK number.
A hypothetical filer converting its traditional electronic
disclosure of $1,000,000 of net sales would have to create
interactive data that identify what the 1,000,000 represents, net
sales, and the currency in which it is disclosed, dollars. The
contextual information would include other information as necessary;
for example, whether it relates to an annual report or quarterly
report, the financial reporting period, continuing or discontinued
operations, or actual, restated, forecast, pro forma or other type
of disclosure.
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Applying data tags to financial statements is accomplished using
commercially available software that guides a preparer in mapping
information in the financial statements to the appropriate tags in the
standard list. Each element in the standard list of tags has a standard
label. A company can therefore match the standard labels to each
caption in its financial statements. Occasionally, because filers have
considerable flexibility in how financial information is reported under
U.S. reporting standards, it is possible that a company may wish to use
a non-standard financial statement line item that is not included in
the standard list of tags.\40\ In this situation, a company would
create a company-specific element, called an extension.
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\40\ In other cases, without a relevant and appropriate tag in
the list of tags, a company would be required to create an extension
in order to provide interactive data that appears the same as the
corresponding portion of traditional format filing.
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For example, what a company identifies in its traditional format
financial statements as ``operating revenues'' may be associated with
an element that has ``net revenues'' as the standard label. In this
situation, a company would need to change, or extend, the standard
label to become ``operating revenues'' when tagging that disclosure
with the element.\41\
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\41\ Unless otherwise stated, extensions, whether relating to an
element or a label, are not part of the standard list of tags.
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A company may choose to tag its own financial statements using
commercially available software, or it may choose instead to outsource
the tagging process. In the event a company relies upon a service
provider to tag the company's financial statements, the company would
want to carefully review the tagging done by the service provider in
order to make sure that the tagged financial statements are accurate
and consistent with the information the company presents in its
traditional format filing.
Similarly, to create interactive data-formatted financial
statements prepared in accordance with IFRS as issued by the IASB, a
filer would use the IFRS list of tags.\42\ The IFRS list of tags
contains descriptive labels, authoritative references to IFRS where
applicable, and other elements and concepts that provide the contextual
information necessary for interactive data to be recognized and
processed by software. The International Accounting Standards Committee
Foundation (IASCF) has developed the IFRS list of tags.\43\ To create
interactive data using the IFRS list of tags, an issuer generally would
need to follow the same mapping, extension and tagging process as would
a company that uses the list of tags for U.S. financial statement
reporting. As further discussed below, the IASCF is collaborating with
XBRL U.S. and other parties to align practices designed to develop the
IFRS list of tags. This collaboration involves the development of the
appropriate scope for the IFRS list of tags' content and technology
architecture.\44\
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\42\ Unless stated otherwise, when we refer to the ``IFRS list
of tags'' we mean the list of tags for financial statements prepared
in accordance with IFRS as issued by the IASB.
\43\ See http://www.iasb.org/xbrl/index.html. The IASCF released
the 2008 taxonomy (list of tags) on March 31, 2008. See IASB Press
Release, The IASC Foundation publishes IFRS Taxonomy 2008, (March
31, 2008).
\44\ As previously noted, in 2006 we contracted with XBRL U.S.
to develop the standard tags necessary for financial reporting in
interactive format consistent with U.S. GAAP and Commission
regulations. That contract has been completed.
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Because financial statements in interactive data format, referred
to as the interactive data file,\45\ are intended to be processed by
software applications, the unprocessed data is not readable. Thus,
viewers are necessary to convert the interactive data file to human
readable format. Some viewers are similar to Web browsers used to read
HTML files.
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\45\ See note 40 above.
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The Commission's Web site currently provides links to four viewers
that allow the public to easily read company disclosures filed using
interactive data.\46\ These viewers demonstrate the capability of
downloading interactive data into software such as Microsoft Excel as
well as into other applications that are widely available on the
Internet. In addition, we are aware of other applications under
development that may provide additional and advanced functionality.
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\46\ See viewers available at http://www.sec.gov/xbrl.
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C. The Commission's Multiyear Evaluation of Interactive Data and
Overview of Proposed Rules
In 2004, we began assessing the benefits of interactive data and
its potential for improving the timeliness and accuracy of financial
disclosure and analysis of Commission filings.\47\ As part of this
evaluation, we adopted rules in 2005 permitting filers, on a voluntary
basis, to provide financial disclosure in interactive data format as an
exhibit to certain filings on our electronic filing system. The
voluntary program has been based on an earlier version of the list of
tags for U.S. financial statement reporting, which does not include a
full array of standard elements for financial statement footnotes and
schedules. After more than two years of increasing participation, over
75 companies have chosen to provide interactive data financial
reporting.\48\
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\47\ See Press Release No. 2004-97 (July 22, 2004).
\48\ A viewer for the voluntary program is available at http://www.sec.gov/spotlight/xbrl/xbrlwebapp.shtml. This viewer, one of
several funded by the Commission to demonstrate interactive data,
maintains a running total of companies and filers submitting data as
part of the voluntary program. As of April 17, 2008, 78 companies
had submitted 350 interactive data reports.
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During this time, we have kept informed of technology advances and
other interactive data developments. We note that several U.S. and
foreign regulators have begun to incorporate interactive data into
their financial reporting systems. The Federal Deposit Insurance
Corporation (FDIC), the Federal Reserve, and the Office of the
Comptroller of the Currency (OCC) require the use of XBRL.\49\ As of
2006, approximately 8,200 U.S. financial institutions were using XBRL
to submit quarterly reports to banking regulators.\50\ Countries that
have required or instituted voluntary or pilot programs for XBRL
financial reporting include Australia, Belgium, Canada, China, Denmark,
France, Germany, Ireland, Israel, Japan, Korea, Luxembourg, the
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Thailand
and the United Kingdom.\51\
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\49\ Since 2005, the FDIC, Federal Reserve, and the OCC have
required the insured institutions that they oversee to file their
quarterly Consolidated Reports of Condition and Income (called Call
Reports) in interactive data format using XBRL. Call Reports, which
include data about an institution's balance sheet and income
statement, are used by these federal agencies to assess the
financial health and risk profile of the financial institution.
\50\ See Improved Business Process Through XBRL: A Use Case for
Business Reporting, available at http://www.xbrl.org/us/us/FFIEC%20White%20Paper%2002Feb2006.pdf.
\51\ See XBRL International Progress Report (November 2007),
available at http://www.xbrl.org/ProgressReports/2007_11_XBRL_Progress_Report.pdf.
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We also have kept informed of relevant advances and developments by
hosting roundtables on the topic of interactive data financial
reporting,\52\ creating the Commission's Office of Interactive
Disclosure,\53\ and meeting with international securities regulators to
discuss, among other items, timetables for implementation of
interactive data initiatives for financial reporting.\54\ Also, staff
of the Commission have attended meetings of the Advisory Committee on
Improvements to Financial Reporting (CIFiR) in which the committee
discussed proposals for financial reporting using interactive data.\55\
We also have reviewed written statements and public comments received
by CIFiR on its XBRL developed proposal.\56\
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\52\ See materials available at http://www.sec.gov/spotlight/xbrl/xbrl-meetings.shtml.
\53\ See Press Release No. 2007-213 (October 9, 2007).
\54\ See Press Release No. 2007-227 (November 9, 2007).
\55\ For example, CIFiR conducted an open meeting on March 14,
2008 in which it heard reactions from an invited panel of
participants to CIFiR's developed proposal regarding required filing
of financial information using interactive data. An archived webcast
of the meeting is available at http://sec.gov/about/offices/oca/cifir.shtml. The March 14, 2008 panelists presented their views and
engaged with CIFiR members regarding issues relating to requiring
interactive data tagged financial statements, including tag list and
technological developments, implications for large and small public
companies, needs of investors, necessity of assurance and
verification of such tagged financial statements, and legal
implications arising from such tagging. Also, CIFiR has provided to
the Commission an interim progress report that contains a developed
proposal that the Commission, over the long term, require the filing
of financial information using interactive data once specified
conditions are satisfied. See Progress Report of the Advisory
Committee on Improvements to the Financial Reporting to the United
States Securities and Exchange Commission (Feb. 14, 2008) (Progress
Report), available at http://www.sec.gov/about/offices/oca/acifr/
acifr-pr-021408-final.pdf. CIFiR's developed proposal is discussed
more fully in Part II.C.2 below.
\56\ The XBRL developed proposal appears in chapter 4 of the
Progress Report. Written statements of panelists at the March 14,
2008 meeting and public comments received on the Progress Report are
available at http://sec.gov/comments/265-24/265-24.shtml.
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Building on our experience monitoring the voluntary program, and
our participation in the other initiatives described above, we are now
proposing rules to require financial reporting using interactive data.
The proposed rules would apply to domestic and foreign public companies
that prepare their financial statements in accordance with U.S. GAAP,
and foreign private issuers \57\ that prepare their financial
statements in accordance with IFRS as issued by the IASB. Interactive
data would be required to be provided on a company's Web site \58\ and
with the filer's Securities Act registration statements,\59\ annual
reports, quarterly reports if applicable,\60\ and transition
reports.\61\ We believe this has the potential to provide advantages
for the investing public by making financial data more accessible,
timely, inexpensive and easier to analyze.
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\57\ Exchange Act Rule 3b-4(c) [17 CFR 240.3b-4(c)] defines
``foreign private issuer'' as a foreign issuer other than a foreign
government that either has 50 percent or less of its outstanding
voting securities held of record by U.S. residents or, if more than
50 percent of its outstanding voting securities are held by U.S.
residents, about which none of the following is true: (1) A majority
of its executive officers or directors are U.S. citizens or
residents; (2) more than 50 percent of its assets are located in the
U.S.; or (3) the issuer's business is administered principally in
the U.S.
\58\ The proposed Web site posting requirement would apply only
to the extent a filer already maintains a corporate Web site.
\59\ Interactive data would be required as an exhibit to a
Securities Act registration statement that contains financial
statements, such as a Form S-1 [17 CFR 239.11] used in connection
with an initial public offering. Interactive data would not be
required as an exhibit to a Securities Act registration statement
that does not contain financial statements, such as a Form S-3 filed
by an issuer that is eligible to and does incorporate by reference
all required financial statements from its periodic reports.
\60\ Foreign private issuers filing on Form 10-Q would be
required to provide financial statements in quarterly reports using
interactive data.
\61\ The proposed rules would not include any investment company
that is registered under the Investment Company Act or any
``business development company,'' as defined in Section 2(a)(48) of
that Act [15 U.S.C. 80a-2(a)(48)]. Business development companies
are a category of closed-end investment companies that are not
required to register under that Act. The proposed rules also would
not include any entity that reports under the Exchange Act and
prepares its financial statements in accordance with Article 6 of
Regulation S-X [17 CFR 210.6-01 et seq.]. The proposed rules would
not apply to these entities because the standard list of tags for
investment management is not yet fully developed.
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By enabling filers to further automate their financial processes,
interactive data may eventually help filers improve the speed at which
they generate financial information, while reducing the cost of filing
and potentially increasing the accuracy of the data. For example, with
standardized interactive data tags, registration statements and
periodic reports may require less time for information gathering and
review. Also, standardized interactive data tagging may enhance the
ability of an issuer's in-house financial professionals to identify and
correct errors in the issuer's registration statements and periodic
reports filed in traditional electronic format. Filers also may gain
benefits not directly related to public financial disclosures. For
example, filers that use interactive data may be able to consolidate
enterprise financial
[[Page 32798]]
information more quickly and potentially more reliably across operating
units with different accounting systems. However, we recognize that at
the outset, filers would most likely prepare their interactive data as
an additional step after their financial statements have been prepared.
The principal elements of the proposal are as follows:
Domestic and foreign large accelerated filers \62\ that
use U.S. GAAP and have a worldwide public common equity float above $5
billion \63\ as of the end of their most recently completed second
fiscal quarter would provide to the Commission a new exhibit.\64\ The
exhibit would contain their financial statements,\65\ and any
applicable financial statement schedules in interactive data format.
The requirement would apply beginning with fiscal periods ending on or
after December 15, 2008.\66\
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\62\ Exchange Act Rule 12b-2 [17 CFR 240.12b-2] generally
defines ``large accelerated filer'' as an issuer that has common
equity held by unaffiliated persons with a value of at least $700
million, has been subject to the Exchange Act's periodic reporting
requirements for at least 12 months, has filed at least one annual
report, and is not eligible to use the disclosure requirements
available to smaller reporting companies for its periodic reports.
\63\ As of the end of 2006, the $5 billion cutoff would
establish a category of approximately 500 filers.
\64\ The exhibit would be required with such filers'
registration statements, quarterly, if applicable, and annual
reports, and transition reports.
\65\ When we refer to financial statements, we mean the face of
the financial statements and accompanying footnotes. The face of the
financial statements refers to the statement of financial position
(balance sheet), income statement, statement of comprehensive
income, statement of cash flows, and statement of owners' equity, as
required by Commission regulations. References to the financial
statements as required for interactive data reporting include any
required schedules to the financial statements, unless we expressly
state otherwise.
\66\ The proposed schedule is premised on the rules being
adopted this fall in time for affected filers to implement this
schedule, and could be adjusted depending on when the Commission
adopts any final rules.
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All other domestic and foreign large accelerated filers
using U.S. GAAP would be subject to the same interactive data reporting
requirements the following year, beginning with fiscal periods ending
on or after December 15, 2009.
All remaining filers using U.S. GAAP, including smaller
reporting companies,\67\ and all foreign private issuers that prepare
their financial statements in accordance with IFRS as issued by the
IASB,\68\ would be subject to the same interactive data reporting
requirements beginning with fiscal periods ending on or after December
15, 2010.\69\
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\67\ Item 10(f)(1) of Regulation S-K [17 CFR 229.10(f)(1)], Rule
405 under the Securities Act [17 CFR 230.405] and Rule 12b-2 under
the Exchange Act [17 CFR 240.12b-2] define the term ``smaller
reporting company,'' in general, as a company that has common equity
securities held by non-affiliates with a market value of less than
$75 million or, if that value cannot be calculated, had less than
$50 million in revenue in the prior fiscal year.
\68\ The proposed rules would not require foreign private
issuers that prepare their financial statements in accordance with a
variation of IFRS as issued by the IASB to provide interactive data.
\69\ We do not propose to require foreign private issuers to
provide in interactive data format interim financial information
contained in Form 6-K or any financial information prepared in
accordance with non-U.S.GAAP that must be reconciled to U.S. GAAP in
the foreign private issuer's Exchange Act reports.
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Filers providing financial statements in interactive data
format would be required to use the most recent and appropriate list of
tags released by XBRL U.S. or the IASCF as required by the EDGAR Filer
Manual. Filers also would be required to tag a limited number of
document and entity identifier elements, such as the form type, company
name, and public float. As with interactive data for the financial
statements, these document and entity identifier elements would be
formatted using the appropriate list of tags as required by the EDGAR
Filer Manual.\70\
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\70\ The appropriate list of tags for document and entity
identifier elements would be a list released by XBRL U.S., but would
not be specific to U.S. GAAP or IFRS as issued by the IASB and would
be required to be used by all issuers required to submit interactive
data regardless of whether reporting in U.S. GAAP or IFRS as issued
by the IASB.
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A filer required to provide financial statements in
interactive data format to the Commission also would be required to
post those financial statements in interactive data format on its
corporate Web site on the same day it filed or was required to file the
related registration statement or report with the Commission, whichever
is earlier.\71\
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\71\ The day the registration statement or report is submitted
electronically to the Commission may not be the business day on
which it was deemed officially filed. For example, a filing
submitted after 5:30 p.m. generally is not deemed officially filed
until the following business day. Under the proposed rules, the Web
posting would be required to be posted at any time on the same day
that the related registration statement or report is deemed
officially filed or required to be filed, whichever is earlier.
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The proposed rules would not alter the requirements to
provide financial statements and any required financial statement
schedules with the traditional format filings.\72\
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\72\ When we established the voluntary program, we stated in the
adopting release that the interactive data submission would be
supplemental to filings and not replace the required traditional
electronic format of the financial information it contains. We also
said that volunteers would be required to continue to file their
traditional electronic filings. See Part II.D of Release No. 33-8529
(Feb. 3, 2005) [70 FR 6556, 6559].
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Financial statements in interactive data format would be
provided as exhibits identified in Item 601(b) of Regulation S-K and
Form 20-F.
Financial statement footnotes and financial statement
schedules initially would be tagged individually as a block of text.
After a year of such tagging, a filer also would be required to tag the
detailed disclosures within the footnotes and schedules.
Viewable interactive data as displayed through software
available on the Commission's Web site, and to the extent identical in
all material respects to the corresponding portion of the traditional
format filing, would be subject to all the same liability provisions of
the federal securities laws as the corresponding data in the
traditional format part of the official filing.
Data in the interactive data file submitted to us
generally would be subject to the federal securities laws in a manner
similar to that of the voluntary program and, as a result, would be
[cir] Excluded from the officer certification requirements under
Rules 13a-14 and 15d-14 of the Exchange Act; \73\
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\73\ 17 CFR 240.13a-14 and 17 CFR 240.15d-14.
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[cir] Deemed not filed for purposes of specified liability
provisions; and
[cir] Protected from liability for failure to comply with the
proposed tagging and related requirements if the interactive data file
either
[ballot] Met the requirements; or
[ballot] Failed to meet those requirements, but the failure
occurred despite the issuer's good faith and reasonable effort, and the
issuer corrected the failure as soon as reasonably practicable after
becoming aware of it.
The proposed rules would require the financial information
and document and entity identifier elements to be tagged according to
Regulation S-T and the EDGAR Filer Manual.\74\
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\74\ Proposed Rule 405 of Regulation S-T would directly set
forth the basic tagging requirements and indirectly set forth the
rest of the tagging requirements through the requirement to comply
with the EDGAR Filer Manual. Consistent with proposed Rule 405, the
Filer Manual would contain the technical tagging requirements.
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The initial interactive data exhibit of a filer would be
required within 30 days of the earlier of the due date or filing date
of the related report or registration statement, as applicable. In year
two, a filer would have a similar 30 day grace period for its first
interactive data exhibit that includes detailed tagging of its
footnotes and schedules. All other interactive data exhibits would be
required at the same time as the rest of the related report or
registration statement.
[[Page 32799]]
Filers that do not provide or post required interactive
data on the date required would be deemed not current with their
Exchange Act reports and, as a result, would not be eligible to use the
short forms S-3, F-3, or S-8, or elect under Form S-4 or F-4 to provide
information at a level prescribed by Form S-3 or F-3. Similarly, such
filers would not be deemed to have available adequate current public
information for purposes of the resale exemption safe harbor provided
by Rule 144.\75\ A filer that was deemed not current solely as a result
of not providing an interactive data exhibit when required would be
deemed current and timely upon providing the interactive data.
Therefore it would regain the ability to incorporate by reference,
short form registration statement eligibility, and current status for
purposes of determining adequate current public information under Rule
144. As such, it would not lose its status as having ``timely'' filed
its Exchange Act reports solely as a result of the delay in providing
interactive data.
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\75\ 17 CFR 230.144.
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Although we have not proposed at this time to require
interactive data for executive compensation disclosure because a
definitive list of tags for this purpose is not yet completed, we are
soliciting comment on the usefulness to investors and others of such
interactive data, as well as the extent of the related costs and
associated questions.
We anticipate that if the proposed rules become effective,
companies that are not required to provide interactive data until a
later time would have the option to do so earlier.
We also anticipate that the voluntary program would be
modified, if the proposed rules are adopted, to permit investment
companies to participate, but to exclude non-investment company
participation. As a result, the voluntary program would continue for
the financial statements of investment companies that are registered
under the Investment Company Act, and business development companies
and other entities that report under the Exchange Act and prepare their
financial statements in accordance with Article 6 of Regulation S-X.
The voluntary program also would continue for the risk/return summary
section of mutual fund prospectuses.\76\
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\76\ See Release No. 33-8823 (July 11, 2007) [72 FR 39290]. On
May 21, 2008, the Commission voted to propose rules that would
require interactive data for the risk/return summary section of
mutual fund prospectuses. See Press Release No. 2008-94 (May 21,
2008).
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II. Discussion of the Proposed Amendments
A. Submission of Financial Information Using Interactive Data
For several years XBRL U.S. and its related entities have developed
and refined the list of tags to classify and define financial
information in accordance with U.S. financial reporting practices and
Commission regulations.\77\ Many investors, auditors, accountants, and
others, including companies that have been providing interactive data
disclosure in the voluntary program, have helped in this process.
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\77\ See Press Release No. 2006-158 (Sept. 25, 2006).
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Interactive data financial statements using the list of tags for
U.S. financial statement reporting have been submitted voluntarily to
us by over 75 companies, some of which have done so since the start of
the voluntary program approximately three years ago. The list of tags
for U.S. financial statement reporting has improved significantly since
the original version available for the voluntary program.\78\ During
this period, there has been a growing development of software products
for users of interactive data, as well as of applications to assist
companies to tag their financial statements using interactive data.\79\
The growing number of software applications available to preparers and
consumers is helping make interactive data increasingly useful to both
institutional and retail investors, as well as to other participants in
the U.S. and global capital markets. On this basis, we believe
interactive data, and in particular the XBRL standard, have become
widespread and that the updated list of tags for U.S. financial
statement reporting is now sufficiently advanced to require that U.S.
GAAP-reporting companies provide their interactive financial statements
in interactive data format.\80\
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\78\ When we adopted the voluntary program, the list of tags for
U.S. GAAP financial statement reporting contained approximately
4,000 data elements. The list of tags released on April 28, 2008
contains approximately 13,000 data elements, with the most
significant additions relating to the development of elements for
standard U.S. GAAP footnote disclosure.
\79\ See Press Release No. 2007-253 (Dec. 5, 2007).
\80\ As previously noted in Part I.C, however, the proposed
rules would not apply to investment companies registered under the
Investment Company Act and other entities. See footnote 61 above.
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With respect to the list of tags for IFRS financial reporting, the
IASCF has, over several years, developed a list of tags designed to
classify and define financial information in accordance with
international accounting standards as promulgated by the IASB. Over the
course of the past year, the IASCF has worked to strengthen the
development of its list of tags by forming an XBRL Advisory Committee
and an XBRL Quality Reporting Team, both consisting of international
representatives from investors, auditors, accountants, regulators and
others. On March 31, 2008, the IASCF published a near final version of
the list of tags for IFRS financial reporting,\81\ which is subject to
public comment through May 30, 2008.\82\ In addition, the IASCF is
collaborating with XBRL U.S. and other parties to align practices
designed to develop the IFRS list of tags. This collaboration involves
the development of the appropriate scope for the IFRS list of tags'
content and technology architecture. On this basis, we believe that the
updated IFRS list of tags will be sufficiently advanced to require that
foreign private issuers that prepare their financial statements in
accordance with IFRS as issued by the IASB provide their financial
statements in interactive data format under the phase-in schedule we
are proposing.
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\81\ Unless stated otherwise, when we refer to the ``list of
tags for IFRS financial reporting'' we mean the interactive data
taxonomy that is based on IFRS as issued by the IASB.
\82\ See Press Release, The IASC Foundation publishes IFRS
Taxonomy 2008 (March 31, 2008), available at http://www.iasb.org/News/Press+Releases/The+IASC+Foundation+publishes+IFRS+Taxonomy+2008.htm.
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As discussed in more detail below, our proposed rules would set
forth a phase-in period beginning with domestic and foreign large
accelerated U.S. GAAP filers with a worldwide public common equity
float above $5 billion as of the end of their most recently completed
second fiscal quarter. These large accelerated filers would be subject
to the proposed rules beginning with their Securities Act registration
statements, periodic reports, and transition reports that contain
financial statements for fiscal periods ending on or after December 15,
2008. Although it would not be required, we encourage other U.S. GAAP
filers to provide financial information in interactive data format
during the phase-in period. We also encourage foreign private issuers
that prepare their financial statements in accordance with IFRS as
issued by the IASB to provide financial information in interactive data
format during the phase-in period. In each instance, these filers'
voluntary interactive data submissions would be under the proposed
rules instead of the existing rules of the voluntary program.
[[Page 32800]]
We are proposing that filers be required to provide the same
information in interactive data format that companies have been
providing in the voluntary program,\83\ together with the following
items: The footnotes to the financial statements; any applicable
schedules to the financial statements; financial statements for
Securities Act registration statements; and document and entity
identifier tags, such as company name and public float. As was the case
in the voluntary program, the proposed requirement for interactive data
reporting is intended to be disclosure neutral. We do not intend the
rules to result in companies providing more, less, or different
disclosure for a given disclosure item depending upon the format
whether ASCII, HTML, or XBRL.
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\83\ Unlike the voluntary program, unless otherwise stated, an
interactive data file would be required to be provided with the
traditional format filing to which it relates. Companies would not
be permitted to provide the interactive data file with a Form 8-K or
6-K.
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We propose to continue requiring the existing electronic formats
now used in filings because we believe it is necessary to monitor the
usefulness of interactive data reporting to investors and the cost and
ease of providing interactive data before attempting further
integration of the interactive data format. However, the proposed rules
would treat viewable interactive data as displayed through software
available on the Commission's Web site, and interactive data
generally,\84\ as part of the official filing, instead of a supplement
as is the case in the voluntary program. Further evaluation will be
useful with respect to the availability of inexpensive, sophisticated
interactive data viewers. Currently there are many software providers
and financial printers that are developing interactive data viewers. We
anticipate that these will become widely available and increasingly
useful to investors.
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\84\ As further discussed below in Part II.C, interactive data
generally would be deemed not filed for purposes of specified
liability provisions.
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We expect that the open standard feature of XBRL format will
facilitate the development of applications and software, and that some
of these applications may be made available to the public for free or
at a relatively low cost. The expected continued improvement in this
software would give the public increasingly useful ways to view and
analyze company financial information. After evaluating the use of the
new interactive data technologies, software, and lists of tags, we may
consider proposing rules to eliminate financial statement reporting in
ASCII or HTML format. Or we may consider proposing rules to require a
filing format that integrates ASCII or HTML with XBRL.
We believe XBRL is the appropriate interactive data format with
which to supplement ASCII and HTML. Our experience with the voluntary
program and feedback from company, audit, and software communities
point to XBRL as the appropriate open standard for the purposes of this
rule. As a derivative of the XML standard, XBRL data would be
compatible with a wide range of open source and proprietary XBRL
software applications. As discussed above, many XBRL-related products
exist for analysts, investors, public and private companies, and others
to more easily create and compare financial data; still others are in
development, and that process would likely be hastened by public
company reporting using interactive data. Comments on our 2004 concept
release and proposed rules in 2004 and 2007 generally supported
interactive data and XBRL in particular.\85\ Several other factors
support our views regarding XBRL's broad and growing acceptance,
internationally as well as in the U.S. For example, as noted above, in
addition to the use of XBRL by other U.S. agencies,\86\ several foreign
securities regulators have adopted voluntary or required XBRL financial
reporting.\87\ We understand that several U.S. public and private
companies use XBRL in connection with financial reporting or
analysis.\88\
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\85\ Release No. 33-8497 (Sept. 27, 2004) [69 FR 59111] (Concept
Release); Release No. 33-8496 (Oct. 1, 2004) [69 FR 59098]; Release
No. 33-8781 (Feb. 12, 2007) [72 FR 6676]. See, e.g., letter from
Deloitte & Touche LLP regarding the Adopting Release and letter from
PR Newswire Association LLC regarding the Concept Release. We also
note that participants in the voluntary program provided positive
feedback with respect to possible required use of XBRL. For example,
the vast majority of voluntary program participants that submitted
responses and views to a questionnaire answered in the affirmative
to the question ``Based on your experience to date, do you think it
would be advisable for the Commission to continue to explore the
feasibility and desirability of the use of interactive data on a
more widespread and, possibly, mandated basis?'' See question V.f in
the Interactive Data Voluntary Program Questionnaire available at
http://www.sec.gov/cgi-bin/XBRL_Questionnaire.
\86\ See note 49 above. Also we note CIFiR's support of XBRL as
referenced above in Part B.2
\87\ For example, such countries include Canada, China, Israel,
Japan, Korea and Thailand.
\88\ Whenever we seek comment in this release, we request that
commenters distinguish in their responses, as appropriate, between
the proposed requirements applicable to U.S. GAAP filers and those
applicable to foreign private issuers that prepare their financial
statements in accordance with IFRS as issued by the IASB, regardless
of whether our question distinguishes between or references one or
both of these types of issuers.
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Request for Comment:
Should we adopt rules that require each filer's financial
statements to be provided in interactive data format? If we do so,
should we include a phase-in period or temporary exception for detailed
tagging of the financial statement footnotes? Should schedules to the
financial statements be tagged? What are the principal factors that
should be considered in making these decisions? Is it useful to users
of financial information to continue to have, in addition to
interactive data, duplicate, human-readable financial statements in
ASCII or HTML format?
What opportunities exist to improve the display of
financial statements prepared using interactive data? For example, if
the technology is sufficiently developed, should we propose rules to
encourage or require a format that embeds interactive data tags in HTML
so that the entire set of financial statements can be viewed in a
browser? How should these affect any continued requirement to file
ASCII- or HTML-formatted financial statements? What obstacles exist to
making such improvements in the display of XBRL information?
Is it appropriate to require public companies to provide
interactive data using XBRL? Alternatively, in place of such a
requirement, should the Commission instead wait to see whether
interactive data reporting by public companies is voluntarily adopted?
Without a requirement, would the development of products for producing
and using interactive data from private and public companies meet the
needs of investors, analysts, and others who seek interactive data?
Would a large percentage of public companies provide interactive data
voluntarily, and following the same standard, if not required to do so?
If we do not adopt the proposed rules and instead wait to
see whether companies on their own expand their use of interactive
data, would such data be less comparable among companies? Is there a
``network effect,'' such that interactive data would not be useful
unless many or all filers provide their financial statements using
interactive data? Would the development of software for retail
investors to obtain and make use of such data be slowed without a
requirement that companies provide interactive data?
What advantages are there to investors having the company
responsible for preparing financial information in interactive data
format, as opposed to a model in which third parties independently
prepare the
[[Page 32801]]
information in interactive format and charge a fee for it?
Do commenters agree that compared to reports using ASCII
and HTML, interactive data would require less manually-transferred
data? If so, do commenters believe that the proposed rules would result
in less human error and therefore contribute to reduced costs?
If we require interactive data reporting and the proposed
rules result in more effective and efficient financial reporting with
reduced human error and cost, would fees charged by financial printers
or other service providers be likely reduced to reflect such lower
costs?
If we adopt rules requiring interactive data financial
reporting, is the XBRL standard the one that we should use? Are any
other standards becoming more widely used or otherwise superior to
XBRL? What would the advantages of any such other standards be over
XBRL?
Is the XBRL format for interactive data sufficiently
developed to require its use at this time with regard to both U.S. GAAP
and IFRS as issued by the IASB? If not, what indicators should we use
to determine when it has become sufficiently developed to require its
use?
Are vendors likely to develop and make commercially
available software applications or Internet products that will be able
to deliver the functionality of interactive data to retail investors?
How important is it that many different types of viewers
with varying levels of sophistication and functionality be available to
investors? In addition to the free viewer provided on the SEC Web site,
are there likely to be other such products available at low or no cost?
If we require interactive data financial reporting, what
are the principal challenges facing the eventual integration of such
reporting with the current filing formats, ASCII and HTML, so that
filing in all three formats would no longer be necessary?
B. Phase-In Under the Proposed Rules
1. Overview
The proposed rules initially would require interactive data
reporting only by domestic and foreign large accelerated filers that
use U.S. GAAP and have a worldwide public common equity float above $5
billion as of the end of their most recently completed second fiscal
quarter.\89\ If the rules are adopted by this fall, we anticipate that
the first required submissions would be for periods ending on or after
December 15, 2008. For calendar year companies, this would first apply
to their December 31, 2008 annual reports filed on Form 10-K or 20-F
and any Securities Act registration statement that contains financial
statements for a period ended on or after December 15, 2008.\90\ We are
sensitive to concerns that undue expense and burden should not
accompany the adoption of required interactive data financial
reporting. We therefore propose a 30-day grace period for each filer's
initial interactive data submission, and a 30-day grace period in year
two of each filer's interactive data reporting when its footnotes and
schedules initially would be required to be tagged in detail.\91\
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\89\ This would amount to approximately 500 companies. We
propose the end of the most recently completed second fiscal quarter
because that date is consistent with when a filer is required to
determine its status as an accelerated and large accelerated filer.
\90\ For companies with a September 30 fiscal year end, the
requirement would first apply to their December 31, 2008 quarterly
report filed on Form 10-Q and any Securities Act registration
statement that contains financial statements for a period ended on
or after December 15, 2008.
\91\ We discuss more fully at Part II.C liability related to
required submissions of interactive data in general and the
continuation of some of the limitations on liability used in the
voluntary program in particular.
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Filers under the proposed rules would be required to convert their
financial statements into an interactive data file using the list of
tags for U.S. financial statement reporting or the IFRS list of tags,
in either case as approved for use by the Commission. The submission
also would be required to include any supporting files as prescribed by
the EDGAR Filer Manual. Interactive data would be required for the
entirety of the financial statements, although tagging of the footnotes
and schedules by increasing level of detail would be phased in the
following year. We are not proposing at this time that filers be
required to provide interactive data for their Management's Discussion
and Analysis, executive compensation, or other financial, statistical
or narrative disclosure. We solicit comment, however, on the
advisability of permissible optional interactive data for financial
disclosures that are not part of the current lists of tags for U.S.
GAAP financial statement reporting and IFRS financial reporting.
We also solicit comment on the usefulness to investors of
interactive data of executive compensation and the burden such
reporting would have on companies. For example, we solicit comment on
whether the scope of interactive data available on the Executive
Compensation Reader, which we posted on our Web site on December 21,
2007, \92\ would be an appropriate level of executive compensation
data. Our requests for comment regarding interactive data and executive
compensation follow up and expand on previous requests in 2006.\93\ We
also note substantial interest in interactive disclosure of executive
compensation, for example a draft list of tags for executive
compensation that has been made available for public comment \94\ and
financial Web pages that link to our Executive Compensation Reader to
provide streamlined Internet viewers of executive compensation. We ask
detailed questions at the end of Part II.B.3.a.\95\
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\92\ See Press Release No. 2007-268 (Dec. 21, 2007).
\93\ Release No. 33-8655 (Jan. 27, 2006). Two commenters
addressed this series of questions. One commenter supported tagging
executive compensation disclosure using XBRL; the other commenter
believed it would not be helpful.
\94\ See ``Broadridge Releases Draft XBRL Proxy Statement
Taxonomy for Public Comment,'' Reuters December 4, 2007.
\95\ See Part II.B.3.a, below.
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The following tables identify the registration statements and
periodic reports that would be required to include interactive data
according to the company's filing status.\96\
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\96\ Transition reports that contain financial statements of the
type and for the periods specified also would be required to be
submitted in interactive data format under the proposed rules. Note
that these dates apply to the initial required interactive data
disclosure and that detailed tagging of the financial statement
footnotes and schedules would not be required for an additional
year, as described below in section II.B.3.a.
Domestic and Foreign Large Accelerated Registration statements
Filers Using U.S. GAAP with Worldwide containing financial
Public Common Equity Float above $5 statements for a period ending
Billion as of the End of Their Most on or after December 15, 2008,
Recently Completed Second Fiscal Form 10-Q \97\ for quarterly
Quarter. periods or Form 10-K \98\ or
20-F \99\ for annual periods
ending on or after December
15, 2008.
All Other Large Accelerated Filers Registration statements
Using U.S. GAAP. containing financial
statements for a period ending
on or after December 15, 2009,
Form 10-Q for quarterly
periods or Form 10-K or 20-F
for annual periods ending on
or after December 15, 2009.
[[Page 32802]]
All Remaining Filers Using U.S. GAAP... Registration statements
containing financial
statements for a period ending
on or after December 15, 2010,
Form 10-Q for quarterly
periods or Form 10-K or 20-F
for annual periods ending on
or after December 15, 2010.
Foreign Private Issuers with Financial Registration statements
Statements Prepared in Accordance with containing financial
IFRS as Issued By the IASB. statements for a period ending
on or after December 15, 2010
or Form 20-F for annual
periods ending on or after
December 15, 2010.
2. Companies and Filings Covered by Proposed Rules and Phase-In
The proposed rules would cover all companies reporting in either
U.S. GAAP, including smaller reporting companies and foreign private
issuers that report in U.S. GAAP or, in the case of foreign private
issuers, in accordance with IFRS as issued by the IASB.\100\ The
proposed phase-in would require domestic and foreign large accelerated
filers that report in U.S. GAAP and meet the minimum worldwide common
equity float of greater than $5 billion to provide their initial
interactive data submissions in year one of the phase-in period
discussed above. All other U.S. GAAP filers that meet the definition of
large accelerated filer would be required to provide their initial
interactive data submissions in year two of the phase-in period. All
remaining U.S. GAAP filers, including smaller reporting companies and
companies not previously subject to periodic reporting requirements,
would be required to provide their initial interactive data submissions
in year three of the phase-in period.
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\97\ 17 CFR 249.308a.
\98\ 17 CFR 249.310.
\99\ 17 CFR 249.220f.
\100\ As noted in Part I.C, however, the proposed rules would
not apply to investment companies registered under the Investment
Company Act, business development companies, or other entities that
report under the Exchange Act and prepare their financial statements
in accordance with Article 6 of Regulation S-X.
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Foreign private issuers that prepare their financial statements in
accordance with IFRS as issued by the IASB would be required to provide
their initial interactive data submissions in year three of the phase-
in period.
The additional phase-in time for all but the largest accelerated
filers is intended to permit companies to plan and implement their data
tagging with the benefit of the experience of year one filers. It also
is intended to enable us to monitor implementation and, if necessary,
make appropriate adjustments during the phase-in period. In the case of
IFRS filers, the phase-in also would provide the necessary time for
development and testing of the list of tags for IFRS financial
reporting.
Our multiyear experience with the voluntary program has helped us
understand the extent to which a filer would incur additional costs to
create and submit its existing financial disclosures in interactive
data format. Based on that experience, we believe that the process of
converting a filer's existing ASCII or HTML financial statements into
interactive data would not impose a significant burden or cost. The
voluntary program clearly demonstrated that companies can, if they
choose, tag their financial statements using currently available
software without need of outside services or consultants;
alternatively, they could rely on financial printers, consultants, and
software companies for assistance, although they would retain ultimate
responsibility for both their financial statements and their tagged
data. As discussed in more detail in the cost-benefit analysis
below,1\101\ we believe that modest first-year costs for a company
would decrease in subsequent periods, particularly once footnote
tagging is implemented. We also believe that these costs would be
justified by interactive data's benefits. As with domestic registrants,
we believe foreign private issuers that report in U.S. GAAP or prepare
their financial statements in accordance with IFRS as issued by the
IASB would be able to comply with the rules without incurring
significant costs.
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\101\ See Part V.
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We expect that smaller companies, which generally are
disproportionately affected by regulatory costs, also would be able to
provide their reports in interactive data format without undue effort
or expense. While interactive data reporting involves changes in
reporting procedures mostly in the initial reporting periods, we expect
that these changes would provide efficiencies in future periods. As a
result, there may be potential net savings to the filer, particularly
if interactive data become integrated into the filer's financial
reporting process. While we recognize that requiring interactive data
financial reporting would likely result in start-up expenses for
smaller companies, these expenses may be substantially lower than those
of larger filers, given that smaller filers tend to have simpler
financial statements than larger companies, with fewer elements and
disclosures to tag. In addition, we expect that both software and
third-party services will be available to help meet the needs of
smaller filers. We also intend that the third year phase-in for smaller
reporting companies would permit them to learn from the experience of
the earlier filers. It would also give them a longer period of time
across which to spread first-year data tagging costs.
As noted above,\102\ CIFiR has issued a Progress Report that
contains a developed proposal that the Commission phase in the
requirement that companies file financial statements using interactive
data after the satisfaction of specified preconditions relating to:
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\102\ See Part I.C above.
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Successful testing of the list of tags for U.S. financial
statement reporting;
The capacity of reporting companies to file interactive
data using the new list of tags for U.S. financial statement reporting;
and
The ability of the Commission's electronic filing system
to provide an accurate human-readable version of the interactive
data.\103\
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\103\ We are giving careful consideration to CIFiR's developed
proposal. We believe that the factors they cite as preconditions
will occur before the start of a requirement to provide interactive
data. We expect to consider the factors in connection with
determining whether to adopt the proposed interactive data
submission requirements with regard to companies that prepare their
financial statements in accordance with U.S. GAAP. We also expect to
consider the same factors for companies that prepare their financial
statements in accordance with IFRS as issued by the IASB.
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The Progress Report's developed proposal recommends that we phase
in financial statements using interactive data by requiring the largest
500 domestic registrants,\104\ as determined by the value of shares
held by unaffiliated persons, to furnish (rather than file) interactive
data for the face of their financial statements and, in block-tagged
form,\105\ the footnotes to the financial statements. The Progress
Report's developed proposal also
[[Page 32803]]
recommends that, one year after we impose this requirement on the first
group of registrants, we impose the same requirement on the remaining
domestic registrants that fall within the definition of ``large
accelerated filer.'' Finally, the Progress Report's developed proposal
recommends that, once the specified conditions have been satisfied and
the second phase-in period has been implemented, we evaluate whether
and when to require that the domestic large accelerated filers file
rather than furnish financial statements in interactive data format, as
well as the inclusion of all other reporting companies.
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\104\ The developed proposal does not address foreign companies.
We do not believe that whether a U.S. GAAP reporting company is
domestic or foreign should determine the applicability of the
proposed rules, and therefore foreign companies using U.S. GAAP
would be included in the phase-in schedule along with their domestic
counterparts. As noted, foreign private issuers that prepare their
financial statements in accordance with IFRS as issued by the IASB
also are included in the proposal, although they would not be phased
in until year three.
\105\ By ``block'' text we mean that the entire footnote or
other discrete item, such as a schedule or table, would be tagged as
an individual element.
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We have carefully considered the Committee's thoughtful developed
proposal, including the recommended phase-in of 500 initial companies
and delayed consideration of non-accelerated and other filers until
after two years. We propose a phase-in schedule similar to the one for
which the Committee calls.\106\ However, instead of waiting until after
the second year to determine whether to propose extending the
applicability of the rules to all filers, the proposed rules would
establish a phase-in for the remaining companies' required interactive
data submissions that would begin in the third year. Based on
participants' experience with the voluntary program and our
consultations with filers, software providers and filing
intermediaries, we believe the proposed rules would accelerate the
improvement and availability of inexpensive software. This, in turn,
would generate more options and assistance for non-accelerated filers,
smaller reporting companies, and foreign private issuers so that they
could become proficient in the use of interactive data without undue
burden.
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\106\ As previously noted, the proposed worldwide public float
cutoff of $5 billion would result in approximately 500 companies
subject to the proposed rules in year one.
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Although including a larger number of filers in the initial phase-
in might increase the overall commercial and analytical value of the
interactive data, which in turn would likely increase the supply of
software for analyzing and presenting interactive data to analysts and
investors, we believe the establishment of a firm schedule for all U.S.
GAAP- and IFRS-reporting companies to file their financial statements
using interactive data would serve nearly as well to stimulate the
further development of interactive data-related software and services
while also affording most companies additional time to learn from the
experience of others.
We also believe that concurrently adopting a phase-in for non-
accelerated filers, smaller reporting companies, and foreign private
issuers using IFRS as issued by the IASB would establish an appropriate
and measured timeline, which we would be able to monitor and, if
necessary, reconsider during the first two years of the phase-in.
Request for Comment:
Is the proposed schedule for implementation of interactive
data tagging appropriate?
Should we delay the first required interactive data
submissions until the second half of 2009 or later? What benefits would
there be to advancing or delaying implementation of the proposed rules?
How much lead time do large accelerated filers need to familiarize
themselves with interactive data and the process of mapping financial
statements using the list of tags for U.S. financial statement
reporting or IFRS financial reporting?
Should the initial submission required by the proposed
rules be a periodic report? If so, should it be a Form 10-Q for
domestic issuers? \107\ Would this be an easier report for companies to
prepare, or would it be best for companies to begin providing
interactive data with respect to the fiscal year end financial
statements?
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\107\ We note that when the Commission adoped the electronic
filing requirements, the first required electronic filing was a Form
10-Q rather than a registration statement or Form 10-K. Release No.
33-6977 (Feb. 23, 1993) [58 FR 14628].
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Instead of a cut-off using a worldwide public common
equity float of $5 billion at the end of the issuer's most recently
completed second fiscal quarter, would an initial phase-in including
all large accelerated filers or large accelerated filers with a smaller
public float better accomplish the goals outlined in the release? If we
use a public float, should it be $5 billion or some other amount lower
or higher than the proposed cut-off, such as $3 billion or $10 billion?
Would some other cut-off, or some other schedule be preferable? Would
it be better to measure the public float as of a time other than the
end of the issuer's most recently completed second fiscal quarter and,
if so, when?
Would the initial phase-in include enough companies to
encourage potential vendors of interactive data products and services
to invest in the development and marketing of new and improved products
and services? If not, how would such a level affect the markets for
both filer and investor products and services?
Should the phase-in schedules differ as between U.S. GAAP
non-accelerated and smaller reporting companies and foreign private
issuers that prepare their financial statements in accordance with IFRS
as issued by the IASB?
Is the proposed third-year phase-in approach for companies
other than large accelerated filers necessary or sufficient for them to
familiarize themselves with interactive data and the process of mapping
financial statements using the list of tags for U.S. financial
statement reporting or IFRS financial reporting?
Is the proposed third-year phase-in sufficient for smaller
reporting companies and foreign private issuers to allocate the
necessary resources and meet the proposed requirements, or would a more
delayed schedule be appropriate?
Should smaller reporting companies and foreign private
issuers reporting in U.S. GAAP be subject to the proposed rules at all?
Should compliance with the proposed rules be solely voluntary for
smaller reporting companies or foreign private issuers reporting in
U.S. GAAP?
Would requiring interactive data from foreign private
issuers reporting in U.S. GAAP create a disincentive for these issuers
to use U.S. GAAP in preparing their financial statements? Is this
offset by the proposed requirement that foreign private issuers
reporting in IFRS as issued by the IASB use interactive data within
three years? Should the requirements extend only to foreign private
issuers reporting in U.S. GAAP that file on domestic forms?
Should foreign private issuers that prepare their
financial statements in accordance with IFRS as issued by the IASB be
subject to the new rules, as proposed? Should the proposed rules also
apply to foreign private issuers that prepare their financial
statements in their local GAAP and reconcile to U.S. GAAP for Exchange
Act reporting purposes if their home jurisdictions have developed
interactive data reporting programs? Would the proposed rules' current
exclusion of such issuers create a disincentive for foreign private
issuers to use IFRS as issued by the IASB for their Exchange Act
reporting?
Are there extra burdens that foreign private issuers
reporting in U.S. GAAP or IFRS as issued by the IASB would incur under
the proposed rules? Do any such burdens necessitate a one year or other
delay in the proposed phase-in requirement as and when it otherwise
would apply to them?
Do foreign private issuers using foreign filing agents
have comparable or
[[Page 32804]]
sufficient access to interactive data software and support services?
Should the proposed new rules apply to a Canadian issuer's
financial statements prepared in accordance with U.S. GAAP and filed
with the Commission under cover of Form 40-F? \108\ Should the proposed
new rules apply to a Canadian issuer's registered offering on Form F-9
\109\ or F-10, or any other forms available under the
Multijurisdictional Disclosure System? \110\
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\108\ 17 CFR 249.240f. Certain Canadian foreign private issuers
file registration statements and annual reports under the
Multijurisdictional Disclosure System, which permits eligible
Canadian companies to use their disclosure documents prepared in
accordance with Canadian requirements in filings with the
Commission.
\109\ 17 CFR 239.39.
\110\ 17 CFR 239.40.
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Should we permit or require foreign private issuers filing
their annual financial statements using U.S. GAAP also to provide in
interactive data format any interim financial information that they
furnish on Form 6-K? If so, what factors should we consider in
determining whether to require or permit such submissions? Should such
a requirement be phased in? What are the answers to these questions if
the foreign private issuer uses IFRS as issued by the IASB?
Should investment companies registered under the
Investment Company Act, business development companies or other
entities that report under the Exchange Act and prepare their financial
statements in accordance with Article 6 of Regulation S-X be subject to
the proposed rules? Is the current investment management list of tags
sufficiently developed for required use by these companies?
The Commission recently proposed to accelerate the filing
deadline for annual reports filed on Form 20-F by foreign private
issuers under the Exchange Act by shortening the filing deadline from 6
months to within 90 days after the foreign private issuer's fiscal
year-end in the case of large accelerated and accelerated filers, and
to within 120 days after a foreign private issuer's fiscal year-end for
all other issuers, after a two-year transition period.\111\ In light of
this rule proposal, should we lengthen the proposed phase-in deadlines
for foreign private issuers, for example, by one year if the issuer is
not a large accelerated filer?
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\111\ Release No. 33-8900 (Feb. 29, 2008) [73 FR 13404].
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3. Documents and Information Covered by the Proposed Rules
a. Financial Statements and Financial Statement Schedules
The proposed rules would require interactive data tagging of a
filer's complete financial statements and any required financial
statement schedules.\112\ As with the voluntary program, the proposed
rules would require companies to provide the interactive data in an
exhibit. Interactive data would be required for all periods included in
the filer's financial statements. The proposed rules would not,
however, require interactive data submissions for other financial
statements that may be required of filers, including those provided
pursuant to Rules 3-05, 3-09, 3-10, 3-14, and 3-16 of Regulation S-
X.\113\
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\112\ As previously noted, proposed Rule 405 of Regulation S-T
would directly set forth the basic tagging requirements and
indirectly set forth the rest of the tagging requirements through
the requirement to comply with the EDGAR Filer Manual. Consistent
with proposed Rule 405, the EDGAR Filer Manual would contain the
detailed tagging requirements.
\113\ 17 CFR 210.3-05, 17 CFR 210.3-09, 17 CFR 210.3-10, 17 CFR
210.3-14, 17 CFR 210.3-16.
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As with the voluntary program, the proposed rules would require
that the line item descriptions and amounts presented on the face of
the financial statements in the traditional format filing be the same
as in the interactive data format. Also, the rules would prohibit
partial presentation of face financial statements in interactive data
format. For example, excluding comparative financial information for
prior periods would not be permitted. Unlike the voluntary program, our
proposed rules require companies using U.S. GAAP or foreign private
issuers using IFRS as issued by the IASB to provide tagged data for the
footnotes and schedules to the financial statements. At the time of our
adopting release for the voluntary program in 2005, we stated that we
recognized technical issues made it difficult to tag the notes to the
financial statements. We did, however, provide volunteers with the
option of tagging the notes to the financial statements.\114\ Since the
time of the adopting release, the necessary list of tags has been
completed and the available software has advanced sufficiently to
require that the financial statement footnotes and schedules be
included in the proposed rules.
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\114\ See section II.E. of Securities Act Release No. 8529
(February 3, 2005) [70 FR 6556, 6559].
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The voluntary program adopting release recommended that if
participants voluntarily provided footnotes in interactive data format,
then they should provide enough detail so that the tagging would be of
practical value to users. The release stated that a single tag for the
entire group of footnotes in a filing would cover too much information
to be useful to the user. We still believe that one tag for the entire
group of footnotes would be confusing and provide little benefit.
Tagging each footnote separately, however, would allow users the
ability to compare footnote disclosure between periods and across
filers while minimizing the burden on preparers. We are therefore
proposing that the footnote disclosures in the traditional format
filing be the same as in the interactive data format. This would be
accomplished by tagging the footnotes using four different levels of
detail:
(i) Each complete footnote tagged as a single block of text;
(ii) Each significant accounting policy within the significant
accounting policies footnote tagged as a single block of text;
(iii) Each table within each footnote tagged as a separate block of
text; and
(iv) Within each footnote, each amount (i.e., monetary value,
percentage, and number) separately tagged and each narrative disclosure
required to be disclosed by U.S. GAAP (or IFRS as issued by the IASB,
if applicable), and Commission regulations separately tagged.
To allow filers time to become familiar with tagging footnotes, we
are proposing that in each filer's first year of interactive data
reporting only level (i) would be required. All four levels would be
required starting one year from the filer's initial required submission
in interactive data. In year two, when a filer would first be required
to tag its footnotes and schedules using multiple levels of detail, the
filer would be given an additional 30 days beyond the due date or
filing date of its report or registration statement to file the
interactive data exhibit. Subsequent interactive data exhibits using
all of the levels would be required at the same time as the rest of the
related report or registration statement. We believe the one-time 30-
day grace period would help a filer comply with the more detailed
tagging requirements.
We propose requiring these various levels of detailed tagging for
the financial statement footnotes after considering the range of needs
of investors, analysts, and other consumers of financial information.
We believe the block-text tagging required under levels (i) through
(iii) would satisfy the need of those who desire disclosures within the
context of an entire footnote or an entire table. The detail tagging of
[[Page 32805]]
individual amounts and narrative disclosures within the footnotes
required under level (iv) would satisfy the need of those who desire to
analyze specific pieces of information or data.
The requirement that in the second year a filer tag separate each
amount within a footnote (i.e., monetary value, percentage, and number)
and each narrative disclosure required to be disclosed by U.S. GAAP (or
IFRS as issued by the IASB, if applicable), and Commission regulations
should not affect a filer's decisions regarding what to disclose in its
traditional format filing. We are aware of questions as to whether the
contextual information or data elements chosen from the standard list
of tags could potentially reveal information that the rest of the
related registration statement or periodic report would not otherwise
make known. However, we do not believe that the contextual information
or data elements chosen should provide any additional substantive
disclosure.
To clarify the intent of the rules, we propose to include an
instruction to proposed Rule 405 of Regulation S-T stating that the
rules require a disclosure format, but do not change substantive
disclosure requirements. The rules also would state clearly that the
information in interactive data format should not be more or less than
the information in the ASCII or HTML part of the related registration
statement or report.
In connection with their annual and transition reporting on Forms
10-K or 20-F, filers may be required under existing financial reporting
requirements to include certain supplementary financial statement
schedules with their financial statements. The form and content of
these schedules are governed by Article 12 of Regulation S-X.\115\ The
list of tags for U.S. financial statement reporting enables companies
to tag individual facts in these financial statement schedules, or to
block tag each entire schedule.
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\115\ See Rules 5-04 and 7-05 of Regulation S-X and Items 17 and
18 of Form 20-F.
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We propose that filers also be required to include with their
interactive data any financial statement schedules prescribed by
Article 12 of Regulation S-X. These financial statement schedules would
be tagged using two different levels of detail; only the first level
would be required in the first year. Both levels would be required
starting one year from the filer's initial required submission in
interactive data format. Similar in concept to the tagging approach
proposed for the financial statement footnotes, the required levels of
detail would be: (i) Each complete financial statement schedule tagged
as a block of text; and (ii) each amount (i.e., monetary value,
percentage, and number) separately tagged and each narrative disclosure
required to be disclosed by Commission regulations separately tagged.
A filer may revise its previously filed financial statements for a
variety of reasons, such as the retrospective application of a new
accounting principle or the correction of an error. Our proposed rules
would require a filer to provide revised interactive data at the same
time it files the revised financial statements with the traditional
format filing.\116\ Under the proposed rules, filers also would be
required to provide interactive data for transition reports on Forms
10-Q, 10-K, or 20-F.
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\116\ Revised interactive data would be required so that the
financial information would be the same in both the traditional
format filing and the interactive data file. If the financial
statements are not revised in connection with an amended
registration statement, periodic report, or transition report, the
exhibit index would indicate that the interactive data file was
already provided.
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Request for Comment:
Are the proposed four levels of detail appropriate for
footnote tagging? What alternative footnote disclosure items or
criteria do commenters recommend we establish for tagging footnotes?
Why would those be more appropriate than what we propose?
Should we require all four levels for footnotes in the
first year instead of using the phase-in approach for the more detailed
tagging? Should detailed tagging of a filer's footnotes and schedules
not be required until more than one year after its initial interactive
data submission, for example, in year three or four?
Are the proposed two levels of detail appropriate for
financial statement schedule tagging? If not, what alternatives would
be more appropriate?
Should we require both levels for financial statement
schedules in the first year instead of using the phase-in approach for
more detailed tagging?
Is the most detailed level of tagging too prescriptive, or
is it too broad? Would it help to achieve comparability among filers?
Would it impose an unnecessary burden on filers in preparing their XBRL
data compared to the potential benefit to consumers of data? What
problems or obstacles may be encountered in applying the proposed
requirement?
Would the most detailed level of tagging result in the
creation of a high number of company-specific extensions? If so, would
the additional effort needed to create new extensions diminish once a
filer has tagged at this level of detail? Should the tagging
requirement instead be only to require detailed tagging to the extent a
standard tag already exists in the standard list of tags?
Does the proposed rule provide adequate and effective
guidance on how to tag information in the footnotes to the financial
statements? For example, would it be feasible for companies to identify
the narrative disclosure required by U.S. GAAP or IFRS as issued by the
IASB that needs to be tagged separately? Should it be more principles-
based? If so, what should those principles be?
Do the standards we propose for tagging provide clear
enough guidance for preparers so that we can expect to achieve
consistency among filers?
Should schedules to the financial statements be omitted
from our proposed rule? If so, why?
What additional costs and burdens would there be with
detailed tagging of the financial statement footnotes and financial
statement schedules as opposed to ``block'' tagging?
Would investors and other users of tagged data benefit
from the tagging of individual amounts (i.e., monetary values,
percentages, and numbers) and narrative disclosures within each
footnote together with block text?
Should we require that filers reporting in U.S. GAAP, or
in IFRS as issued by the IASB, tag their document and entity \117\
information? Would this information be useful in interactive data
format?
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\117\ See footnote 70 above.
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Is it reasonable to expect that requiring interactive
data-formatted financial statements in general or footnotes in
particular will not change the discretionary content that companies
provide in the traditional format filing? Would the availability of
tagged data possibly cause competitive pressures on filers to choose to
make more disclosures that are permissible, encouraged, or otherwise
not required by Commission regulations? Alternatively, might the
availability of tagged data possibly cause filers to choose to curtail
such disclosures? What types of disclosures would those be?
Should transition reports not be subject to the proposed
rules? If not, why not?
Would users of financial information find tagged financial
statement schedules useful for analytical purposes?
Should the proposed rules require interactive data
submissions for a filer's
[[Page 32806]]
financial information provided under Forms 8-K and 6-K, such as
earnings releases or interim financial information? If so, what level
of tagging detail would be appropriate, and would a reasonable grace
period from the date of the Form 8-K or 6-K to the deadline for
interactive data (e.g., one, three, or five days) address concerns that
filers require additional time to provide interactive data for such
financial information? Does financial information provided under Form
8-K or 6-K, such as earnings releases, present additional burdens
compared to other forms that would warrant excluding them from the
proposed rules?
Should the proposed rules require interactive data
submissions for other financial statements that may be provided by
filers, including those provided pursuant to Rules 3-05, 3-09, 3-10, 3-
14 and 3-16 of Regulation S-X? If so, how should a requirement be
phased in?
Should we provide an opportunity for non-investment
company issuers to submit voluntarily interactive data format
information other than that which they would be required to submit as
interactive data? If so, should we permit such interactive data format
information to be subject to provisions governing the proposed required
filing of interactive data? Should we instead permit such interactive
data format information to be submitted under a modified voluntary
program that would apply to such information in a manner similar to the
way it applies to XBRL-Related Documents under the current voluntary
program?
Should we require or permit interactive data submissions
for executive compensation? Would interactive data of executive
compensation be useful to investors? Approximately how much additional
cost would interactive reporting of executive compensation require of
companies?
If we were to require or permit interactive data for
executive compensation, should all narrative and numerical disclosure
required in the traditional electronic filing \118\ be required in
interactive data format? If we were to require only a subset of the
required disclosure, what subset should be required? For example, would
it be appropriate to required tagging of only the Summary Compensation
Table and other tables as applicable? Would it present an accurate
picture of the compensation? How should an interactive data requirement
for executive compensation treat the footnotes and narrative
disclosure?
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\118\ See Item 402 of Regulation S-K, 17 CFR 229.402.
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If we were to require or permit interactive data for
executive compensation, should we require the same data provided by the
Executive Compensation Reader currently available on our Web site?
\119\
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\119\ The Executive Compensation Reader displays the Summary
Compensation Table disclosure of 500 large companies that followed
the new executive compensation rules in reporting 2006 compensation
information in their proxy statements filed with the Commission. By
using the reader, an investor can view amounts included in the
Summary Compensation Table Stock Awards and Option Awards columns
based on either the full grant date fair value of the awards granted
during the fiscal year, or the compensation cost of awards
recognized for financial statement reporting purposes with respect
to the fiscal year, and recalculate the Total Compensation column
accordingly.
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If we were to require or permit interactive data for
executive compensation, should the interactive data be filed with the
proxy statement, which often contains the executive compensation
disclosure, or as an amendment to the Form 10-K, which often
incorporates the executive compensation disclosure by reference? \120\
Would it diminish significantly the value to investors if interactive
data for executive compensation were not required to be submitted
until, for example, 30 or 45 days after it was required to be submitted
in traditional format? If there were such a 30- or 45-day delay in the
requirement, would it be advisable to permit the delayed submission to
be made in an exhibit to a Form 8-K or to an amendment on Form 10-K?
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\120\ General Instruction G.3. to Form 10-K.
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How should a requirement to provide interactive data for
executive compensation apply to foreign private issuers? \121\
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\121\ Item 6.B of Form 20-F.
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Should we require or permit interactive data submissions
for other financial, statistical or narrative disclosure, such as
beneficial ownership of management and five percent or greater
shareholders or tabular disclosure of contractual obligations? \122\
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\122\ 17 CFR 229.403, 17 CFR 229.303(a)(5).
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b. Registration Statements Covered by the Proposed Rules
We are proposing that, subject to the phase-in period described
above, all registration statements filed under the Securities Act,
including initial public offerings, be required to include interactive
data when financial statements are included directly in the
registration statement, rather than being incorporated by reference.
This would include all periods included in the registration statement
as required by Regulation S-X and our rules. We believe analysts,
investors, the public, and others would benefit from the enhanced
ability of interactive data to locate and compare financial data
included in registration statements. Under the proposed rules,
interactive data would be required for the acquiring company, the
filer, but not for the company being acquired, in the context of a
business combination. The additional burden of configuring disclosure
from traditional electronic format into interactive data format in the
context of a registered offering is not anticipated to significantly
add to the time or expense of companies filing registration
statements.\123\
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\123\ As noted above, if an amended registration statement is
filed that does not involve any change in the financial statements,
the interactive data exhibit would not be required to be re-filed.
The exhibit index would simply note that the exhibit had already
been filed.
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Request for Comment:
Should registration statement financial information be
subject to the new rules, as proposed? In particular, should
registrants making initial public offerings in year three (and later
years) of the phase-in period be required to provide interactive data
if, as would be typical, they were not already required to file
periodic reports subject to the requirement to submit an interactive
data exhibit? \124\ Should we permit rather than require interactive
data to be provided in initial public offerings or other registration
statements?
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\124\ An issuer might already be required to submit periodic
reports subject to the requirement to submit an interactive data
exhibit without ever having made an initial public offering
registered under the Securities Act. An issuer could be in that
position, even during year one of the phase-in, for example, if the
issuer became publicly held as a result of the type of spin-off
Staff Legal Bulletin No. 4 (Sept. 16, 1997) describes as not
requiring registration under the Securities Act.
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If we require interactive data, should the proposed rules
apply to registration statement financial information based on the size
of the registrant (for example, distinguishing between large
accelerated filers and smaller reporting companies)?
Should the proposed rules require filers to include
interactive data with respect to all filings of the registration
statement when the registration statement is filed multiple times due
to amendments? If not, which filings of the registration statement
should be subject to the interactive data submission requirement?
Should we, for example, limit the Securities Act filings that would
require interactive data to those that contain a preliminary prospectus
that is circulated? \125\ Should the
[[Page 32807]]
proposed rules apply to a final prospectus supplement filed under
Securities Act Rule 424? \126\ If we require interactive data with
filings that do not currently include exhibits, such as final
prospectuses, should we require that the interactive data be provided
as schedules or exhibits? Once interactive data are provided with a
registration statement, should we limit the requirement to provide
interactive data for amendments to only the amendments that reflect
substantive changes from or additions to the financial information?
Would revising interactive data that previously were provided in
connection with a registration to reflect changes to the registration
statement involve much burden?
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\125\ The instruction to Item 501(b)(3) of Regulation S-K [17
CFR 229.501(b)(3)] addresses disclosure requirements applicable to
specified circulated preliminary prospectuses.
\126\ 17 CFR 230.424. Currently, Rule 424 prospectuses do not
have a provision for exhibits, so additional EDGAR programming would
be needed.
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Should interactive data be required only in connection
with initial public offering registration statements under the
Securities Act, rather than, as proposed, all Securities Act
registration statements?
In a registration statement on Form S-4 or F-4, or proxy
statement relating to a proposed merger, should interactive data be
required for the company being acquired as well as the acquiring
company? Should interactive data of the company being acquired be
required only if that company already is subject to interactive data
reporting under the proposed rules?
Should we also require interactive data to be provided in
connection with Exchange Act registration statements on Form 10 and
Form 20-F?
4. Initial Filing Grace Period
As noted above, interactive data would be required at the same time
as the rest of the filing to which it relates. Each company's initial
interactive data submission, however, would be permitted as an
amendment to a registration statement within 30 days of the date of
filing or as an amendment to Form 10-K, 20-F, or 10-Q within 30 days of
the due date for filing of the rest of the related report. In addition,
as discussed above in Part II.B.3.a, in year two when a filer would
first be required to tag its footnotes and schedules using all levels
of detail, the interactive data exhibit would be required within 30
days of the due date or filing date of the related report or
registration statement, as applicable.
Currently in the voluntary program, filers may provide the
interactive data at the time of filing or at any later time, without a
deadline.\127\ We believe that, consistent with our view regarding the
value of widespread market use of the interactive data, companies
should be required to provide the interactive data at the time the
registration statement or report is required to be filed. We do not
believe this timing requirement would place undue pressure on filers.
We believe, for example, based on our experience with the voluntary
program, that the time period for the quarterly or annual report is
sufficient for filers to convert their ASCII or HTML financial
statements into interactive data format.
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\127\ The voluntary program permits filers to provide the
initial and any such restated financial information in interactive
data format using Form 8-K. The proposed rules, however, would
require that interactive data be provided as an exhibit to the
filing itself, including any restated Forms 10-K, 10-Q, or 20-F.
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Request for Comment:
Should we permit interactive data information to be
provided later than the related filing for the first year, rather than
just the first filing? Should we provide a grace period for the first
filing as to which the issuer is required to tag financial statement
footnotes in detail? Is a grace period not needed?
Should any grace period either for the first filing or for
subsequent filings be for fewer or more than 30 days, such as five, 20
or 45 days? What would the impact of a grace period be on the
usefulness of interactive data?
5. Web Site Posting of Interactive Data
We believe interactive data, consistent with our proposed rules,
should be easily accessible for all investors and other market
participants. As such disclosure becomes more widely available,
advances in interactive data software, online viewers, search engines
and other Web tools may in turn facilitate access and usability of the
data. Encouraging widespread accessibility to filers' financial
information furthers our mission to promote fair, orderly, and
efficient markets, and facilitate capital formation. We believe Web
site availability of the interactive data would encourage its
widespread dissemination, thereby contributing to lower access costs
for users. We therefore propose that each filer covered by the proposed
rules be required to provide the same interactive data on its corporate
Web site, if it has one, that would be required to be provided to the
Commission on the earlier of the day it filed or was required to file
the related registration statement or report, as applicable.\128\
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\128\ Proposed Rule 405 would contain the Web site posting
requirement. We also propose to provide, however, that Web site
posting of the interactive data would not be required until the end
of any applicable grace period that would apply to the submission of
the interactive data to the Commission. Similarly, we propose to
provide that Web site posting of the interactive data would not be
required before submission of the interactive data when submission
of the data is delayed in accordance with and during the term of any
applicable hardship exemption provided under Rule 201 or 202 as
proposed to be revised. Proposed revisions to Rules 201 and 202 are
more fully discussed below in Part II.E.
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We believe access to the interactive data on corporate Web sites
would enable search engines and other data aggregators to more quickly
and cheaply aggregate the data and make them available to investors
because the data would be available directly from the filer, instead of
through third-party sources that may charge a fee. To help further our
goals of decreasing user cost and increasing availability, we do not
propose to allow companies to comply with the Web posting requirement
by including a hyperlink to the documents available electronically on
the Commission's Web site.
We believe this requirement would 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. For example, we note that since
2003 issuers with corporate Web sites have been required to post on
their Web sites beneficial ownership reports filed with respect to
their securities on Forms 3, 4, and 5 under Section 16(a) of the
Exchange Act.\129\ We also note that many companies provide on their
Web sites access to their periodic reports, proxy statements, and other
Commission filings.\130\ This proposal would expand such Web site
posting by requiring companies with Web sites to post their interactive
data as well.\131\
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\129\ Section 16(a)(4)(C) [15 U.S.C. 78p(a)(4)(C)], Rule 16a-
3(k) [17 CFR 240.16a-3(k)].
\130\ Companies filing registration statements and accelerated
filers and large accelerated filers in their periodic reports are
required to disclose whether or not they make available free of
charge on or through their Web site, if they have one, their annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, and amendments to those reports. Companies that do not
make their reports available in that manner also must disclose the
reasons they do not do so and whether they voluntarily provide
electronic or paper copies of their filings free of charge upon
request. See Item 101(e) of Regulation S-K.
\131\ As further discussed in Part II.E, we propose that a
company that failed to post its interactive data as required would
be deemed ineligible to use short form registration Forms S-3, S-8,
and F-3 and would be deemed not to have adequate public information
available for purposes of Rule 144(c)(1) unless and until it posted.
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Request for Comment:
Should we adopt rules that require each filer to post
interactive data from
[[Page 32808]]
registration statements and periodic and transition reports on its
corporate Web site, if it has one?
What advantages, if any, would dual Internet and EDGAR
availability have for users, search engines, software developers, and
others involved in the extraction and processing of financial data?
Would it be helpful if our Web site provided the option to download the
interactive data submission from our Web site or the issuer's Web site?
Would it add a significant burden if an issuer were required to submit
with its interactive data the URL that would link specifically to that
interactive data as posted on the issuer's Web site or, alternatively,
link to a part of the issuer's Web site from which there would be easy
access to the interactive data as posted there? What would facilitate
the realization of any advantages of Web site posting, for example the
use of a standardized URL for interactive data? Would a standardized
URL add significant cost to posting?
Instead of requiring Web site posting, should we require
that filers disclose in their registration statements or reports
whether or not they provide free access to their interactive data on
their corporate Web sites and, if not, why not?
What impact would be realized by filers that do not
currently provide Web sites? Would the proposed rules affect whether
filers create or maintain Web sites?
Would Web site posting decrease the time and cost required
for aggregators of financial information and users to access disclosure
formatted using interactive data?
If we require Web site posting of interactive data, should
we also require that the Web site include language stating that the
entire registration statement, or periodic report also is available for
free at the Commission's Web site?
If we require Web site posting of interactive data, should
we require, as proposed, that each filer provide the interactive data
on its corporate Web site on the same day as the related filing,
instead of at the same time?
C. Accuracy and Reliability of Interactive Data
1. Voluntary Program
To help ensure the accuracy of interactive data in the voluntary
program, the data has undergone validation upon receipt by our
electronic filing system separate from the normal validation of the
traditional format filing.\132\ Potential liability also helps ensure
the accuracy and reliability of the data. Although the voluntary
program has provided limited protections from liability under the
federal securities laws \133\ and excluded interactive data from being
subject to officer certification requirements under Exchange Act Rules
13a-14 and 15d-14,\134\ interactive data in the voluntary program are
subject to the anti-fraud provisions of the federal securities laws.
The voluntary program also encourages participants' efforts to create
accurate and reliable interactive data that is the same as the
corresponding disclosure in the traditional electronic format filing by
providing that a participant is not liable for information in its
interactive data that reflects the same information that appears in the
corresponding portion of the traditional format filing, to the extent
that the information in the corresponding portion of the traditional
format filing was not materially false or misleading. To further
encourage reasonable efforts to provide accurate interactive data, the
voluntary program treats interactive data that do not reflect the same
information as the official version as reflecting the official version
if the volunteer meets several conditions. The volunteer must have made
a good faith and reasonable attempt to reflect the same information as
appears in the traditional format filing and, as soon as reasonably
practicable after becoming aware of any difference, the volunteer must
amend the interactive data to cause them to reflect the same
information.\135\
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\132\ If the traditional format filing meets its validation
criteria, but any interactive data fail their own validation
criteria, all interactive data are removed and the traditional
format filing is accepted and disseminated without the interactive
data file.
\133\ Rule 402 under Regulation S-T provides these liability
protections.
\134\ See Rules 13a-14(f) [17 CFR 240.13a-14(f)] and 15d-14(f)
[17 CFR 240.15d-14(f)].
\135\ 17 CFR 232.402(b).
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2. Use of Technology To Detect Errors
Complete, accurate, and reliable financial statements and other
disclosures are essential to investors and the proper functioning of
the securities markets. Our proposed requirement to submit interactive
data with registration statements and reports is designed to provide
investors with new tools to obtain, review, and analyze information
from public filers more efficiently and effectively. To satisfy these
goals, interactive data must meet investor expectations of reliability
and accuracy. Many factors, including company policies and procedures
buttressed by incentives provided by the application of technology by
the Commission, market forces and the liability provisions of the
federal securities laws, help further those goals.
Building on the validation criteria referenced above for
interactive data in the voluntary program, we plan to use validation
software to check interactive data for compliance with many of the
applicable technical requirements and to help the Commission identify
data that may be problematic. For example, we expect the validation
software to
Check if required conventions (such as the use of angle
brackets to separate data) are applied properly for standard and, in
particular, non-standard special labels and tags;
Identify, count, and provide the staff with easy access to
non-standard special labels and tags; \136\
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\136\ For example, if a company uses the word ``liabilities'' as
the caption for a value data tagged as ``assets,'' the software
would flag the filing and bring it to the staff's attention. In
contrast, if the company used ``Total Assets'' or ``Assets, Total,''
the software would identify the use of these terms as a low risk
discrepancy.
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Identify the use of practices, including some the XBRL
U.S. Preparers Guide contains, that enhance usability; \137\
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\137\ The XBRL U.S. Preparers Guide, available from the XBRL
U.S. Web site, would provide guidance to facilitate preparing
information in the interactive data format that we propose to
require.\
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Facilitate comparison of interactive data with disclosure
in the corresponding traditional format filing;
Check for mathematical errors; and
Analyze the way that companies explain how particular
financial facts relate to one another.\138\
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\138\ The technology used to show these relationships is known
as a ``linkbase.'' The Commission will seek to ensure that linkbases
not only comply with technical requirements but are not used to
evade accounting standards.
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The availability of interactive data to the staff may also enhance
its review of company filings. After the FDIC required submission of
interactive data, it reported that its analysts were able to increase
the number of banks they reviewed by 10% to 33%, and that the number of
bank reports that failed to fully meet filing requirements fell from
30% to 0%. These bank reports require information that is more
structured and less varied than the information we would require. As a
result, the FDIC's efficiency gains from the use of interactive data
likely would be greater than ours.
We believe analysts, individual investors and others outside the
Commission that use the interactive data submitted to us also will make
use of software and other tools to evaluate the interactive data and,
as a result, market forces will encourage companies
[[Page 32809]]
to provide interactive data that accurately reflects the corresponding
traditional format data in the traditional format filing. For example,
the use of non-standard special labels or tags (extensions) could
introduce errors, but we expect the open source and public nature of
interactive data and the list of tags for U.S. financial statement
reporting would enable software easily to detect and identify any
modifications or additions to the approved list of tags. We believe
such software and other technology will be widely available for free or
at reasonable cost. Investors, analysts, and other users therefore
would be able to identify the existence and evaluate the validity of
any such modifications or additions. We also anticipate that companies
preparing their interactive data and investors, analysts, and other
users would use such devices to search for and detect any changes made
to the standard list of tags. Because analysts and other users would
rapidly discover mistakes or alterations not consistent with the
desired use of interactive data, filers would have a powerful incentive
to prepare such data with care and promptly correct any errors.
With this proposal, we seek the rapid adoption and use of
interactive data without imposing unnecessary cost and expense on
filers. We therefore propose that the interactive data itself provided
to us generally would be subject to a liability regime under the
federal securities laws similar to that governing the voluntary
program. We also propose that viewable interactive data as displayed
through software available on the Commission's Web site, as described
above and further discussed below, would be subject to the same
liability under the federal securities laws as the corresponding
portions of the traditional format filing.\139\
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\139\ Proposed Rule 406 of Regulation S-T would set forth the
liability applicable to interactive data and viewable interactive
data that is displayed through software available on the
Commission's Web site. Proposed Rule 406 also would clarify that
disclosures in the traditional format part of the related official
filing with which the interactive data appear as an exhibit remain
subject to the federal securities laws as in the past and that
nothing in proposed Rule 405 of Regulation S-T (setting forth
content, format and other requirements related to interactive data)
or proposed Rule 406 would affect the liability otherwise applicable
to the traditional format data. Proposed revised Rules 13a-14(f) and
15d-14(f) would exclude interactive data from the officer
certification requirements.
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Interactive data would be subject to the following liability-
related provisions:
Deemed not filed or part of a registration statement or
prospectus for purposes of sections 11 and 12 of the Securities Act;
Deemed not filed for purposes of section 18 of the
Exchange Act and section 34(b) of the Investment Company Act;
Not otherwise subject to the liabilities of these
sections;
Subject to other liability under these Acts for the
substantive content of the financial disclosures (as distinct from
compliance with proposed Rule 405) in the same way and to the same
extent as the traditional format part of the related official filing.
The content of the financial disclosure refers, for example, to the
numerical values in the financial statements or footnotes and the
statements in the footnotes. The Rule 405 requirements generally refer
to the process of tagging and formatting the content of the financial
statements for the interactive data file;
Deemed filed for purposes of (and, as a result, benefit
from) Rule 103 under Regulation S-T; \140\
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\140\ The viewed data would be deemed filed for purposes of Rule
103 under Regulation S-T [17 CFR 232.103] and, as a result, in
general, the issuer would not be subject to liability for electronic
transmission errors beyond its control if the issuer corrects the
problem through an amendment as soon as reasonably practicable after
the issuer becomes aware of the problem.
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Protected from liability under these Acts for failure to
comply with the requirements of proposed Rule 405 if the interactive
data either:
[cir] Met the requirements of proposed Rule 405 of Regulation S-T;
or
[cir] Failed to meet those requirements but the failure occurred
despite the issuer's good faith and reasonable effort and the issuer
corrected the failure as soon as reasonably practicable after becoming
aware of it; and
Excluded from the officer certification requirements under
Exchange Act Rules 13a-14 and 15d-14.
None of the proposed liability-related provisions for interactive
data submitted to the Commission, however, would affect the application
of the anti-fraud provisions under the federal securities laws, whether
the interactive data is submitted to the Commission or posted on an
issuer's Web site.
Rule 405 is being proposed, in part, under the Commission's
authority to specify information required to be submitted to the
Commission in, for example, registration statements and periodic
reports. To encourage accurate filing of interactive data without fear
of making good faith errors, the Commission is proposing Rule 406.
Although not expressly addressed in proposed Rule 406, the Commission
would have the authority to enforce compliance with proposed Rule 405
because it has the authority to enforce compliance with any of its
rules.
We believe these liability-related provisions strike an appropriate
balance between avoiding unnecessary cost and expense and encouraging
accuracy in light of the nature of the interactive data to which they
apply and the additional accuracy incentives that may be provided by
our validation software and market forces.
Other aspects of the proposal would supplement the Commission's
objective of supplying reliable and accurate information to investors.
First, the financial statements and other disclosures in the
traditional format part of the related official filing with which the
interactive data appear as an exhibit would continue to be subject to
the usual liability provisions of the federal securities laws. For
example, the traditional format part of the related official filing
would continue to be subject to section 10(b) and Rule 10b-5 \141\ of
the Exchange Act and, in the appropriate circumstance, to section 11 of
the Securities Act. Form 10-K would continue to be considered filed,
while the information required by Items 1, 2, and 3 of Form 10-Q would
continue to be considered furnished for purposes of section 18 of the
Exchange Act.\142\
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\141\ 17 CFR 240.10b-5.
\142\ General Instruction F. Form 10-Q: ``Filed Status of
Information Presented.''
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Second, we propose that the usual liability provisions of the
federal securities laws also would apply to human-readable interactive
data that is identical in all material respects to the corresponding
data in the traditional format filing \143\ as displayed by a viewer
that the Commission provides. Under these circumstances, for example, a
Form 10-K's viewable interactive data would be deemed filed and subject
to section 18 of the Exchange Act, consistent with the liability
applicable to the corresponding part of the traditional format Form 10-
K, and a Form 10-Q's viewable interactive data would be deemed
furnished and not subject to section 18 of the Exchange Act, consistent
with the liability applicable to the corresponding part of the
traditional format Form 10-Q. And a Securities Act registration
statement's viewable interactive data as displayed through software
available on the Commission's Web site and identical in all material
respects to the corresponding data in the traditional
[[Page 32810]]
format filing would be subject to section 11 of the Securities Act. In
that regard, such viewable interactive data disclosure therefore would
have exactly the same potential liability as the corresponding portions
of the traditional format part of the filing. We believe applying
liability for such viewable interactive data displayed through software
on the Commission's Web site would further investors' interests in
filers providing accurate interactive data under our proposal.
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\143\ The human-readable interactive data would be identical to
the corresponding data in the traditional format filing if the filer
complied with the interactive data tagging requirements of proposed
Rule 405.
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We expect that each filer would be in the best position to
determine the appropriate manner in which to assure the accuracy of the
interactive data it would be required to submit and the viewable
interactive data that would result. We also expect that software
providers and other private sector third parties would help develop
procedures and tools to help in that regard. As an adjunct to those
private sector efforts, we plan to make available to filers, on an
optional basis, the opportunity to help assure accuracy by making a
test submission with the Commission or using software we provide to
create viewable interactive data.
A filer would have the opportunity to submit an interactive data
exhibit as part of a test submission just as a filer can make test
submissions today.\144\ The validation system would process the test
submission with an interactive data exhibit similar to the way it
processes test submissions today. If it found an error, it would advise
the filer of the nature of the error and as to whether the error was
major or minor. As occurs in the voluntary program, a major error in an
interactive data exhibit that was part of a live filing would cause the
exhibit to be held in suspense in the electronic filing system while
the rest of the filing would be accepted and disseminated if there were
no major errors outside of the interactive data exhibit. If that were
to happen, the filer would need to revise the interactive data exhibit
to eliminate the major error and submit the exhibit as an amendment to
the filing to which it is intended to appear as an exhibit. A minor
error in an interactive data exhibit that was part of a live filing
would not prevent the interactive data exhibit from being accepted and
disseminated together with the rest of the filing if there were no
major errors in the rest of the filing. We believe it would be
appropriate to accept and disseminate a filing without the interactive
data exhibit submitted with it if only the exhibit has a major error,
in order to disseminate at least as much information as timely as would
have been disseminated were there no interactive data requirement.
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\144\ The EDGAR Filer Manual addresses test submissions
primarily at Section 6.6.5 of Volume II.
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We are not proposing that filers be required to involve third
parties such as auditors or consultants in the creation of the
interactive data provided as an exhibit to a filer's periodic reports
or registration statements, including assurance. We are taking this
approach after considering various factors, including:
The availability of a comprehensive list of tags for U.S.
financial statement reporting from which appropriate tags can be
selected, thus reducing a filer's need to develop new elements; \145\
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\145\ We expect the same would be true with respect to the tags
for reporting under IFRS as issued by the IASB.
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The availability of user-friendly software with which to
create the interactive data file;
The multi-year phase-in for each filer, the first year of
which entails the relatively straightforward process of tagging face
financial statements, as was done during the voluntary program, and
block tagging footnotes and financial statement schedules;
The availability of interactive data technology
specifications, and of other XBRL U.S., and XBRL International
resources for preparers of tagged data;
The advances in rendering/presentation software and
validation tools for use by preparers of tagged data that can identify
the existence of certain tagging errors;
The expectation that preparers of tagged data will take
the initiative to develop sufficient internal review procedures to
promote accurate and consistent tagging; and
The filer's and preparer's liability for the accuracy of
the traditional format version of the financial statements that will
also be provided using the interactive data format.
Request for Comment:
Do the proposed rules strike an appropriate balance to
promote the availability of reliable interactive data without imposing
undue additional costs and burdens? If not, what balance of liability
will best encourage filers to prepare reliable interactive data without
subjecting them to undue fear of mis-tagging? How does the
``extensibility'' of interactive data, i.e., a filer's ability to
customize the standard list of tags to correspond more closely to the
company's particular financial information, affect your answer?
What are the risks to investors under the proposed
liability rules? Will investors still find the interactive data
sufficiently reliable to use it?
Should interactive data be subject to liability if a filer
does not tag its financial information in a manner consistent with the
standards approved by the Commission, irrespective of the filer's good
faith effort? If the answer is yes, what should the filer's liability
be for such errors, and should liability attach even if the mistake is
inadvertent? What if the error is the result of negligent tagging
practices, but there was no affirmative intent to mislead?
If interactive data are subject to liability as proposed,
is it necessary or appropriate for viewable interactive data to be
subject to liability as and to the extent proposed or otherwise? Should
the answer depend on the degree of liability to which the interactive
data are subject? Should viewable interactive data be subject to
liability in a manner or to an extent different than as proposed?
Should any or all interactive data be encompassed within
the scope of officer certifications? Is there any reason to treat
interactive data differently from traditional format data in this
respect?
Should any or all interactive data be deemed filed for
purposes of Section 34(b) of the Investment Company Act and, if so,
should it be regardless of compliance with proposed rule 405 or a
filer's good faith and reasonable efforts to comply?
Should the liability for interactive data be exactly the
same as it is for XBRL-Related Documents under the voluntary program?
Would software be commercially available and reasonably
accessible to all required interactive data filers, investors and
analysts that would make detection of tagging errors, such as the use
of inappropriate tags or improper extensions, easy and cost-effective?
If so, would such monitoring by investors and analysts likely
discourage the improper use of extensions or negligent conduct in the
tagging process?
Would the use of software to search for and detect any
differences between a filer's interactive data and the Commission-
approved interactive data tags, financial statement captions, and other
attributes depend on the degree of analyst coverage or investor
interest?
Should a rule expressly state that the Commission retains
the authority to enforce compliance with proposed Rule 405?
Should we require the involvement of auditors,
consultants, or other third parties in the tagging of data? If
assurance should be required, what should be its scope, and should any
such requirement be phased in?
[[Page 32811]]
Should we phase in increasing levels of liability over
time? Are the proposed limitations on liability necessary and
appropriate at the outset, for example, the first year that a company
is subject to the interactive data requirement, but inappropriate at a
later time? Should we require that interactive data be subject to more
liability later?
Should the validation software, as contemplated, cause an
interactive data exhibit with a major error to be held in suspense in
the electronic filing system while the rest of the filing would be
accepted and disseminated if there were no major errors outside of the
interactive data exhibit? In that case, should the validation software
hold the entire filing in suspense or reject or accept the entire
filing or interactive data exhibit?
3. Integration of Interactive Data and Business Information Processing
As the technology associated with interactive data improves,
issuers may integrate interactive data technology into their business
information processing. When this integration occurs, the preparation
of financial statements may become interdependent with the interactive
data tagging process. As this occurs, an issuer and its auditor should
evaluate these changes in the context of their reporting on internal
control over financial reporting.\146\ However, the evaluation would
not require an auditor to separately report on an issuer's interactive
data provided as an exhibit to a filers' reports or registration
statements.
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\146\ Exchange Act Rules 13a-15(f) [17 CFR 240.13a-15(f)] and
15d-15(f) [17 CFR 240.15d-15(f)] define the term ``internal control
over financial reporting,'' in general, as a process designed by or
under the supervision of specified persons and effected by the
issuer's board of directors, management and other personnel ``to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with [GAAP] and includes [specified] policies
and procedures.'' Rules 13a-15 and 15d-15 generally require
specified issuers to maintain internal control over financial
reporting and require the management of those issuers to evaluate
the effectiveness of the issuer's internal control over financial
reporting. In addition, the certifications specified by Item
601(b)(31) of Regulation S-K and Instruction B(e) of Form 20-F that
relate to these specified issuers generally must address the
establishment, maintenance, design, changes in and deficiencies and
material weaknesses related to the issuer's internal control over
financial reporting.
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SAS 8 (AU Section 550) was issued in December 1975 to address an
auditor's consideration of information in addition to audited financial
statements and the independent auditor's report on the audited
financial statements included in documents that are published by an
entity (e.g., an annual periodic report). Similarly, paragraph 18(f) of
SAS 100 (AU Section 722) addresses an auditor's consideration of other
information that accompanies interim financial statements included in
quarterly periodic reports. With respect to registration statements,
SAS 37 (AU Section 711) was issued in April 1981 to address the
auditor's responsibilities in connection with filings under the federal
securities statutes. With respect to our proposed rules, an auditor
would not be required to apply AU Sections 550, 722, or 711 to the
interactive data provided as an exhibit in a company's reports or
registration statements, or to the viewable interactive data.
4. Continued Traditional Format and Interactive Data Cautionary
Disclosure
The proposed rules would not eliminate or alter existing filing
requirements that financial statements and financial statement
schedules be filed in traditional format. We believe investors and
analysts may wish to use these electronic formats to obtain an
electronic or printed copy of the entire registration statement or Form
10-Q, 10-K, or 20-F, either in addition to or instead of disclosure
formatted using interactive data. In addition, we propose to no longer
require or permit the cautionary disclosure from the voluntary program
for required interactive data, which states that investors should not
rely on the interactive data information in making investment
decisions. We believe that such language would be inconsistent with the
proposal that interactive data be part of the related registration
statement or report.
Request for comment:
Should the proposed rules eliminate the requirement that
the financial information be submitted in traditional format, in
addition to interactive data format? Should cautionary language from
the voluntary program be eliminated or modified and, if not, why not?
D. Required Items
1. Data Tags
To comply with the proposed rules, filers using U.S. GAAP would be
required to tag their financial information using the most recent list
of tags for U.S. financial statement reporting, as released by XBRL
U.S. and required by the EDGAR Filer Manual.\147\ Each company would be
required to use one or more of the five standard industry-specific
lists identified in the EDGAR Filer Manual, as is appropriate for its
business.\148\
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\147\ The latest list of data tags for U.S. financial statement
reporting was released on April 28, 2008 and is available at http://xbrl.us/pages/us-gaap.aspx. See XBRL U.S. Press Release, XBRL U.S.
Finalizes U.S. GAAP Taxonomies and Preparers Guide with Delivery to
SEC (May 2, 2008).
\148\ We note that the vast majority of companies would fall
under the Commercial and Industrial industry group. Additional
guidance on the industry-specific lists is expected to appear in the
EDGAR Filer Manual.
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Regular updates to the list of tags for U.S. financial statement
reporting will likely be posted annually and be available for
downloading. In addition, interim extensions may be made available for
download in order to reflect changes in accounting and reporting
standards. To provide companies sufficient time to become familiar with
any such updates, we anticipate giving advance notice before requiring
use of an updated list of tags. Based on experience to date with the
most recent update to the list of tags, we believe that it is
sufficiently developed to support the interactive data disclosure
requirements in the proposed rules.
Similarly, filers using IFRS as issued by the IASB would be
required to tag their financial information using the most recent list
of tags for international financial reporting, as released by the IASCF
and specified in the EDGAR Filer Manual.\149\
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\149\ The International Accounting Standards Committee
Foundation has been developing the IFRS financial reporting tag list
since 2002. See http://www.iasb.org/xbrl/index.html. The 2008
version of the IFRS financial reporting tag list is planned to be
finalized in June 2008 and updated annually for changes in
accounting and reporting standards.
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One of the principal benefits of interactive data is its
extensibility--that is, the ability to add to the standard list of tags
in order to accommodate unique circumstances in a filer's particular
disclosures. The use of customized tags, however, may also serve to
reduce the ability of users to compare similar information across
companies. In order to promote comparability across companies, our
proposed rules would limit the use of extensions to circumstances where
the appropriate financial statement element does not exist in the
standard list of tags. We are also proposing that wherever possible,
preparers change the label for a financial statement element that
exists in the standard list of tags, instead of creating a new
customized tag. For example, the standard list of tags for U.S. GAAP
includes the financial statement element ``gross profit.'' The list
does not include ``gross margin,'' because this is definitionally the
same
[[Page 32812]]
as ``gross profit''--both are generally used to mean ``excess of
revenues over the cost of revenues.'' A filer using the label ``gross
margin'' in its income statement should use the tag corresponding to
the financial statement element ``gross profit.'' It can then change
the label for this item on the standard list to ``gross margin.''
Under Item 401(c) of Regulation S-T, voluntary filers' interactive
data elements must reflect the same information as the corresponding
traditional format elements. Further, no data element can be ``changed,
deleted or summarized'' in the interactive data file. We do not propose
to change this equivalency standard for financial statements provided
in interactive data format as required by the proposed rules.
Request for Comment:
Is our focus on comparability appropriate? Instead of
stressing ease of financial statement comparability, should our rules
permit greater use of customized data tags?
Should we codify any other principles to encourage
comparability without unduly reducing the extensibility of interactive
data?
2. Regulation S-T and the EDGAR Filer Manual
We propose to require that filers provide interactive data in the
form of exhibits to the related registration statements or
reports.\150\ Interactive data would be required to comply with our
Regulation S-T \151\ and the EDGAR Filer Manual. The EDGAR Filer Manual
is available on our Web site. It includes technical information for
making electronic filings to the Commission. Volume II of this manual
includes guidance on the preparation, submission, and validation of
interactive data submitted under the voluntary program. Before adoption
of our proposed rules, we plan to update our manual with additional
instructions for filers of interactive data.
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\150\ The requirement to submit XBRL data as an exhibit would
appear in Item 601(b)(101) of Regulation S-K and Item 101 of the
Instructions to Exhibits of Form 20-F.
\151\ Proposed Rule 405 of Regulation S-T would directly set
forth the basic tagging and posting requirements for the XBRL data
and require compliance with the EDGAR Filer Manual. Consistent with
proposed Rule 405, the EDGAR Filer Manual would contain the detailed
tagging requirements.
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In addition to both Regulation S-T, which would include the rules
we are proposing, and the instructions in our EDGAR Filer Manual,
filers may access other sources for guidance in tagging their financial
information. These include the XBRL U.S. Preparers Guide; user guidance
accompanying tagging software; and financial printers and other service
providers. New software and other forms of third-party support for
tagging financial statements using interactive data are also becoming
widely available.
Request for Comment:
What specific guidance should be provided in Regulation S-
T for interactive data filers?
Does the XBRL U.S. Preparers Guide provide useful guidance
to promote consistent tagging between periods and among various
companies?
Is the user guidance accompanying tagging software, and
the guidance available from financial printers and other service
providers helpful for filers to tag their financial statements? What
other sources of guidance might prove useful?
E. Consequences of Non-Compliance and Hardship Exemption
We propose that if a filer does not provide the required
interactive data submission, or post the interactive data on the
company Web site, by the required due date, the filer would be unable
to use short form registration statements on Forms S-3, F-3, or S-
8.\152\ This disqualification would last for so long as the interactive
data are not provided. During the period of disqualification, the filer
would be deemed not to have available adequate current public
information for purposes of the resale exemption safe harbor provided
by Rule 144.\153\ Once a filer complies with the interactive data
submission and posting requirements--provided it previously filed its
financial statement information in traditional format on a timely
basis--it would be deemed to have timely filed all of its periodic
reports.
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\152\ Forms S-3, F-3, and S-8 are regarded as short form
registration statements because they enable eligible issuers to
register securities for offer and sale under the Securities Act by
providing information in a more streamlined manner than they
otherwise could. In order to be eligible to use these short forms,
an issuer must meet specified requirements, including being current
in its filing of Exchange Act reports. In general, an issuer is
current if it has filed all of its required Exchange Reports for the
twelve months before filing the registration statement. Filers that
are unable to use short form registration also are unable to
incorporate by reference certain information into Forms S-4 and F-4.
See Item 12 of Form S-4 and F-4.
\153\ Rule 144 under the Securities Act creates a safe harbor
for the resale of securities under the exemption from Securities Act
registration set forth in Section 4(1) of the Securities Act [15
U.S.C. 77d(1)]. In order for some resales of securities to comply
with Rule 144, the issuer of the securities must be deemed to have
adequate current public information available as specified by Rule
144(c)(1) [17 CFR 230.144(c)(1)]. Rule 144(c)(1) deems an issuer
required to file reports under the Exchange Act to have adequate
public information available if it is current in its filing of
Exchange Act periodic reports. In general, an issuer would be deemed
current for this purpose if it has filed all of its required
Exchange Act periodic reports for the twelve months before the sale
of securities for which the Rule 144 safe harbor is sought.
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We believe that precluding the use of short form registration
statements during any period of failure to comply would appropriately
direct attention to the proposed interactive data reporting
requirement. And allowing filers to reestablish their current and
timely status by later complying with the interactive data reporting
requirement would strike a reasonable balance of negative consequences
and recognition that the company's traditional format reports would
have been filed.
Consistent with the treatment of other applicable reporting
obligations, we propose to provide hardship exemptions for the
inability to timely electronically submit interactive data. Rule 201
under Regulation S-T provides for temporary hardship exemptions. Rule
202 under Regulation S-T provides for continuing hardship exemptions.
Rule 201 generally provides a temporary hardship exemption from
electronic submission of information, without staff or Commission
action, when a filer experiences unanticipated technical difficulties
that prevent timely preparation and submission of an electronic filing.
The temporary hardship exemption permits the filer to initially submit
the information in paper but requires the filer to submit a confirming
electronic copy of the information within six business days of filing
the information in paper. Failure to file the confirming electronic
copy by the end of that period results in short form
ineligibility.\154\
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\154\ Rule 201 of Regulation S-T.
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We recognize the inherently electronic nature of interactive data.
In light of this and the consequences to an issuer of not timely
submitting interactive data, we propose to revise Rule 201 to provide a
temporary hardship exemption. This exemption would apply without staff
or Commission action if a filer experiences unanticipated technical
difficulties that prevent the timely preparation and electronic
submission of interactive data. The proposed temporary hardship
exemption would cause the filer to be deemed current for purposes of
incorporation by reference, short form registration, and Rule 144 for a
period of up to six business days from the date the interactive data
were required to be
[[Page 32813]]
submitted.\155\ If the filer did not electronically submit the
interactive data by the end of that period, from the seventh business
day forward the filer would not be deemed current until it did
electronically submit the interactive data.
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\155\ The information would not have to be filed in paper first,
as this would be meaningless in the case of interactive data.
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Rule 202 permits a filer to apply in writing for a continuing
hardship exemption if information otherwise required to be submitted in
electronic format cannot be so filed without undue burden or expense.
If the staff, through authority delegated from the Commission, grants
the request, the filer must file the information in paper by the
applicable due date and file a confirming electronic copy if and when
specified in the grant of the request.
We propose to revise Rule 202 to provide that a grant of a
continuing hardship exemption for interactive data would not require a
paper submission and that filer would be deemed current until the end
of the period for which the exemption is granted. Rule 202 also would
provide that, if the exemption was granted for only a specified period
rather than indefinitely, the filer would be deemed current up to the
end of that period. If the filer did not electronically submit the
interactive data by the end of that period, from the next business day
forward the filer would not be deemed current until it did
electronically submit the interactive data. Similarly, we propose to
revise Rule 202 to provide an essentially mirror-image exemption from
the proposed requirement for an issuer that has a corporate Web site to
post the interactive data on its Web site.
Request for Comment:
Are the consequences for failure to comply with the
interactive data submission requirements appropriate?
Should the proposed rules treat companies that do not
comply as not current? Should the proposed rules provide similar
treatment whether the failure to comply relates to interactive data
submission, or to corporate Web site posting?
Alternatively, should the proposed rules go further and
treat companies that do not comply as not timely?
Should the proposed rules treat a filer's compliance with
interactive data reporting as an express condition to the filer's
registration statement's being declared effective?
Does our proposed rule strike the correct balance of
positive and negative consequences when a filer meets its requirements
to provide traditional format documents but fails to provide
interactive data?
Do commenters believe that the proposed revisions to the
hardship exemptions would be sufficient to cover unanticipated
technical difficulties associated with interactive data? If
insufficient, why would they be insufficient and how should the
hardship exemptions be tailored to address technical difficulties
associated with interactive data? For example, would six business days
be an appropriate period for the temporary hardship exemption to apply?
If not, would a shorter or longer period be appropriate, and why?
III. General Request for Comments
We request comment on the specific issues we discuss in this
release, and on any other approaches or issues that we should consider
in connection with the proposed amendments. We seek comment from any
interested persons, including those required to file information with
us on the EDGAR system, as well as investors, disseminators of EDGAR
data, industry analysts, EDGAR filing agents, and any other members of
the public.
IV. Paperwork Reduction Act
A. Background
The proposed amendments contain ``collection of information''
requirements within the meaning of the Paperwork Reduction Act of 1995,
or PRA.\156\ The purpose of the proposed amendments is to make
financial information easier for investors to analyze and to assist
issuers in automating regulatory filings and business information
processing. We are submitting the proposed amendments to the Office of
Management and Budget (OMB), for review in accordance with the
PRA.\157\ An agency may not conduct or sponsor, and a person is not
required to respond to, an information collection unless it displays a
currently valid OMB control number.
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\156\ 44 U.S.C. 3501 et seq.
\157\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
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The title for the new collection of information the proposed
amendments would establish is ``Interactive Data'' (OMB Control No.
3235-XXXX). This collection of information relates to already existing
regulations and forms adopted under the Securities Act and the Exchange
Act that set forth financial disclosure requirements for registration
statements and periodic reports. The proposed amendments would require
issuers to submit specified financial information to the Commission and
post it on their corporate Web sites, if any, in interactive data form.
The specified financial information already is and would continue to be
required to be submitted to the Commission in traditional format under
existing registration statement and periodic report requirements.
Compliance with the proposed amendments would be mandatory according to
the phase-in schedule previously described.\158\ Issuers not yet
phased-in, however, could comply voluntarily with the proposed
amendments. The information required to be submitted would not be kept
confidential by the Commission.
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\158\ See Part II.B.
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B. Reporting and Cost Burden Estimates
1. Registration Statement and Periodic Reporting
Form S-1 (OMB Control No. 3235-0065), Form S-3 (OMB Control No.
3235-0073), Form S-4 (OMB Control No. 3235-0324), and Form S-11 (OMB
Control No. 3235-0067) prescribe information that a filer must disclose
to register certain offers and sales of securities under the Securities
Act. Form F-1 (OMB Control No. 3235-0258), Form F-3 (OMB Control No.
3235-0256) and Form F-4 (OMB Control No. 3235-0325) prescribe
information that a foreign private issuer must disclose to register
certain offers and sales of securities under the Securities Act. Form
10-K (OMB Control No. 3235-0063) prescribes information that a filer
must disclose annually to the market about its business. Form 10-Q (OMB
Control No. 3235-0070) prescribes information that a filer must
disclose quarterly to the market about its business. Form 20-F (OMB
Control No. 3235-0288) is used by a foreign private issuer both to
register a class of securities under the Exchange Act as well as to
provide its annual report required under the Exchange Act.
The information required by the new collection information we
propose, would correspond to specified financial information now
required by these forms and would be required to appear in exhibits to
these forms and on filers' corporate Web sites. The compliance burden
estimates for the proposed collection of information are based on the
proposed phase-in, beginning with approximately 500 large accelerated
filers subject to the rules in the first year, followed by
approximately 1,300 more filers in year two and approximately 10,200
more filers in year three.
Based on estimates from the voluntary filer participant
questionnaire results,
[[Page 32814]]
we estimate that interactive data filers would incur the following
average:
Internal burden hours to tag the face financials:
125 hours for the first filing under the proposed
requirements; and
17 hours for each subsequent filing.
Out-of-pocket cost for software and filing agent services:
$6,140 for each filing.
Based on qualitative assessments of time, we estimate that
interactive data filers would incur the following average internal
burden hours:
Footnotes
7 hours to block tag for each filing made during the first
year under the proposed requirements;
100 hours to detail tag for the first filing made in the
second year under the proposed requirements; and
50 hours to detail tag for each subsequent filing.
Schedules
1 hour to block tag for each filing made during the first
year under the proposed requirements;
10 hours to detail tag for the first filing made in the
second year under the proposed requirements; and
5 hours to detail tag for each subsequent filing.
Web site Posting: 4 hours to post all interactive data
submissions made during each year.
Based on the number of filers we expect to be phased in each of the
first three years under the proposed requirements, the number of
filings that we expect those filers to make that would require
interactive data \159\ and the internal burden hour and out-of-pocket
cost estimates described, we estimate that the average yearly burden of
the proposed requirements over the first three years would be 1,164,690
internal hours per year and $129 million in out-of-pocket expenses per
year and would be incurred by an average of 4708 filers for an average
yearly burden per filer of 247.4 internal hours and $27,400 in out-of-
pocket expenses.
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\159\ We include in the number of filings that would require
interactive data both initial filings and amended filings but we
estimate that the burden incurred in connection with an amended
filing would be one half the burden that would be incurred if the
amended filing were an initial filing.
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By the fifth year under the proposed requirements, filers to be
phased in generally will have been subject to the proposed requirements
for at least two years. As a result, filers generally would incur
burdens applicable to interactive data filings made after the first
filing in which the filer detail tagged footnotes and schedules.
Consequently, we estimate that in the fifth year under the proposed
requirements, the burden on filers would be 3,743,683 internal hours
and $330.9 million in out-of-pocket expenses and would be incurred by
11,893 filers for an average burden per filer of 314.8 internal hours
and $27,800 in out-of-pocket expenses.\160\
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\160\ We provide an estimate of the burden in the fifth year
under the proposed requirements because we believe the burden in the
fifth year may help indicate what the burden would be under the
proposed requirements on an ongoing basis.
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2. Regulation S-K and Regulation S-T
Regulation S-K (OMB Control No. 3235-0071) specifies information
that a registrant must provide in filings under both the Securities Act
and the Exchange Act. Regulation S-T (OMB Control No. 3235-0424)
specifies the requirements that govern the electronic submission of
documents. The proposed changes to these items would add and revise
rules under Regulations S-K and S-T. The filing requirements
themselves, however, are included in the forms and we have reflected
the burden for these new requirements in the burden estimate for the
forms. These rules in Regulations S-K and S-T do not impose any
separate burden. We assign one burden hour each to Regulations S-K and
S-T for administrative convenience to reflect the fact that these
regulations do not impose any direct burden on companies.
C. Request for Comments
We solicit comment on the expected Paperwork Reduction Act effects
of the proposed amendments, including the following:
The accuracy of our estimates of the additional burden
hours that would result from adoption of the proposed amendments;
Whether the proposed new collection of information is
necessary for the proper performance of the functions of the
Commission, including whether the information will have practical
utility;
Ways to enhance the quality, utility and clarity of the
information to be collected;
Ways to minimize the burden of the collection of
information on those who respond, including through the use of
automated collection techniques or other forms of information
technology; and
Any effects of the proposed amendments on any other
collections of information not previously identified.
Any member of the public may direct to us any comments concerning
these burden estimates and suggestions for reducing the burdens.
Persons submitting comments on the collection of information
requirements should direct their comments to the OMB, Attention: Desk
Officer for the Securities and Exchange Commission, Office of
Information and Regulatory Affairs, Washington, DC 20503, and send a
copy of the comments to Secretary, Securities and Exchange Commission,
100 F Street, NE., Washington, DC 20549-9303, with reference to File
No. S7-11-08. Requests for materials submitted to OMB by the Commission
with regard to these collections of information should be in writing,
refer to File No. S7-11-08, and be submitted to the Securities and
Exchange Commission, 100 F Street, NE., Washington, DC 20549. OMB is
required to make a decision concerning the collection of information
between 30 and 60 days after publication of this release. Consequently,
a comment to OMB is best assured of having its full effect if OMB
receives it within 30 days of publication.
V. Cost-Benefit Analysis
The proposed rules would require submission of interactive data-
formatted financial statements and other financial information and the
posting of such information on an issuer's corporate Web site, if any,
according to a phase-in schedule. The proposed rules likely would
result in the benefits and costs described below. We base our belief on
an economic analysis of data obtained from several sources, including
voluntary program participant responses to a staff-prepared
questionnaire, information on the experience of issuers that
participated in an interactive data pilot program in Japan (covering a
larger sample of issuers), and interviews conducted with parties
knowledgeable about interactive data technology in order to learn their
views on issues including those that might affect the interpretation of
the questionnaire responses.\161\
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\161\ The proposed required program, similar to the voluntary
program and the pilot program in Japan, would require use of
interactive data in XBRL format.
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Interactive data are intended to remove a barrier in the flow of
information between issuers and users of information that is conveyed
through corporate financial reports. This should enable less costly
dissemination of information and thereby improve the allocation of
capital. The cost of implementation will depend primarily on the costs
of transition by issuers to the new mode of reporting. The magnitudes
of these benefits and costs from any individual issuer's adoption of
interactive data reporting will depend
[[Page 32815]]
on the number of other issuers who also adopt and on the availability
of supporting software and other infrastructures that enable analysis
of the information. To the extent that submitted information allows
investors to make investment decisions based on market-wide comparison
and analysis, the value to the investors of the reported information
tends to increase with the total number of issuers adopting the regime.
Likewise, issuers' incentives to report their information using
interactive data depends on the interest level of the investors in this
mode of reporting. By mandating implementation, the rule will expand
the network of adopters and thereby create positive network
externalities of reported information for the investors.
A. Benefits of Interactive Data Submission and Web Site Posting
The proposed rules have the potential to benefit investors both
directly and by facilitating the exchange of information between
issuers and the analysts and other intermediaries who receive and
process the financial reports of public companies.
1. Information Access
Benefits of the proposed rulemaking accrue from the acceleration of
market-wide adoption of interactive data format reporting. The
magnitudes of the benefits thus depend on the value to investors of the
new reporting regime relative to the old reporting regime and on the
extent to which the mandated adoption speeds up the market-wide
implementation.
Requiring issuers to file their financial statements using the
interactive data format would enable investors, analysts, and the
Commission staff to capture and analyze that information more quickly
and at a lower cost than is possible using the same financial
information provided in a static format.\162\ Even though the new
regime does not require any new information to be disclosed or
reported, certain benefits accrue when issuers use an interactive data
format to report their financial reports. These include the following.
Through interactive data, what is currently static, text-based
information can be dynamically searched and analyzed, facilitating the
comparison of financial and business performance across companies,
reporting periods, and industries. Any investor with a computer would
have the ability to acquire and download interactive financial data
that have generally been available only to large institutional users.
For example, users of financial information could download it directly
into spreadsheets, analyze it using commercial off-the-shelf software,
or use it within investment models in other software formats. Also, to
the extent investors currently are required to pay for access to annual
or quarterly report disclosure that has been extracted and reformatted
into an interactive data format by third-party sources, the
availability of interactive data in Commission filings could allow
investors to avoid additional costs associated with third-party
sources.
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\162\ See Part I.
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The magnitude of this informational benefit varies, however, with
the availability of sophisticated tools that will allow investors to
analyze the information. The growing development of software products
for users of interactive data is helping to make it increasingly useful
to both institutional and retail investors.\163\ For example, currently
there are many software providers and financial printers that are
developing interactive data viewers. We anticipate that these will
become widely available and increasingly accessible to investors. We
expect that the open standard feature of the interactive data format
will facilitate the development of applications, software, and that
some of these applications may be made available to the public for free
or at a relatively low cost. The continued improvement in this software
would allow increasingly useful ways to view and analyze company
financial information.
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\163\ Press Release No. 2007-253 (Dec. 5, 2007).
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Interactive data also could provide a significant opportunity for
issuers to automate their regulatory filings and business information
processing, with the potential to increase the speed, accuracy, and
usability of financial disclosure. This reporting regime may in turn
reduce filing and processing costs.
By enabling filers to further automate their financial processes,
interactive data may eventually help filers improve the speed at which
they generate financial information. For example, with standardized
interactive data tags, registration statements and periodic reports may
require less time for information gathering and review.
Because a substantial portion of each financial report makes use of
the same information, a filer that uses a standardized interactive data
format at earlier stages of its reporting cycle may also increase the
accuracy of its financial disclosure by reducing the need for
repetitive data entry that could contribute human error and enhancing
the ability of a filer's in-house financial professionals to identify
and correct errors in the issuer's registration statements and periodic
reports filed in traditional electronic format.
A filer that uses a standardized interactive data format at earlier
stages of its reporting cycle also may increase the usability of its
internal financial information. Through interactive data, a filer can
dynamically search and analyze what is currently static, text-based
internal financial information, facilitating the comparison of
financial and business performance across business units and reporting
periods. For example, filers that use interactive data may be able to
consolidate enterprise financial information more quickly and
potentially more reliably across operating units with different
accounting systems.\164\ There has been a growing development of
software products to assist filers to tag their financial statements
using interactive data helping make interactive data increasingly
useful.\165\
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\164\ However, we recognize that at the outset, filers would
most likely prepare their interactive data as an additional step
after their financial statements have been prepared.
\165\ Press Release No. 2007-253 (Dec. 5, 2007).
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Filers that automate their regulatory filings and business
information processing in a manner that facilitates their generation
and analysis of internal financial information could, as a result,
realize a reduction in costs.
2. Market Efficiency
The proposed requirements could benefit investors by making
financial markets more efficient in regard to the following: \166\
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\166\ We believe the benefits would stem primarily from the
requirement to submit interactive data to the Commission and the
Commission's disseminating that data. We also believe, however, that
the requirement that issuers with corporate Web sites post the
interactive data required to be submitted would encourage its
widespread dissemination thereby contributing to lower access costs
for users and the related benefits described. We solicit comment in
Part II.B.5 regarding what advantages, if any, dual Commission and
corporate Web site availability would have.
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Capital formation as a result of public companies being in
a better position to attract investor capital because of greater (less
costly) awareness on the part of the investors of issuer financial
information; and
Capital allocation as a result of investors being better
able to allocate capital among those issuers seeking it because of
interactive data reporting facilitating innovations in efficient
communication of issuer financial information.
[[Page 32816]]
a. More Efficient Capital Formation
An increase in the efficiency of capital formation is a benefit
that may accrue to the extent that interactive data reduces some of the
information barriers that make it costly for companies to find
appropriate sources of external finance. In particular, smaller public
companies are expected to benefit from enhanced exposure to investors.
If interactive data financial reporting increases the availability, or
reduces the cost of collecting and analyzing corporate financial data,
then there could be improved coverage of small companies by analysts
and commercial data vendors.
At present, many small companies are not included in commercially
available products that provide corporate financial data, possibly due
to high data collection costs relative to the value of providing
coverage. Their absence may reduce the likelihood that they receive
coverage by financial analysts who use commercially available products
to assess issuer performance. Hence, if interactive data reporting
increases coverage of smaller companies by commercially available
financial information products, and this increases their exposure to
analysts and investors, then lower search costs for capital could
result. In other words, smaller companies could realize a lower cost of
capital, or less costly financing.
While an increase in coverage should occur for some issuers, it is
possible that less than full coverage will remain in more sophisticated
products that provide analysis or reporting items beyond basic
financial information. This conclusion is based on an assumption that
many commercially available product offerings provide valuable
information beyond what is reported in basic financial information, and
the costs of providing this additional information for every company
may make 100% coverage prohibitive. In particular, the smallest issuers
may not offer sufficient market capitalization to make investment
worthwhile to larger investors, for whom these commercial products are
primarily designed.
So while lower data collection costs are likely to increase the
level of coverage that smaller issuers receive from investors and
market analysts, there is no certainty that this will extend down to
the very smallest set of issuers. As a result, it is possible that the
capital-raising benefits of interactive data reporting for some issuers
will not be as great as for others. Regardless, we are not aware of any
data to suggest that any issuer would be made worse off with respect to
analyst and investor coverage as it pertains to capital formation.
b. More Efficient Capital Allocation
An increase in the efficiency of capital allocation may accrue to
the extent that interactive data increase the quality of information in
financial markets by reducing the cost to access, collect and analyze
corporate financial data or improves the content of issuer-reported
information.\167\ An increase in quality and improvement in content
could enable investors to better allocate their capital among
issuers.\168\
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\167\ In the context of the discussion below, quality refers to
the ease with which end-users of financial data can access, collect
and analyze the financial data. This issue is separate from the
content of issuer-reported information. The higher the quality and
the better the content, the more accurately investors can price the
underlying securities.
\168\ Among the benefits to investors are some that are specific
or most valuable to smaller money managers and retail investors,
including the ability to acquire and download interactive financial
reporting data that have generally been available only to large
institutional users, and at substantial expense.
---------------------------------------------------------------------------
Information quality in financial markets would likely be higher if
interactive data reporting were required than if not, leading to more
efficient capital allocation. As a result of the improved utility of
information, investors may be able to better distinguish the merits of
various investment choices, thereby facilitating capital flow into the
favored investment prospects. This outcome is the main tenet of
improved market efficiency, whereby providing more widespread access to
information concerning the value of a financial asset such as a
company's shares results in better market pricing. Consequently,
reducing the costs of accessing, collecting and analyzing information
about the value of a financial asset facilitates this end.
Requiring companies to provide interactive data would improve the
quality of financial information available to end users, and help spur
interactive data-related innovation in the supply of financial services
products, resulting from a potential increased competition among
suppliers of such products due to lower entry barriers as a result of
lower data collection costs.
However, we have considered competing views of the informational
consequences of interactive data. For example, a requirement to submit
interactive data information could decrease the marginal benefit of
collecting information and thus reduce the information quality to the
extent it reduces third-party incentives to facilitate access to,
collect or analyze information. Assuming that markets efficiently price
the value of information, the amount of information accessed, collected
(or enhanced) and analyzed will be determined by the marginal benefit
of doing so.\169\ Lowering information collection costs (through a
requirement to submit interactive data information) should increase
this benefit. If this is so, then there should be no degradation in the
level of information quality as a result of changes in third-party
provider behavior under an interactive data reporting regime. However,
if one competitor in the industry can subsidize its operations through
an alternative revenue stream, both quality and competition may
suffer.\170\
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\169\ Also, we expect that because the proposed rules would
require the use of the XBRL interactive data standard, XBRL's being
an open standard would facilitate the development of related
software, some of which may, as a result, be made available to the
public for free or at a relatively low cost and provide the public
alternative ways to view and analyze interactive data information
provided under our proposed rules.
\170\ For illustration purposes only, assume that an Internet
service company develops an interactive data-based tool that easily
provides company financial data for free to all subscribers, and it
uses this product as a loss leader to increase viewership and
advertising revenue. If the data provided is of the same quality as
data provided through subscription to other available commercial
products, then there should be no informational efficiency loss.
However, if a data aggregator's providing information that improves
investor interpretation and goes beyond base financials is possible,
but no longer profitable to produce for competitors without the
subsidy, then valuable information production may be lost.
---------------------------------------------------------------------------
Another potential information consequence of the proposed
requirements may be changes to the precision and comparability of the
information disseminated by data service providers since the
interactive data requirements would shift the source of data formatting
that allows aggregation and facilitates comparison and analysis from
end-users to issuers submitting interactive data. At present, data
service providers manually key financial information into a format that
allows aggregation. As a result, the data service provider makes
interpretive decisions on how to aggregate reported financial items so
that they can be compared across all companies. Consequently, when a
subscriber of the commercial product offered by a data service provider
uses this aggregated data, it can expect consistent interpretation of
the reported financial items. In contrast, a requirement for issuers to
submit interactive data information would require the issuers to
independently decide within the confines of applicable requirements
which financial ``tag'' best describes
[[Page 32817]]
each financial item--perhaps with the help from a filing agent or
consultant--lessening the amount of interpretation required by data
aggregators or end-users of the data. Once a tag is chosen, comparison
to other companies is straightforward. However, since companies have
some discretion in how to select tags, and can choose extensions (new
tags) when they can not find an appropriate existing tag, unique
interpretations by each company could result in reporting differences
from what current data service providers and other end-users would have
chosen. This view suggests that the information disseminated by data
aggregators may be, on the one hand, less comparable because they have
not normalized it across issuers but, on the other hand, more accurate
because the risk of human error in the manual keying and interpretation
of filed information would be eliminated and more precise because it
will reflect decisions by the issuers themselves. Replication of prior
methods of interpretation still would be possible, however, because
issuers would continue to be required to file financial information in
traditional format. As a result, nothing would prohibit data
aggregators from continuing to provide normalized data. Nonetheless,
interactive data benefits could diminish if other reporting formats are
required for clarification in data aggregation.
The content of issuer-reported information may improve because, as
previously discussed, an issuer that uses a standardized interactive
data format at earlier stages of its reporting cycle may increase the
accuracy of its financial disclosure.\171\ In contrast, the content of
issuer-reported information may improve or decline to the extent that
the interactive data process influences what issuers report. While the
proposed requirements to submit and post interactive data information
are intended to be disclosure neutral, it is possible they would affect
what is reported.\172\
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\171\ See Part V.A.1.
\172\ We solicit comment on whether the proposed requirements
would affect issuer disclosure in Part II.B.3.a.
---------------------------------------------------------------------------
B. Costs of Requiring Submission and Posting of Interactive Data
The primary cost of the rulemaking is the cost of filers'
implementation of the rule, which includes the costs of submitting and
posting interactive data. We discuss this cost element extensively
below. In addition, because the rule allows an increase in the flow of
financial information being reported directly to analysts and
investors, there will be a cost of learning on the part of the
investors in using and analyzing financial information at the
interactive data level.
As for the cost of implementation of the rule, based on currently
available data, we estimate the average direct costs of submitting and
posting interactive data-formatted financial statements and other
information for all issuers under the proposed rules would, based on
certain assumptions, be as follows:
Table 1.--Estimated Direct Costs of Submitting Interactive Data-Formatted Financial Statements and Other
Information
----------------------------------------------------------------------------------------------------------------
Subsequent Subsequent
First submission submission with First submission submission with
with block-text block-text with detailed detailed
footnotes & footnotes & footnotes & footnotes &
schedules schedules schedules schedules
----------------------------------------------------------------------------------------------------------------
Preparation face financials \173\... $31,369 $4,312 $4,312 $4,312
Preparation footnotes \174\......... 1,750 1,750 25,000 12,500
Preparation schedules............... 250 250 2,500 1,250
Software and filing agent services 6,140 6,140 6,140 6,140
\175\..............................
Web site posting \176\.............. 1,000 1,000 1,000 1,000
---------------------------------------------------------------------------
Total cost...................... 40,509 13,452 38,952 25,202
----------------------------------------------------------------------------------------------------------------
The above estimates are generated in part from a limited number of
voluntary program participant questionnaire responses. In particular,
these responses provided detail on the projected costs of preparing the
face financials and for purchasing software or related filing agent
services. A more detailed analysis of just the costs associated with
voluntary program participation suggests that the estimated direct cost
of submitting face financial statements in interactive data format
falls within the range of $17,980 to $71,125 per issuer for the first
submission.\177\ This cost reflects expenditures on interactive data-
related software, consulting or filing agent services used, and the
market rate for all internal labor hours spent (including training) to
prepare, review and submit the first interactive data format
information face financial statements. Although the estimate accounts
for estimation error resulting from the small sample statistics on
which it is based, the future experiences of individual issuers
regarding face financial statements still may vary due to differences
between the voluntary program and the proposed required
[[Page 32818]]
program \178\ and may vary according to the issuers' size, complexity,
prior experience with interactive data, and other factors not apparent
from the voluntary program participant responses.\179\ The discussion
below summarizes the direct cost estimates of compliance regarding face
financial statements based on voluntary program participant
questionnaire responses and the specified assumptions.\180\
---------------------------------------------------------------------------
\173\ Estimates based on voluntary filer program questionnaire
responses, excluding participants with an interactive data-related
business interest. These data suggest that the time required for
tagging the face financials decreases by approximately 85% between
the first and second submissions. A $250 wage rate is assumed for
all preparation cost estimates.
\174\ The costs associated with block-tagging of footnotes and
schedules are assumed to remain constant in subsequent filings. In
contrast, anticipated learning benefits from more complicated
detailed tagging of footnotes and schedules are assumed to result in
a 50% reduction in cost for subsequent filings.
\175\ Software licensing and the use of a print agent can be
substitutionary--companies can choose to do one or the other, or do
both--and are thus aggregated.
\176\ This is an annual cost, and as such, will not be incurred
for subsequent filings within the same year.
\177\ Voluntary program participants were not required to tag
financial statement footnotes or schedules related to the financial
statements except that registered management investment company
participants were required to tag one specified schedule. Similarly,
voluntary program participants were not required to post on their
corporate Web sites, if any, the interactive data information they
submitted. Consequently, the costs of requirements to tag financial
statement footnotes and schedules related to financial statements
and post interactive data information are not derived from the
voluntary program participant questionnaire responses or discussed
in our analysis of those responses. Those costs are, instead,
derived from informal discussions with a limited number of persons
believed to be generally knowledgeable about preparing, submitting
and posting interactive data.
\178\ For example, the related list of tags would differ between
the voluntary and proposed required program. When we adopted the
voluntary program, the list of tags for U.S. GAAP financial
statement reporting contained approximately 4,000 data elements. The
list of tags released on April 28, 2008 contains approximately
13,000 data elements, with the most significant additions relating
to the development of elements for standard U.S. GAAP footnote
disclosure.
\179\ As such, caution should be used when referring to a
particular estimate without also acknowledging the potential effect
of these factors on future compliance costs.
\180\ The details of this analysis regarding face financial
statements, including the underlying assumptions, concerns on
extrapolating these results to a broader set of issuers, and other
considerations related to both the costs and benefits of requiring
submission of interactive data, are provided following the summary.
---------------------------------------------------------------------------
Average cost of first submission from voluntary program
questionnaire data is $30,933.
Average cost of second submission is $9,060 (69% average
reduction).
These average cost estimates increase by 20% after
removing voluntary program participants in an interactive data-related
business (these participants may have skills and incentives specific to
interactive data, unrepresentative of other issuers).
Due to sampling error,\181\ there is a 1% chance that the
true costs are underestimated by up to 80%. Assuming this 1% likelihood
and after removing participants in an interactive data-related
business, estimated cost of first submission is $71,125.
---------------------------------------------------------------------------
\181\ In general, sampling error is the error that arises as a
function of sampling in general and the sample chosen in particular.
---------------------------------------------------------------------------
Smaller financial issuers appear to have less complex
financials and labor costs that tend to be 20-30% lower than for other
issuers to submit interactive data information.
There also is some evidence to suggest that the smallest
(non-accelerated) issuers might have submission costs or compliance
difficulties in excess of other issuers.
This analysis attempts to quantify some of the direct costs that
issuers will incur if we require submission and posting of interactive
data.\182\ Whether issuers choose to purchase and learn how to use
software packages designed for interactive data submissions or
outsource this task to a third party, internal (labor) resources would
be required to complete the task. The cost estimates provided here
using voluntary program participant questionnaire responses shed light
on the potential dollar magnitude of the costs of requiring interactive
data submission other than with regard to tagging schedules and
footnotes to financials statements. However, the small size of the
participant response and the voluntary nature of participation suggest
that the numbers may not reflect the costs that all issuers would incur
in a required participation regime.
---------------------------------------------------------------------------
\182\ Because we are not proposing to require any kind of
attestation or audit of interactive data in the rulemaking, the
costs from attestation or auditing are not discussed in this
analysis.
---------------------------------------------------------------------------
At present, there are 76 issuers that have participated in the
voluntary program. Of these, 35 were provided questionnaires on the
details of their cost experience, and 22 responses were collected by
the time of this analysis. Table 2 summarizes the average aggregate
costs, including software and filing agent service costs and an
estimated cost for the internal labor hours required to prepare and
submit the interactive data format information. The low and high
estimates of the cost for internal labor hours represent billing rates
of $130 (internal junior accountant) and $250 (external accountant) per
hour, respectively.\183\ The reported costs are calculated using
responses from all voluntary program participants that provided
complete responses (20), and are also calculated using only those
voluntary program complete responses (15) from participants without an
interactive data-related business activity. We also report the
estimated bias in the reported cost when interactive data-related
businesses are included, calculated as the percent difference between
all participants and only those participants with no interactive data-
related business activity.
---------------------------------------------------------------------------
\183\ These estimates are from the Securities Industry and
Financial Markets Association's Management & Professional Earnings
in the Securities Industry 2007, modified to account for an 1,800-
hour work-year and multiplied by 5.35 to account for bonuses, firm
size, employee benefits and overhead.
Table 2.--Summary of Illustrative Survey Data on the Direct Cost Estimates for Voluntary Program and Confidence
Intervals (CIs) for Voluntary Program Participants
----------------------------------------------------------------------------------------------------------------
All voluntary program No interactive data- Estimated bias (percent)
participants (N=20) related business (N=15) -------------------------
----------------------------------------------------
Low High Low High Low High
----------------------------------------------------------------------------------------------------------------
First submission:
Estimated costs............... $17,980 $30,933 $21,424 $37,509 19.2 21.3
Upper bound using 5% CI....... 29,682 49,749 36,550 61,771 23.1 23.1
Upper bound using 1% CI....... 34,065 56,635 42,555 71,125 37.7 25.6
Subsequent submissions:
Estimated costs............... 7,408 9,060 8,382 10,452 13.1 15.4
Upper bound using 5% CI....... 12,691 15,357 15,209 18,494 19.8 20.4
Upper bound using 1% CI....... 14,687 17,753 17,938 21,737 22.1 22.4
Average reduction in cost:
From 1st to 2nd submission.... 69% ........... 71% ........... ........... ...........
----------------------------------------------------------------------------------------------------------------
Although there is a great deal of consistency across the voluntary
program questionnaire responses, three considerations become important
when extending these questionnaire-based cost estimates from the
voluntary program sample to the population of all issuers that would be
required to submit interactive data. First, the sample size is small.
There are only 22 voluntary program respondents to the questionnaire,
representing approximately 0.21% of all issuers that ultimately would
be required to submit interactive data.\184\ The small sample
[[Page 32819]]
size reduces the reliability of the cost estimates as a predictor of
future costs, a result of sampling error.\185\
---------------------------------------------------------------------------
\184\ This is based on 10,692 domestic and foreign issuers that
filed an annual report in 2006. Under our proposed rules, not all
foreign private issuers would be required to submit interactive
data; only those foreign private issuers that prepare their
financial statements in accordance with U.S. GAAP or IFRS as issued
by the IASB would be required to submit interactive data. Foreign
private issuers that report in accordance with other structures and
reconcile to U.S. GAAP would not be required to submit interactive
data.
\185\ For example, a 1% confidence interval (reported above)
measures 80% of the reported mean, such that if a different set of
randomly drawn respondents were surveyed about their interactive
data cost experience, there is a 1% chance that this new group would
have more than an 80% increase in costs from what is estimated in
this analysis. As a result, for example, if a different group of
randomly drawn voluntary program participants had responded to the
questionnaire with their cost experience, there is a 1% chance that
the new group would have more than an 80% increase in the lowest
cost for the first submission above $34,065.
---------------------------------------------------------------------------
The second and third factors to consider arise from the fact that
the survey respondents may not be representative of the general
population of issuers that would comply with a proposed rule. This is
known as ``sample selection bias.'' The first of these factors arises
from evidence that many voluntary program survey participants have a
business interest in interactive data, such as filing agents, other
filing service providers, financial services providers, and other
consulting agents. Five of the 22 survey respondents had such an
affiliation. These issuers may have incentives and skill sets
unrepresentative of the average issuer, and as such, may cause their
costs to depart from the likely submission cost of the average issuer
if interactive data become required. Indeed, after removing the five
respondents with an obvious interactive data related business interest,
the average cost estimate increased by 20%. Thus, submission costs
appear to be lower for issuers that have an interactive data-related
business relative to other issuers.
The other effect of sample selection relates to the size of the
respondent companies. The voluntary program questionnaire evidence is
based on responses of predominantly large issuers, and their cost
experience may not be representative of the smaller issuers. As is
evident from Figure 1, voluntary program participants are found among
the largest of all issuers, with more than 64% in the largest market
size decile, and more than 88% considered to be large accelerated
filers (measured as greater than $750 million in market
capitalization).\186\ In contrast, only 1,846 of 10,692 filers (17.4%
of all filers) were considered large accelerated filers in 2006.
---------------------------------------------------------------------------
\186\ ``Large accelerated filers,'' among other things, have
shares held by unaffiliated persons with a value of at least $700
million. Our analysis instead uses as a threshold $750 million in
the value of shares held by all persons (market capitalization) as
an approximation of the value of shares held by non-affiliates. The
use of market capitalization may overestimate the number of large
accelerated filers.
---------------------------------------------------------------------------
A size bias is plausible, since there are reasons to believe that
the reported submission costs vary with the size of the issuer. For
instance, larger issuers might have lower interactive data submission
costs than smaller issuers, since they have a larger pool of internal
resources to draw from, allowing them to more efficiently allocate
available skill sets from their labor pools to implement interactive
data reporting technology. Moreover, larger organizations might have
greater excess capacity in their internal labor pool such that they are
better able to absorb the short-term labor needs of ``learning''
interactive data. If so, the effect of sample selection in this
instance may be to underreport the interactive data submission costs
for smaller issuers.
Alternatively, smaller issuers could have lower submission costs
than larger issuers if their operations are less complex. This
reasoning suggests that simpler business operations lead to simpler
financial statements, requiring less effort to tag and submit using
interactive data. Hence, any reduction in available resources to
allocate to interactive data submission may be offset by lesser demand
for resources. This view suggests a trade-off in submission costs as
issuers become smaller, and as a typical result, less complex.
[GRAPHIC] [TIFF OMITTED] TP10JN08.059
[[Page 32820]]
1. Survey Results From the Japanese Interactive Data Pilot Program
We have also reviewed evidence from the Japanese interactive data
pilot program. Starting in April 2008, Japanese filers are required to
report financial statements with their Financial Services Agency (JFSA)
using interactive data technology. Before this requirement, 1,233
Japanese companies participated in a pilot program; 768 participants
described their interactive data submission experience through a JFSA
survey. Unlike the U.S. voluntary program participants, Japanese pilot
program participants span a larger issuer size range, including a
considerable number of the smallest issuers in the market (see Figure
3).
The survey evidence suggests that smaller Japanese filers required
less time to prepare and submit their first interactive data filing
than larger Japanese filers, but even so, some of the smallest filers
exhibited the greatest compliance difficulty.\187\ Figure 2 plots the
average number of labor hours required for a Japanese filer to
successfully prepare and submit its first interactive data filing,
disaggregated by approximate filer size measured by the book value of
their capital.\188\ The number of labor hours required is approximately
30% higher for the largest filers relative to the smaller, but not
smallest, filers. However, the size-labor hour relation is not
perfectly linear. The smallest size group deviates from the trend, with
the average number of labor hours required being similar to that of
larger filers.
---------------------------------------------------------------------------
\187\ Japanese filers did not tag financial footnotes.
\188\ Data provided by the JFSA reported firm sizes according to
their book value of equity, in Yen. These values were converted into
dollars at a rate of 108 Yen to the dollar. Although the Commission
generally measures issuer size based on the market value of
outstanding securities, market value is highly correlated to book
value of equity. As a result, the use of book value of equity in
Figures 2 and 3 should not impact the relevance of inferences drawn
from those Figures.
[GRAPHIC] [TIFF OMITTED] TP10JN08.060
While the number of labor hours required for the smallest filers is
not greater than that of the largest filers, the smaller filers were
far more likely to file late, or ``fail'' (Figure 3). The JFSA
classified firms as ``failures'' for having not completed their first
filing in the time required (i.e., before the filing deadline). This
smallest filer size group has a failure rate of nearly 25% compared to
less than 5% for the largest filer size group.
[[Page 32821]]
[GRAPHIC] [TIFF OMITTED] TP10JN08.061
The JFSA indicated that most of the ``failures'' occurred among
filers who underestimated the resources required for their first
filing, with many of the failing firms (44%) electing to prepare and
submit their documents on their own. In contrast, it is estimated that
87% of pilot program firms used a printing company to prepare and
submit their documents. Of the Japanese pilot program participants that
were classified as having failed to submit, 69% indicated that they
would not have a problem for their next submission.
The results of the JFSA survey yield two relevant conclusions.
First, smaller, but not the smallest, issuers are likely to have lower
submission costs as a result of fewer labor hours required to submit
information using interactive data. Second, these submission cost
savings may not accrue to the smallest issuers (i.e., those with total
equity held by non-affiliates with a market value below $75 million).
Moreover, there is a risk that the smallest issuers might have
difficulty in complying with a time-specific requirement if implemented
too quickly. These findings add to the evidence from the U.S. voluntary
program questionnaire results given that they span a greater issuer
size range.
2. U.S. Issuer Document Complexity Also Suggests Lower Costs for
Smaller Issuers
Although the Japanese pilot program findings document an important
size-related cost consideration, extrapolating these results to what
might be expected in a U.S. interactive data required program poses
some risk given the potential differences between Japanese and U.S.
regulatory regimes and filing requirements. For instance, implementing
required interactive data reporting in the United States may be more
complex, as a greater number of accounting concepts can be tagged.\189\
Indeed, voluntary program results demonstrate an average of 101 hours
to complete the first filing, more than three times the time required
for the Japanese pilot program participants.
---------------------------------------------------------------------------
\189\ The technical differences between the two systems are
beyond the scope of this analysis.
---------------------------------------------------------------------------
To assess the likelihood that the Japanese survey results can be
applied to the proposed program under which interactive data would be
required, Form 10-K complexity is examined across issuer size. If
reduced complexity in financial reporting is responsible for the lower
labor costs among smaller Japanese issuers, then evidence of reduced
complexity among Commission issuers as their size decreases would
suggest that lower labor costs among small U.S. issuers as well. This
analysis uses the number of items reported in a filer's financial
document as the measure of document complexity. The evidence in Figure
4 reveals that there is roughly a 15% difference in the number of
elements reported by the smallest and largest filers.\190\ In other
words, U.S. filer document complexity results are consistent with lower
compliance costs for smaller firms (leaving aside the very smallest
filers).
---------------------------------------------------------------------------
\190\ Edgar Online provided the number of reported items in each
of the three main financial tables (balance sheet, income statement,
and statement of cash flow) for all U.S. filers from 2001 and 2007,
and this was matched to market data from CRSP (Center for Research
in Security Prices) to be included in the analysis.
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[[Page 32822]]
[GRAPHIC] [TIFF OMITTED] TP10JN08.062
3. Scalability of Interactive Data-Related Support Services and
Technology
The final cost consideration in this section is the scalability of
interactive data-related support services and technology. In
particular, it is unclear how the market for interactive data support
services and technology may change if the Commission required over
10,000 issuers to submit and post interactive data.
The roles of each potential kind of service provider within the
interactive data market are likely to develop further and are not yet
clear, and there are many potential participants to consider, including
the software vendors, financial reporting system providers (i.e.,
providers of widely used financial products), print/filing agents,
auditors and other consultants, as well as the Commission. Until the
market of issuers that submit interactive data information grows
substantially larger (either by requirement or by expansion of the
number of volunteers), it is difficult to predict how standard
solutions will evolve. For example, we do not know whether issuers will
adopt solutions that create interactive data submissions using third
party software, a so-called ``bolt-on'' approach, or will seek
integrated solutions that enable issuers to prepare interactive data
submissions from their existing financial services software. Moreover,
filing agents may maintain their role as an intermediary by offering
interactive data technology or other service providers may cause that
role to change. Others with financial and technical expertise may
participate in the technology with unpredictable results.
Combining the uncertainty over the source of future interactive
data services with increased demand for these services could result in
a new equilibrium market price that is different from what is currently
reported by voluntary program participants. This price could be higher
if the demand for interactive data services increases (from 76
voluntary program participants to more than 10,000 total participants)
at a faster rate than the supply for these same services. For example,
we are aware that one interactive data service provider offers a basic
package to issuers that costs $15,000, and includes all software
resources and training required (it suggests 40 hours is needed) for
the issuer to submit its first quarterly interactive data information.
This price schedule was based on an expectation of servicing as many as
100 voluntary participants in the first year of the program. However,
the main pricing concern for the future is whether this or similar
products could be scaled upwards to service a much larger market
without material (adverse) impact to the stated price. More broadly, if
an interactive data requirement resulted in clients subscribing for
interactive data services faster than the rate at which these services
can be supplied, then a price increase is the natural discriminator in
how to allocate limited resources.
The submission costs discussed in this section suggest that a
phase-in program that is implemented too quickly could result in higher
than necessary submission costs if the supply of interactive data-
related resources is constrained, but the effect would likely diminish
as a market place for interactive data services develops. Hence, this
concern is mitigated to the extent that issuers are phased in at a rate
that allows interactive data service suppliers to keep pace with
demand.
D. Comment Solicited
We solicit comment on all aspects of this cost-benefit analysis,
including the identification of any additional costs or benefits or,
suggested alternatives to, the proposed rules. Commenters are requested
to provide empirical data and other factual support for their views to
the extent possible.
We request comment regarding the costs and benefits to investors,
companies, analysts, third-party information providers, software
providers, filing agents, and others who may be affected by the
proposed rules. We are particularly interested in information on the
costs and benefits to smaller reporting companies.
In particular, we request comment regarding:
The differences between start-up costs and the costs of
providing interactive data on a continuing basis after the initial
preparation;
The cost to prepare interactive data in block-text and
detail for footnotes and schedules to financial statements;
Differences in interactive data preparation costs due to
differences between U.S. GAAP and IFRS as issued by the IASB and the
list of tags related to each; and the cost of Web site posting.
[[Page 32823]]
VI. Consideration of Burden on Competition and Promotion of Efficiency,
Competition and Capital Formation
Section 23(a)(2) of the Exchange Act \191\ requires us, when
adopting rules under the Exchange Act, to consider the impact that any
new rule would have on competition. In addition, section 23(a)(2)
prohibits us from adopting any rule that would impose a burden on
competition not necessary or appropriate in furtherance of the purposes
of the Exchange Act. Furthermore, section 2(b) \192\ of the Securities
Act, section 3(f) \193\ of the Exchange Act, and section 2(c) \194\ of
the Investment Company Act require us, when engaging in rulemaking
where we are required to consider or determine whether an action is
necessary or appropriate in the public interest, to consider, in
addition to the protection of investors, whether the action will
promote efficiency, competition, and capital formation.
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\191\ 15 U.S.C. 78w(a)(2).
\192\ 15 U.S.C. 77b(b).
\193\ 15 U.S.C. 78c(f).
\194\ 15 U.S.C. 80a-2(c).
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The proposals to require issuers to submit interactive data to the
Commission and post it on their corporate Web sites are intended to
make financial information easier for investors to analyze while
assisting in automating regulatory filings and business information
processing. In particular, we believe that the proposed rules would
enable investors and others to search and analyze the financial
information dynamically; facilitate comparison of financial and
business performance across issuers, reporting periods and industries;
and, possibly, provide a significant opportunity to automate regulatory
filings and business information processing with the potential to
increase the speed, accuracy, and usability of financial disclosure.
Further, as discussed in detail above, we believe that the proposals
may lead to more efficient capital formation and allocation.\195\
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\195\ See Part V.A.2.
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We understand that private sector businesses such as those that
access financial information and aggregate, analyze, compare or convert
it into interactive format have business models and, as a result,
competitive strategies that the proposed interactive data requirements
might affect. Since interactive data technology is designed to remove
an informational barrier, business models within the financial services
industry that are currently adapted to traditional format document
reporting may change, with possible consequences for the revenue stream
of current product offerings due to the competitive effects of such a
change. The competitive effects may relate to changes in the
accessibility of financial information to investors, the nature of the
information that investors receive, and the potential from new entry or
innovation in the markets through which financial reports are
transmitted from filers to investors. For example, lower entry barriers
that result from lower data collection costs may increase competition
among suppliers of financial services products and help spur
interactive data-related innovation. It is also possible, however, that
a requirement to submit interactive data information could decrease the
marginal benefit of collecting information and thus cause suppliers of
financial services products to produce information that is less robust
to the extent the decreased marginal benefit reduces third-party
incentives to facilitate access to, collect or analyze information. If
markets efficiently price the value of information, the amount of
information accessed, collected (or enhanced) and analyzed will be
determined by the marginal benefit of doing so.\196\ Lowering
information collection costs (through a requirement to submit
interactive data information) should increase this benefit. If this is
so, then there should be no degradation in the level of information
quality as a result of changes in third-party provider behavior under
an interactive data reporting regime. However, if one competitor in the
industry can subsidize its operations through an alternative revenue
stream, both quality and competition may suffer.
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\196\ Also, we expect that because the proposed rules would
require the use of the XBRL interactive data standard, XBRL's being
an open standard would facilitate the development of related
software, some of which may, as a result, be made available to the
public for free or at a relatively low cost and provide the public
alternative ways to view and analyze interactive data information
provided under our proposed rules.
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For the reasons described more fully above, we believe the
liability protections for interactive data would be necessary or
appropriate in the public interest and consistent with the protection
of investors. Moreover, the protections would also be consistent with
the purposes fairly intended by the policy and provisions of the
Investment Company Act.
We request comment on whether the proposals, if adopted, would
promote efficiency, competition, and capital formation or have an
impact or burden on competition. Commenters are requested to provide
empirical data and other factual support for their views, if possible.
VII. Initial Regulatory Flexibility Act Analysis
This Initial Regulatory Flexibility Analysis has been prepared in
accordance with 5 U.S.C. 603. It relates to proposed amendments that
would require issuers to provide their financial statements to the
Commission and on their corporate Web sites in interactive data format.
A. Reasons for, and Objectives of, the Proposed Action
The main purpose of the proposed amendments is to make financial
information easier for investors to analyze while assisting in
automating regulatory filings and business information processing.
Currently, issuers are required to file their registration statements,
quarterly and annual reports, and transitional reports in a traditional
format that provides static text-based information. We believe that
providing the financial statements these filings contain in interactive
data format would
Enable investors and others to search and analyze the
information dynamically;
Facilitate comparison of financial and business
performance across issuers, reporting periods and industries; and
Possibly provide a significant opportunity to automate
regulatory filings and business information processing with the
potential to increase the speed, accuracy, and usability of financial
disclosure.
B. Legal Basis
We are proposing the amendments under sections 7, 10, 19(a) and 28
of the Securities Act,\197\ sections 3, 12, 13, 14, 15(d), 23(a), 35A
and 36 of the Exchange Act,\198\ sections 314 and 319 of the Trust
Indenture Act \199\ and sections 6(c), 8, 24, 30 and 38 of the
Investment Company Act \200\ and section 3(a) of the Sarbanes-Oxley
Act.\201\
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\197\ 15 U.S.C. 77g, 77j, 77s(a) and 77z-3.
\198\ 15 U.S.C. 78c, 78l, 78m, 78n, 78o(d), 78w(a), 78ll and
78mm.
\199\ 15 U.S.C. 77nnn and 77sss.
\200\ 15 U.S.C. 80a-6(c), 80a-8, 80a-24, 80a-29 and 80a-37.
\201\ [Pub. L. No. 107-204, 116 Stat. 745.]
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C. Small Entities Subject to the Proposed Rules
The proposed amendments would affect issuers that are small
entities. Exchange Act Rule 0-10(a) \202\ defines
[[Page 32824]]
an issuer, other than an investment company, to be a ``small business''
or ``small organization'' for purposes of the Regulatory Flexibility
Act if it had total assets of $5 million or less on the last day of its
most recent fiscal year.\203\ We estimate that there are approximately
1,100 issuers that file reports under the Exchange Act and may be
considered small entities.\204\ All of these issuers would become
subject to the proposed rules in year three of the phase-in.
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\202\ 17 CFR 240.0-10(a).
\203\ Securities Act Rule 157(a) [17 CFR 230.157(a)] generally
defines an issuer, other than an investment company, to be a ``small
business'' or ``small entity'' for purposes of the Regulatory
Flexibility Act if it had total assets of $5 million or less on the
last day of its most recent fiscal year and it is conducting or
proposing to conduct a securities offering of $5 million or less.
For purposes of our analysis of issuers other than investment
companies in this Part VII of the release, however, we use the
Exchange Act definition of ``small business'' or ``small entity''
because that definition includes more issuers than does the
Securities Act definition and, as a result, assures that the
definition we use would not itself lead to an understatement of the
impact of the amendments on small entities.
\204\ The estimated number of small entities that report under
the Exchange Act is based on 2007 data including the Commission's
internal computerized filing system and Thompson Financial's
Worldscope database.
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D. Reporting, Recordkeeping and Other Compliance Requirements
All issuers subject to the proposed rules would be required to
submit financial information to the Commission in interactive data
format and, if they have a corporate Web site, post the interactive
data on their Web site. We believe that, in order to submit financial
information in interactive data format, issuers in general and small
entities in particular likely would need to prepare and then submit the
interactive data by expending internal labor hours in connection with
either or both of
Purchasing, learning and using software packages designed
to prepare financial information in interactive format; and
Hiring and working with a consultant or filing agent.\205\
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\205\ Some issuers such as those that have participated in the
voluntary program may already prepare financial information in
interactive data format or already have the expertise and software
to prepare financial information in interactive data format. Those
issuers would incur fewer costs as a result of the proposed
requirements. Based on our experience with the voluntary program,
however, we believe that it would be unlikely that those issuers
would include many small entities.
---------------------------------------------------------------------------
We believe that issuers would incur relatively little cost in
connection with the requirement to post the interactive data on the
issuer's corporate Web site because the requirement applies only to
issuers that already have a corporate Web site.\206\
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\206\ The internal labor and external costs required to comply
with the proposed rules are discussed more fully in Parts IV and V
above.
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E. Duplicative, Overlapping, or Conflicting Federal Rules
We believe that the proposed amendments would not duplicate, or
overlap or conflict with, other federal rules.
F. Agency Action To Minimize the Effect on Small Entities
The Regulatory Flexibility Act directs us to consider significant
alternatives that would accomplish the stated objective, while
minimizing any significant adverse impact on small entities. In
connection with the proposed amendments, we considered several
alternatives, including the following:
Establishing different compliance or reporting
requirements or timetables that take into account the resources
available to small entities;
Further clarifying, consolidating or simplifying the
proposed requirements;
Using performance rather than design standards; and
Providing an exemption from the proposed requirements, or
any part of them, for small entities.
We believe that, as to small entities, differing compliance,
reporting or non-phase-in timetable requirements, a partial or complete
exemption from the proposed requirements or the use of performance
rather than design standards would be inappropriate because these
approaches would detract from the long-term completeness and uniformity
of the interactive data format financial information database. Less
long-term completeness and uniformity would reduce the extent to which
the proposed requirements would enable investors and others to search
and analyze the information dynamically; facilitate comparison of
financial and business performance across issuers, reporting periods
and industries; and, possibly, provide a significant opportunity to
automate regulatory filings and business information processing with
the potential to increase the speed, accuracy, and usability of
financial disclosure. We note, however, that small entities would not
be subject to the proposed requirements until year three of the phase-
in and, as all other issuers, would not be required to tag in detail
the footnotes and schedules to their financial statements until their
second year subject to the requirements.\207\ We solicit comment,
however, on whether differing compliance, reporting or timetable
requirements, a partial or complete exemption, or the use of
performance rather than design standards would be consistent with our
described main goal of making financial information easier for
investors to analyze while assisting in automating regulatory filings
and business information processing.
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\207\ In this regard, in Part II.B.2 of this release we note
that the additional time phase-in time for companies not required to
submit interactive data in year one of the phase-in period is
intended to permit them to plan for and implement the interactive
data reporting process after having the opportunity to learn from
the experience of year one filers. We also there solicit comment on
the appropriate phase-in schedule for smaller reporting companies
(which would include small entities) and note that the additional
phase-in time also is intended to enable us to monitor
implementation and, if necessary, make appropriate adjustments to
the phase-in period.
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We are considering whether further clarifying, consolidating or
simplifying the proposed interactive data submission and posting
requirements would be appropriate. Based in part on our experience with
the voluntary program, we believe that the proposed requirements are
sufficiently clear and straightforward (although, we seek comment on
this).
G. Solicitation of Comment
We encourage comments with respect to any aspect of this Initial
Regulatory Flexibility Analysis. In particular, we request comments
regarding:
The number of small entities that may be affected by the
proposed amendments;
The existence or nature of the potential impact of the
proposed amendments on small entities as discussed in this analysis;
and
How to quantify the impact of the proposed amendments.
We ask those submitting comments to describe the nature of any
impact and provide empirical data supporting the extent of the impact.
These comments will be considered in the preparation of the Final
Regulatory Flexibility Analysis, if the proposed amendments are
adopted, and will be placed in the same public file as comments on the
proposed amendments themselves.
VIII. Small Business Regulatory Enforcement Fairness Act
For purposes of the Small Business Regulatory Enforcement Fairness
Act of 1996, a rule is ``major'' if it has resulted, or is likely to
result in:
An annual effect on the economy of $100 million or more;
A major increase in costs or prices for consumers or
individual industries; or
Significant adverse effects on competition, investment or
innovation.
We request comment on whether our proposals would be a ``major
rule'' for
[[Page 32825]]
purposes of SBREFA. We solicit comment and empirical data on:
The potential effect on the U.S. economy on an annual
basis;
Any potential increase in costs or prices for consumers or
individual industries; and
Any potential effect on competition, investment or
innovation.
IX. Statutory Authority and Text of Proposed Amendments
We are proposing the amendments outlined above under sections 7,
10, 19(a) and 28 of the Securities Act, \208\ sections 3, 12, 13, 14,
15(d), 23(a), 35A, and 36 of the Exchange Act, \209\ sections 314 and
319 of the Trust Indenture Act \210\ and sections 6(c), 8, 24, 30, and
38 of the Investment Company Act \211\ and section 3(a) of the
Sarbanes-Oxley Act.\212\
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\208\ 15 U.S.C. 77g, 77j, 77s(a), and 77z-3.
\209\ 15 U.S.C. 78c, 78l, 78m, 78n, 78o(d), 78w(a), 78ll, and
78mm.
\210\ 15 U.S.C. 77nnn and 77sss.
\211\ 15 U.S.C. 80a-6(c), 80a-8, 80a-24, 80a-29, and 80a-37.
\212\ [Pub. L. No. 107-204, 116 Stat. 745.]
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List of Subjects in 17 CFR Parts 229, 230, 232, 239, 240 and 249
Reporting and recordkeeping requirements, Securities.
For the reasons set out in the preamble, we propose to amend Title
17, Chapter II of the Code of Federal Regulations as follows:
PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND
CONSERVATION ACT OF 1975--REGULATION S-K
1. The authority citation for part 229 continues to read in part as
follows:
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2,
77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 777iii,
77jjj, 77nnn, 77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78u-5, 78w,
78ll, 78mm, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-31(c), 80a-37,
80a-38(a), 80a-39, 80b-11, and 7201 et seq.; and 18 U.S.C. 1350,
unless otherwise noted.
* * * * *
2. Amend Sec. 229.601 by revising the exhibit table in paragraph
(a) and by revising paragraph (b)(100) and adding paragraph (b)(101) to
read as follows:
Sec. 229.601 (Item 601) Exhibits.
(a) * * *
Exhibit Table
* * * * *
Exhibit Table
--------------------------------------------------------------------------------------------------------------------------------------------------------
Securities Act Forms Exchange Act Forms
--------------------------------------------------------------------------------------------------------------------------------------------------------
S-1 S-3 S-4 \1\ S-8 S-11 F-1 F-3 F-4 \1\ 10 8-K \2\ 10-D 10-Q 10-K
--------------------------------------------------------------------------------------------------------------------------------------------------------
(1) Underwriting agreement......... X X X ....... X X X X ....... X ....... ....... .......
(2) Plan of acquisition, X X X ....... X X X X X X ....... X X
reorganization, arrangement,
liquidation or succession.........
(3) (i) Articles of incorporation.. X ....... X ....... X X ....... X X X X X X
(ii) Bylaws........................ X ....... X ....... X X ....... X X X X X X
(4) Instruments defining the rights X X X X X X X X X X X X X
of security holders, including
indentures........................
(5) Opinion re legality............ X X X X X X X X ....... ....... ....... ....... .......
(6) [Reserved]..................... N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
(7) Correspondence from an ....... ....... ....... ....... ....... ....... ....... ....... ....... X ....... ....... .......
independent accountant regarding
non-reliance on a previously
issued audit report or completed
interim review....................
(8) Opinion re tax matters......... X X X ....... X X X X ....... ....... ....... ....... .......
(9) Voting trust agreement......... X ....... X ....... X X ....... X X ....... ....... ....... X
(10) Material contracts............ X ....... X ....... X X ....... X X ....... X X X
(11) Statement re computation of X ....... X ....... X X ....... X X ....... ....... X X
per share earnings................
(12) Statements re computation of X X X ....... X X ....... X X ....... ....... ....... X
ratios............................
(13) Annual report to security ....... ....... X ....... ....... ....... ....... ....... ....... ....... ....... ....... X
holders, Form 10-Q or quarterly
report to security holders \3\....
(14) Code of Ethics................ ....... ....... ....... ....... ....... ....... ....... ....... ....... X ....... ....... X
(15) Letter re unaudited interim X X X X X X X X ....... ....... ....... X .......
financial information.............
(16) Letter re change in certifying X ....... X ....... X ....... ....... ....... X X ....... ....... X
accountant \4\....................
(17) Correspondence on departure of ....... ....... ....... ....... ....... ....... ....... ....... ....... X ....... ....... .......
director..........................
(18) Letter re change in accounting ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... X X
principles........................
(19) Report furnished to security ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... X .......
holders...........................
(20) Other documents or statements ....... ....... ....... ....... ....... ....... ....... ....... ....... X ....... ....... .......
to security holders...............
(21) Subsidiaries of the registrant X ....... X ....... X X ....... X X ....... ....... ....... X
[[Page 32826]]
(22) Published report regarding ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... X X X
matters submitted to vote of
security holders..................
(23) Consents of experts and X X X X X X X X ....... X \5\ X \5\ X \5\ X \5\
counsel...........................
(24) Power of attorney............. X X X X X X X X X X ....... X X
(25) Statement of eligibility of X X X ....... ....... X X X ....... ....... ....... ....... .......
trustee...........................
(26) Invitation for competitive X X X ....... ....... X X X ....... ....... ....... ....... .......
bids..............................
(27) through (30) [Reserved]....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... .......
(31) (i) Rule 13a-14(a)/15d-14(a) ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... X X
Certifications....................
(ii) Rule 13a-14/15d-14 ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... X
Certifications................
(32) Section 1350 Certifications ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... X X
\6\...............................
(33) Report on assessment of ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... X
compliance with servicing criteria
for asset-backed issuers..........
(34) Attestation report on ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... X
assessment of compliance with
servicing criteria for asset-
backed securities.................
(35) Servicer compliance statement. ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... X
(36) through (98) [Reserved]....... N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
(99) Additional exhibits........... X X X X X X X X X X X X X
(100) XBRL-Related Documents....... ....... ....... ....... ....... ....... ....... ....... ....... X X ....... X X
(101) Interactive Data File........ X X X ....... X X X X ....... ....... ....... X X
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ An exhibit need not be provided about a company if: (1) With respect to such company an election has been made under Form S-4 or F-4 to provide
information about such company at a level prescribed by Form S-3 or F-3; and (2) the form, the level of which has been elected under Form S-4 or F-4,
would not require such company to provide such exhibit if it were registering a primary offering.
\2\ A Form 8-K exhibit is required only if relevant to the subject matter reported on the Form 8-K report. For example, if the Form 8-K pertains to the
departure of a director, only the exhibit described in paragraph (b)(17) of this section need be filed. A required exhibit may be incorporated by
reference from a previous filing.
\3\ Where incorporated by reference into the text of the prospectus and delivered to security holders along with the prospectus as permitted by the
registration statement; or, in the case of the Form 10-K, where the annual report to security holders is incorporated by reference into the text of
the Form 10-K.
\4\ If required pursuant to Item 304 of Regulation S-K.
\5\ Where the opinion of the expert or counsel has been incorporated by reference into a previously filed Securities Act registration statement.
\6\ Pursuant to Sec. Sec. 240.13a-13(b)(3) and 240.15d-13(b)(3) of this chapter, asset-backed issuers are not required to file reports on Form 10-Q.
(b) * * *
(100) XBRL-Related Documents. Only an electronic filer that
prepares its financial statements in accordance with Article 6 of
Regulation S-X (17 CFR 210.6-01 et seq.) is permitted to participate in
the voluntary XBRL (eXtensible Business Reporting Language) program
and, as a result, may submit XBRL-Related Documents (Sec. 232.11 of
this chapter) in electronic format as an exhibit to: The filing to
which they relate; an amendment to such filing; or a Form 8-K (Sec.
249.308 of this chapter) that references such filing, if the Form 8-K
is submitted no earlier than the date of filing. Rule 401 of Regulation
S-T (Sec. 232.401 of this chapter) sets forth further details
regarding eligibility to participate in the voluntary XBRL program.
(101) Interactive Data File. An Interactive Data File (Sec. 232.11
of this chapter) is:
(i) Required to be Submitted and Posted. Required to be submitted
to the Commission and posted on the registrant's corporate Web site, if
any, in the manner provided by Rule 405 of Regulation S-T (Sec.
232.405 of this chapter) if the registrant does not prepare its
financial statements in accordance with Article 6 of Regulation S-X (17
CFR 210.6-01 et seq.) and is:
(A) A large accelerated filer (Sec. 240.12b-2 of this chapter)
that had an aggregate worldwide market value of the voting and non-
voting common equity held by non-affiliates of more than $5 billion as
of the last business day of its most recently completed second fiscal
quarter that prepares its financial statements in accordance with
generally accepted accounting principles as used in the United States
and the filing contains financial statements of the registrant for a
period that ends on or after December 15, 2008;
(B) A large accelerated filer not specified in paragraph
(b)(101)(i)(A) of this Item that prepares its financial statements in
accordance with generally accepted accounting principles as used in the
United States and the filing contains financial statements of the
registrant for a period that ends on or after December 15, 2009;
(C) A filer not specified in paragraph (b)(101)(i)(A) or (B) of
this Item that prepares its financial statements in accordance with
generally accepted accounting principles as used in the United States
and the filing contains financial statements of the registrant for a
period that ends on or after December 15, 2010; or
(D) A foreign private issuer (Sec. 240.3b-4(c) of this chapter)
that prepares its financial statements in accordance with International
Financial Reporting Standards as issued by the International Accounting
Standards Board, and the filing contains financial statements of
[[Page 32827]]
the registrant for a period that ends on or after December 15, 2010.
(ii) Permitted to be Submitted. Permitted to be submitted to the
Commission in the manner provided by Rule 405 of Regulation S-T (Sec.
232.405 of this chapter) if the registrant:
(A) Prepares its financial statements
(1) In accordance with either
(a) Generally accepted accounting principles as used in the United
States; or
(b) International Financial Reporting Standards as issued by the
International Accounting Standards Board; and
(2) Not in accordance with Article 6 of Regulation S-X (17 CFR
210.6-01 et seq.) and
(B) Is not required to be submitted to the Commission under
paragraph (b)(101)(i) of this Item.
(iii) Not Permitted to be Submitted. Not permitted to be submitted
to the Commission if the registrant prepares its financial statements
in accordance with Article 6 of Regulation S-X (17 CFR 210.6-01 et
seq.).
PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933
3. The authority citation for part 230 continues to read in part as
follows:
Authority: 15 U.S.C. 77b, 77c, 77d, 77f, 77g, 77h, 77j, 77r,
77s, 77z-3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 78o, 78t, 78w,
78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 80a-29, 80a-30, and 80a-37,
unless otherwise noted.
* * * * *
4. Amend Sec. 230.144 by revising paragraph (c)(1) to read as
follows:
Sec. 230.144 Persons deemed not to be engaged in a distribution and
therefore not underwriters.
* * * * *
(c) * * *
(1) Reporting issuers. The issuer is, and has been for a period of
at least 90 days immediately before the sale, subject to the reporting
requirements of section 13 or 15(d) of the Exchange Act, has filed all
required reports under section 13 or 15(d) of the Exchange Act, as
applicable, and has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File (Sec. 232.11
of this chapter) required to be submitted and posted under either Item
601(b)(101) of Regulation S-K (Sec. 229.601(b)(101) of this chapter)
or Item 101 of the Instructions as to Exhibits of Form 20-F (Sec.
249.220f of this chapter), during the 12 months preceding such sale (or
for such shorter period that the issuer was required to file such
reports), other than form 8-K reports (Sec. 249.308 of this chapter);
or
* * * * *
PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR
ELECTRONIC FILINGS
5. The authority citation for part 232 continues to read in part as
follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77z-3,
77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll, 80a-6(c),
80a-8, 80a-29, 80a-30, 80a-37, and 7201 et seq.; and 18 U.S.C. 1350.
* * * * *
6. Amend Sec. 232.11 by adding definitions for ``Interactive Data
File'', ``Interactive Data in Viewable Form'', and ``Related Official
Filing'' in alphabetical order to read as follows:
Sec. 232.11 Definition of terms used in part 232.
* * * * *
Interactive Data File. The term Interactive Data File means the
machine-readable computer code that presents information in eXtensible
Business Reporting Language in electronic format in accordance with
Sec. 232.405.
Interactive Data in Viewable Form. The term Interactive Data in
Viewable Form means the financial statements, financial statement
schedules and financial statement footnotes that
(1) Are displayed when an Interactive Data File is converted from
machine-readable computer code into human-readable text through
software the Commission provides; and
(2) Are displayed through such conversion identically in all
material respects to the corresponding financial statements, financial
statement schedules and financial statement footnotes in the Related
Official Filing.
* * * * *
Related Official Filing. The term Related Official Filing means the
ASCII or HTML format part of the official filing with which an
Interactive Data File appears as an exhibit.
* * * * *
7. Amend Sec. 232.201 by:
a. Revising paragraph (a) introductory text;
b. Amending paragraph (b) by revising the headings to Notes 1 and
2;
c. Adding paragraph (c).
The revisions and additions read as follows:
Sec. 232.201 Temporary hardship exemption.
(a) If an electronic filer experiences unanticipated technical
difficulties preventing the timely preparation and submission of an
electronic filing, other than a Form 3 (Sec. 249.103 of this chapter),
a Form 4 (Sec. 249.104 of this chapter), a Form 5 (Sec. 249.105 of
this chapter), a Form ID (Sec. Sec. 239.63, 249.446, 269.7 and 274.402
of this chapter), a Form TA-1 (Sec. 249.100 of this chapter), a Form
TA-2 (Sec. 249.102 of this chapter), a Form TA-W (Sec. 249.101 of
this chapter), a Form D (Sec. 239.500 of this chapter) or an
Interactive Data File (Sec. 232.11 of this chapter), the electronic
filer may file the subject filing, under cover of Form TH (Sec. Sec.
239.65, 249.447, 269.10 and 274.404 of this chapter), in paper format
no later than one business day after the date on which the filing was
to be made.
* * * * *
(b) * * *
Note 1 to paragraph (b): * * *
Note 2 to paragraph (b): * * *
(c) If an electronic filer experiences unanticipated technical
difficulties preventing the timely preparation and
(1) Submission of an Interactive Data File (Sec. 232.11) as an
exhibit as required by either Item 601(b)(101) of Regulation S-K (Sec.
229.601(b)(101) of this chapter) or Item 101 of the Instructions as to
Exhibits of Form 20-F (Sec. 249.220f of this chapter), the electronic
filer still can timely satisfy the requirement to submit the
Interactive Data File in the following manner:
(i) Substitute for the Interactive Data File in the required
exhibit a document that sets forth the following legend:
IN ACCORDANCE WITH THE TEMPORARY HARDSHIP EXEMPTION PROVIDED BY
RULE 201 OF REGULATION S-T, THE DATE BY WHICH THE INTERACTIVE DATA FILE
IS REQUIRED TO BE SUBMITTED HAS BEEN EXTENDED BY SIX BUSINESS DAYS; and
(ii) Submit the required Interactive Data File no later than six
business days after the Interactive Data File originally was required
to be submitted.
(2) Posting on its corporate Web site of an Interactive Data File
as required by either Item 601(b)(101) of Regulation S-K or Item 101 of
the Instructions as to Exhibits of Form 20-F, the electronic filer
still can timely satisfy the requirement to post the Interactive Data
File by so posting the Interactive Data File within six business days
after the Interactive Data File was required to be submitted to the
Commission.
Note to paragraph (c): Electronic filers unable to submit or
post, as applicable, the Interactive Data File under the
circumstances specified by paragraph (c), must comply with the
provisions of this section and cannot use Form 12b-25 (Sec. 249.322
of this chapter) as a notification of late filing. Failure to submit
or
[[Page 32828]]
post, as applicable, the Interactive Data File as required by the
end of the six-business-day period specified by paragraph (c) of
this section will result in ineligibility to use Forms S-3, S-8 and
F-3 (Sec. Sec. 239.13, 239.16b and 239.33 of this chapter) and
constitute a failure to have filed all required reports for purposes
of the current public information requirements of Rule 144(c)(1)
(Sec. 230.144(c)(1) of this chapter).
8. Amend Sec. 232.202 by:
a. Revising paragraphs (a) introductory text, (a)(2), (b)(2), and
(b)(3);
b. Revising paragraph (c);
c. Revising paragraph (d) and;
d. Revising the headings to Notes 1, 2, and 3 to the section; and
e. Adding Note 4 to the section.
The revisions and additions read as follows:
Sec. 232.202 Continuing hardship exemption.
(a) An electronic filer may apply in writing for a continuing
hardship exemption if all or part of a filing, group of filings or
submission, other than a Form ID (Sec. Sec. 239.63, 249.446, 269.7,
and 274.402 of this chapter) or a Form D (Sec. 239.500 of this
chapter), otherwise to be filed or submitted in electronic format or,
in the case of an Interactive Data File (Sec. 232.11), to be posted on
the electronic filer's corporate Web site, cannot be so filed,
submitted or posted, as applicable, without undue burden or expense.
Such written application shall be made at least ten business days
before the required due date of the filing(s), submission(s) or posting
of the proposed filing, submission or posting date, as appropriate, or
within such shorter period as may be permitted. The written application
shall contain the information set forth in paragraph (b) of this
section.
(1) * * *
(2) If the Commission, or the staff acting pursuant to delegated
authority, denies the application for a continuing hardship exemption,
the electronic filer shall file or submit the required document or
Interactive Data File in electronic format or post the Interactive Data
File on its corporate Web site, as applicable, on the required due date
or the proposed filing or submission date, or such other date as may be
permitted.
* * * * *
(b) * * *
(1) * * *
(2) The burden and expense to employ alternative means to make the
electronic submission or posting, as applicable;
(3) The reasons for not submitting electronically the document,
group of documents or Interactive Data File or not posting the
Interactive Data File, as well as the justification for the requested
time period.
(c) If the request is granted with respect to:
(1) Electronic filing of a document or group of documents, not
electronic submission or posting of an Interactive Data File, then the
electronic filer shall submit the document or group of documents for
which the continuing hardship exemption is granted in paper format on
the required due date specified in the applicable form, rule or
regulation, or the proposed filing date, as appropriate and the
following legend shall be placed in capital letters at the top of the
cover page of the paper format document(s):
IN ACCORDANCE WITH RULE 202 OF REGULATION S-T, THIS (specify
document) IS BEING FILED IN PAPER PURSUANT TO A CONTINUING HARDSHIP
EXEMPTION.
(2) Electronic submission of an Interactive Data File, then the
electronic filer shall substitute for the Interactive Data File in the
exhibit in which it was required a document that sets forth one of the
following legends, as appropriate:
IN ACCORDANCE WITH A CONTINUING HARDSHIP EXEMPTION OBTAINED UNDER
RULE 202 OF REGULATION S-T, THE DATE BY WHICH THE INTERACTIVE DATA FILE
IS REQUIRED TO BE SUBMITTED HAS BEEN EXTENDED TO (specify date); or
IN ACCORDANCE WITH A CONTINUING HARDSHIP EXEMPTION OBTAINED UNDER
RULE 202 OF REGULATION S-T, THE INTERACTIVE DATA FILE IS NOT REQUIRED
TO BE SUBMITTED.
(3) Web site posting by an electronic filer of its Interactive Data
File, the electronic filer need not post on its Web site any statement
with regard to the grant of the request.
(d) If a continuing hardship exemption is granted for a limited
period of time for:
(1) Electronic filing of a document or group of documents, not
electronic submission or posting of an Interactive Data File, then the
grant may be conditioned upon the filing of the document or group of
documents that is the subject of the exemption in electronic format
upon the expiration of the period for which the exemption is granted.
The electronic format version shall contain the following statement in
capital letters at the top of the first page of the document: THIS
DOCUMENT IS A COPY OF THE (specify document) FILED ON (DATE) PURSUANT
TO A RULE 202(d) CONTINUING HARDSHIP EXEMPTION.
(2) Electronic submission or posting of an Interactive Data File,
then the grant may be conditioned upon the electronic submission and
posting, as applicable, of the Interactive Data File that is the
subject of the exemption upon the expiration of the period for which
the exemption is granted.
Note 1 to Sec. 232.202: * * *
Note 2 to Sec. 232.202: * * *
Note 3 to Sec. 232.202: * * *
Note 4 to Sec. 232.202: Failure to submit or post, as
applicable, the Interactive Data File as required by Rule 405 by the
end of the continuing hardship exemption if granted for a limited
period of time, will result in ineligibility to use Forms S-3, S-8,
and F-3 (Sec. Sec. 239.13, 239.16b and 239.33 of this chapter) and
constitute a failure to have filed all required reports for purposes
of the current public information requirements of Rule 144(c)(1)
(Sec. 230.144(c)(1) of this chapter).
9. Amend Sec. 232.305 by revising paragraph (b) to read as
follows:
Sec. 232.305 Number of characters per line; tabular and columnar
information.
* * * * *
(b) Paragraph (a) of this section does not apply to HTML documents,
Interactive Data Files (Sec. 232.11) or XBRL-Related Documents (Sec.
232.11).
10. Amend Sec. 232.401(a) by adding a new first sentence to read
as follows:
Sec. 232.401 XBRL-Related Document submissions.
(a) Only an electronic filer that is an investment company
registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et
seq.), a ``business development company'' as defined in section
2(a)(48) of that Act, or an entity that reports under the Exchange Act
and prepares its financial statements in accordance with Article 6 of
Regulation S-X (17 CFR 210.6-01 et seq.) is permitted to participate in
the voluntary XBRL (eXtensible Business Reporting Language) program. *
* *
* * * * *
11. Amend Sec. 232.402 by removing the phrase ``Public Utility
Act,'' from the first sentence of paragraph (b).
Sec. Sec. 232.403 and 232.404 [Reserved]
12. Reserve Sec. 232.403 and Sec. 232.404.
13. Add Sec. 232.405 to read as follows:
Sec. 232.405 Interactive Data File submissions and postings.
Preliminary Notes
1. Sections 405 and 406 of Regulation S-T (Sec. Sec. 232.405 and
232.406) apply to electronic filers that submit or post Interactive
Data Files. Item 601(b)(101) of Regulation S-K (Sec. 229.601(b)(101)
of this chapter) and Item 101 of the
[[Page 32829]]
Instructions as to Exhibits of Form 20-F (Sec. 249.220f of this
chapter) specify when electronic filers are required or permitted to
submit or post an Interactive Data File (Sec. 232.11), as further
described below in the Note to Section 405.
2. Section 405 imposes content, format, submission and Web site
posting requirements for an Interactive Data File, but does not change
the substantive content requirements for the financial and other
disclosures in the Related Official Filing (Sec. 232.11).
3. Section 406 addresses liability related to Interactive Data
Files.
(a) Content, Format, Submission and Posting Requirements--General.
An Interactive Data File must:
(1) Comply with the content, format, submission and Web site
posting requirements of this section;
(2) Be submitted only by an electronic filer either required or
permitted to submit an Interactive Data File as specified by Item
601(b)(101) of Regulation S-K (Sec. 229.601(b)(101) of this chapter)
or Item 101 of the Instructions as to Exhibits of Form 20-F (Sec.
249.220f of this chapter), as applicable, as an exhibit to a form that
contains the disclosure required by this section;
(3) Be submitted in accordance with the EDGAR Filer Manual and, as
applicable, either Item 601(b)(101) of Regulation S-K or Item 101 of
the Instructions as to Exhibits of Form 20-F; and
(4) Be posted on the electronic filer's corporate Web site, if any,
in accordance with, as applicable, either Item 601(b)(101) of
Regulation S-K or Item 101 of the Instructions as to Exhibits of Form
20-F.
(b) Content--Categories of Information Presented. An Interactive
Data File must consist of only a complete set of information for all
periods required to be presented in the corresponding data in the
Related Official Filing, no more and no less, from all of the following
categories:
(1) The complete set of the electronic filer's financial statements
(which includes the face of the financial statements and all
footnotes); and
(2) All schedules set forth in Article 12 of Regulation S-X
(Sec. Sec. 210.12-01-210.12-29) related to the electronic filer's
financial statements.
Note to paragraph (b): It is not permissible for the Interactive
Data File to present only partial face financial statements, such as
by excluding comparative financial information for prior periods.
(c) Format--Generally. An Interactive Data File must comply with
the following requirements, except as modified by paragraph (d) or (e)
of this section, as applicable, with respect to the corresponding data
in the Related Official Filing consisting of footnotes to financial
statements or financial statement schedules as set forth in Article 12
of Regulation S-X:
(1) Data Elements and Labels.
(i) Element Accuracy. Each data element (i.e., all text, line item
names, monetary values, percentages, numbers, dates and other labels)
contained in the Interactive Data File reflect the same information in
the corresponding data in the Related Official Filing;
(ii) Element Specificity. No data element contained in the
corresponding data in the Related Official Filing is changed, deleted
or summarized in the Interactive Data File;
(iii) Standard and Special Labels and Elements. Each data element
contained in the Interactive Data File is matched with an appropriate
tag from the most recent version of the standard list of tags specified
by the EDGAR Filer Manual. A tag is appropriate only when its standard
definition, standard label and other attributes as and to the extent
identified in the list of tags match the information to be tagged,
except that:
(A) Labels. An electronic filer must create and use a new special
label to modify a tag's existing standard label when that tag is an
appropriate tag in all other respects (i.e., in order to use a tag from
the standard list of tags only its label needs to be changed); and
(B) Elements. An electronic filer must create and use a new special
element if and only if an appropriate tag does not exist in the
standard list of tags for reasons other than or in addition to an
inappropriate standard label; and
(2) Additional Mark-Up Related Content. The Interactive Data File
contains any additional mark-up related content (e.g., the eXtensible
Business Reporting Language tags themselves, identification of the core
XML documents used and other technology related content) not found in
the corresponding data in the Related Official Filing that is necessary
to comply with the EDGAR Filer Manual requirements.
(d) Format--Footnotes--Generally. The part of the Interactive Data
File for which the corresponding data in the Related Official Filing
consists of footnotes to financial statements must comply with the
requirements of paragraphs (c)(1) and (c)(2) of this section, as
modified by this paragraph (d), unless the electronic filer is within
one of the categories specified in paragraph (f) of this section.
Footnotes to financial statements must be tagged as follows:
(1) Each complete footnote must be block-text tagged;
(2) Each significant accounting policy within the significant
accounting policies footnote must be block-text tagged;
(3) Each table within each footnote must be block-text tagged; and
(4) Within each footnote, each amount (i.e., monetary value,
percentage, and number) must be tagged separately and each narrative
disclosure required to be disclosed by generally accepted accounting
principles as used in the United States, (or International Financial
Reporting Standards as issued by the International Accounting Standards
Board, if applicable) and Commission regulations must be tagged
separately.
(e) Format--Schedules--Generally. The part of the Interactive Data
File for which the corresponding data in the Related Official Filing
consists of financial statement schedules as set forth in Article 12 of
Regulation S-X must comply with the requirements of paragraphs (c)(1)
and (c)(2) of this section, as modified by this paragraph (e), unless
the electronic filer is within one of the categories specified in
paragraph (f) of this section. Financial statement schedules as set
forth in Article 12 of Regulation S-X must be tagged as follows:
(1) Each complete financial statement schedule must be block-text
tagged; and
(2) Within each financial statement schedule, each amount (i.e.,
monetary value, percentage and number) must be tagged separately and
each narrative disclosure required by Commission regulations must be
tagged separately.
(f) Format--Footnotes and Schedules Eligible for Phased-In Detail.
The following electronic filers must comply with paragraphs (c)(1) and
(c)(2) of this section as modified by paragraphs (d) and (e) of this
section, except that they may choose to comply with paragraph (d)(1)
rather than paragraphs (d)(1) through (d)(4) and may choose to comply
with paragraph (e)(1) rather than paragraphs (e)(1) and (e)(2):
(1) Any large accelerated filer (Sec. 240.12b-2 of this chapter)
that had an aggregate worldwide market value of the voting and non-
voting common equity held by non-affiliates of more than $5 billion as
of the last business day of its most recently completed second fiscal
quarter that prepares its financial statements in accordance with
generally accepted accounting principles as used in the United States,
if none of the financial statements for which an Interactive Data File
is required is for a
[[Page 32830]]
period that ends on or after December 15, 2009;
(2) Any large accelerated filer not specified in paragraph (f)(1)
that prepares its financial statements in accordance with generally
accepted accounting principles as used in the United States, if none of
the financial statements for which an Interactive Data File is required
is for a period that ends on or after December 15, 2010;
(3) Any filer not specified in paragraph (f)(1) or (2) that
prepares its financial statements in accordance with generally accepted
accounting principles as used in the United States, if none of the
financial statements for which an Interactive Data File is required is
for a period that ends on or after December 15, 2011; and
(4) Any foreign private issuer (Sec. 240.3b-4(c) of this chapter)
that prepares its financial statements in accordance with International
Financial Reporting Standards as issued by the International Accounting
Standards Board, if none of the financial statements for which an
Interactive Data File is required is for a period that ends on or after
December 15, 2011.
(g) Posting. Any electronic filer that maintains a corporate Web
site and is required to submit an Interactive Data File must post that
Interactive Data File on that Web site by the end of the business day
on the earlier of the date the Interactive Data File is submitted or is
required to be submitted.
Note to Sec. 232.405: Item 601(b)(101) of Regulation S-K
specifies the circumstances under which an Interactive Data File
must be submitted as an exhibit and be posted to the issuer's
corporate Web site, if any, and the circumstances under which it is
permitted to be submitted as an exhibit, with respect to Forms S-1
(Sec. 239.11 of this chapter), S-3 (Sec. 239.13 of this chapter),
S-4 (Sec. 239.25 of this chapter), S-11 (Sec. 239.18 of this
chapter), F-1 (Sec. 239.31 of this chapter), F-3 (Sec. 239.33 of
this chapter), F-4 (Sec. 239.34 of this chapter), 10-K (Sec.
249.310 of this chapter) and 10-Q (Sec. 249.308a of this chapter).
Similarly, Item 101 of the Instructions as to Exhibits of Form 20-F
specifies the circumstances under which an Interactive Data File
must be submitted as an exhibit and be posted to the issuer's
corporate Web site, if any, and the circumstances under which it is
permitted to be submitted as an exhibit, with respect to Form 20-F.
Item 601(b)(101) of Regulation S-K and Item 101 of the Instructions
as to Exhibits of Form 20-F both prohibit submission of an
Interactive Data File by an issuer that prepares its financial
statements in accordance with Article 6 of Regulation S-X (17 CFR
210.6-01 et seq.).
14. Add Sec. 232.406 to read as follows:
Sec. 232.406 Liability for Related Official Filing, Interactive Data
in Viewable Form and Interactive Data File.
(a) Liability for Related Official Filing Unaffected. The
disclosures in the Related Official Filing are subject to the liability
provisions of the Securities Act, Exchange Act, Trust Indenture Act,
and Investment Company Act and the rules and regulations under those
Acts. Nothing in Rule 405 of Regulation S-T (Sec. 232.405) or this
Rule 406 changes the liability otherwise applicable to an electronic
filer's Related Official Filing.
(b) Liability for Interactive Data in Viewable Form. Interactive
Data in Viewable Form are subject to liability under the Securities
Act, Exchange Act, Trust Indenture Act, and Investment Company Act and
the rules and regulations under those Acts in the same way and to the
same extent as the Related Official Filing.
(c) Liability for Interactive Data File. An Interactive Data File
submitted to the Commission:
(1) Will be deemed to comply with Rule 405 if:
(A) The electronic filer makes a good faith and reasonable attempt
to comply with Rule 405; and
(B) As soon as reasonably practicable after the electronic filer
becomes aware that the Interactive Data File does not comply with Rule
405, the electronic filer amends the Interactive Data File to comply
with Rule 405.
(2) That complies or is deemed to comply with Rule 405 is not
subject to liability under any provision of the Securities Act,
Exchange Act, Trust Indenture Act and Investment Company Act or the
rules and regulations under those Acts for failure to comply with Rule
405.
(3) In addition to paragraphs (c)(1) and (c)(2),
(A) Is deemed not filed or part of a registration statement or
prospectus for purposes of sections 11 and 12 of the Securities Act (15
U.S.C. 77k and 77l), is deemed not filed for purposes of section 18 of
the Exchange Act (15 U.S.C. 78r) and section 34(b) of the Investment
Company Act (15 U.S.C. 80a-33(b)), and otherwise is not subject to the
liabilities of these sections;
(B) Is deemed filed for purposes of (and thereby benefits from the
liability protection provided by) Item 103 of Regulation S-T (Sec.
232.103); and
(C) Other than as stated in subparagraph (c)(3)(A), is subject to
liability for the substantive content of the financial and other
disclosures, as distinct from its compliance with Rule 405, under the
Securities Act, Exchange Act, Trust Indenture Act, and Investment
Company Act and the rules and regulations under those Acts in the same
way and to the same extent as the Related Official Filing.
PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933
15. The authority citation for part 239 continues to read in part
as follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3,
77sss, 78c, 78l, 78m, 78n, 78o(d), 78u-5, 78w(a), 78ll, 78mm, 80a-
2(a), 80a-3, 80a-8, 80a-9, 80a-10, 80a-13, 80a-24, 80a-26, 80a-29,
80a-30, and 80a-37, unless otherwise noted.
* * * * *
16. Amend Sec. 239.13 by revising paragraph (a)(8) to read as
follows:
Sec. 239.13 Form S-3, for registration under the Securities Act of
1933 of securities of certain issuers offered pursuant to certain types
of transactions.
* * * * *
(a) * * *
(8) Electronic filings. In addition to satisfying the foregoing
conditions, a registrant subject to the electronic filing requirements
of Rule 101 of Regulation S-T (Sec. 232.101 of this chapter) shall
have:
(i) Filed with the Commission all required electronic filings,
including electronic copies of documents submitted in paper pursuant to
a hardship exemption as provided by Rule 201 or Rule 202(d) of
Regulation S-T (Sec. 232.201 or Sec. 232.202(d) of this chapter); and
(ii) Submitted electronically to the Commission and posted on its
corporate Web site, if any, all Interactive Data Files required to be
submitted and posted under either Item 601(b)(101) of Regulation S-K
(Sec. 229.601(b)(101) of this chapter) or Item 101 of the Instructions
as to Exhibits of Form 20-F (Sec. 249.220f of this chapter) during the
twelve calendar months and any portion of a month immediately preceding
the filing of the registration statement on this Form.
17. Amend Form S-3 (referenced in Sec. 239.13) by revising
paragraph I.A.8 and adding paragraphs I.A.8(a) and I.A.8(b) of the
General Instructions to read as follows:
Note: The text of Form S-3 does not and this amendment will not
appear in the Code of Federal Regulations.
Form S-3
* * * * *
General Instructions
I. * * *
A. * * *
8. Electronic filings. In addition to satisfying the foregoing
conditions, a
[[Page 32831]]
registrant subject to the electronic filing requirements of Rule 101 of
Regulation S-T (Sec. 232.101 of this chapter) shall have:
(a) Filed with the Commission all required electronic filings,
including electronic copies of documents submitted in paper pursuant to
a hardship exemption as provided by Rule 201 or Rule 202(d) of
Regulation S-T (Sec. 232.201 or Sec. 232.202(d) of this chapter); and
(b) Submitted electronically to the Commission and posted on its
corporate Web site, if any, all Interactive Data Files required to be
submitted and posted under either Item 601(b)(101) of Regulation S-K
(Sec. 229.601(b)(101) of this chapter) or Item 101 of the Instructions
as to Exhibits of Form 20-F (Sec. 249.220f of this chapter) during the
twelve calendar months and any portion of a month immediately preceding
the filing of the registration statement on this Form.
* * * * *
18. Amend Sec. 239.16b by revising paragraph (b) to read as
follows:
Sec. 239.16b Form S-8, for registration under the Securities Act of
1933 of securities to be offered to employees pursuant to employee
benefit plans.
(a) * * *
(b) Electronic filings. In addition to satisfying the foregoing
conditions, a registrant subject to the electronic filing requirements
of Rule 101 of Regulation S-T (Sec. 232.101 of this chapter) shall
have:
(1) Filed with the Commission all required electronic filings,
including electronic copies of documents submitted in paper pursuant to
a hardship exemption as provided by Rule 201 or Rule 202(d) of
Regulation S-T (Sec. 232.201 or Sec. 232.202(d) of this chapter); and
(2) Submitted electronically to the Commission and posted on its
corporate Web site, if any, all Interactive Data Files required to be
submitted and posted under either Item 601(b)(101) of Regulation S-K
(Sec. 229.601(b)(101) of this chapter) or Item 101 of the Instructions
as to Exhibits of Form 20-F (Sec. 249.220f of this chapter) during the
twelve calendar months and any portion of a month immediately preceding
the filing of the registration statement on this Form.
19. Amend Form S-8 (referenced in Sec. 239.16b) by revising
paragraph A.3 and adding paragraphs A.3(a) and A.3(b) of the General
Instructions to read as follows:
Note: The text of Form S-8 does not and this amendment will not
appear in the Code of Federal Regulations.
Form S-8
* * * * *
General Instructions
A. * * *
1. * * *
2. * * *
3. Electronic filings. In addition to satisfying the foregoing
conditions, a registrant subject to the electronic filing requirements
of Rule 101 of Regulation S-T (Sec. 232.101 of this chapter) shall
have:
(a) Filed with the Commission all required electronic filings,
including electronic copies of documents submitted in paper pursuant to
a hardship exemption as provided by Rule 201 or Rule 202(d) of
Regulation S-T (Sec. 232.201 or Sec. 232.202(d) of this chapter); and
(b) Submitted electronically to the Commission and posted on its
corporate Web site, if any, all Interactive Data Files required to be
submitted and posted under either Item 601(b)(101) of Regulation S-K
(Sec. 229.601(b)(101) of this chapter) or Item 101 of the Instructions
as to Exhibits of Form 20-F (Sec. 249.220f of this chapter) during the
twelve calendar months and any portion of a month immediately preceding
the filing of the registration statement on this Form.
* * * * *
20. Amend Sec. 239.33 by revising paragraph (a)(6) to read as
follows:
Sec. 239.33 Form F-3, for registration under the Securities Act of
1933 of securities of certain foreign private issuers offered pursuant
to certain types of transactions.
* * * * *
(a) * * *
(6) Electronic filings. In addition to satisfying the foregoing
conditions, a registrant subject to the electronic filing requirements
of Rule 101 of Regulation S-T (Sec. 232.101 of this chapter) shall
have:
(i) Filed with the Commission all required electronic filings,
including electronic copies of documents submitted in paper pursuant to
a hardship exemption as provided by Rule 201 or Rule 202(d) of
Regulation S-T (Sec. 232.201 or Sec. 232.202(d) of this chapter); and
(ii) Submitted electronically to the Commission and posted on its
corporate Web site, if any, all Interactive Data Files required to be
submitted and posted under either Item 601(b)(101) of Regulation S-K
(Sec. 229.601(b)(101) of this chapter) or Item 101 of the Instructions
as to Exhibits of Form 20-F (Sec. 249.220f of this chapter) during the
twelve calendar months and any portion of a month immediately preceding
the filing of the registration statement on this Form.
* * * * *
21. Amend Form F-3 (referenced in Sec. 239.33) by revising
paragraph I.A.6 and adding paragraphs I.A.6(i) and I.A.6(ii) of the
General Instructions to read as follows:
Note: The text of Form F-3 does not and this amendment will not
appear in the Code of Federal Regulations.
Form F-3
* * * * *
General Instructions
I. * * *
A. * * *
6. Electronic filings. In addition to satisfying the foregoing
conditions, a registrant subject to the electronic filing requirements
of Rule 101 of Regulation S-T (Sec. 232.101 of this chapter) shall
have:
(i) Filed with the Commission all required electronic filings,
including electronic copies of documents submitted in paper pursuant to
a hardship exemption as provided by Rule 201 or Rule 202(d) of
Regulation S-T (Sec. 232.201 or Sec. 2.202(d) of this chapter); and
(ii) Submitted electronically to the Commission and posted on its
corporate Web site, if any, all Interactive Data Files required to be
submitted and posted under either Item 601(b)(101) of Regulation S-K
(Sec. 229.601(b)(101) of this chapter) or Item 101 of the Instructions
as to Exhibits of Form 20-F (Sec. 249.220f of this chapter) during the
twelve calendar months and any portion of a month immediately preceding
the filing of the registration statement on this Form.
* * * * *
PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934
22. The authority citation for part 240 continues to read in part
as follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i,
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5,
78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4,
80b-11, and 7201 et seq.; and 18 U.S.C. 1350, unless otherwise
noted.
* * * * *
23. Amend Sec. 240.13a-14 by revising paragraph (f) to read as
follows:
Sec. 240.13a-14 Certification of disclosure in annual and quarterly
reports.
* * * * *
(f) The certification requirements of this section do not apply to
[[Page 32832]]
(1) An Interactive Data File, as defined in Rule 11 of Regulation
S-T (Sec. 232.11 of this chapter); or
(2) XBRL-Related Documents, as defined in Rule 11 of Regulation S-
T.
24. Amend Sec. 240.15d-14 by revising paragraph (f) to read as
follows:
Sec. 240.15d-14 Certification of disclosure in annual and quarterly
reports.
* * * * *
(f) The certification requirements of this section do not apply to:
(1) An Interactive Data File, as defined in Rule 11 of Regulation
S-T (Sec. 232.11 of this chapter); or
(2) XBRL-Related Documents, as defined in Rule 11 of Regulation S-
T.
PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934
25. The authority citation for part 249 continues to read in part
as follows:
Authority: 15 U.S.C. 78a et seq., 7202, 7233, 7241, 7262, 7264,
and 7265; and 18 U.S.C. 1350, unless otherwise noted.
* * * * *
26. Amend Form 20-F (referenced in Sec. 249.220f) by revising
paragraph 100 and adding paragraph 101 at the end of ``Instructions as
to Exhibits'' to read as follows:
Note: The text of Form 20-F does not and this amendment will not
appear in the Code of Federal Regulations.
Form 20-F
* * * * *
Instructions as to Exhibits
* * * * *
100. XBRL-Related Documents. Only a registrant that prepares its
financial statements in accordance with Article 6 of Regulation S-X (17
CFR 210.6-01 et seq.) is permitted to participate in the voluntary XBRL
(eXtensible Business Reporting Language) program and, as a result, may
submit XBRL-Related Documents (Sec. 232.11 of this chapter). Rule 401
of Regulation S-T (Sec. 232.401 of this chapter) sets forth further
details regarding eligibility to participate in the voluntary XBRL
program.
101. Interactive Data File. An Interactive Data File (Sec. 232.11
of this chapter) is:
(a) Required to be submitted to the Commission and posted on the
registrant's corporate Web site, if any, in the manner provided by Rule
405 of Regulation S-T (Sec. 232.405 of this chapter) if the Form 20-F
is an annual report and the registrant is not specified by paragraph
(c) of this Instruction 101 and is:
(i) A large accelerated filer (Sec. 240.12b-2 of this chapter)
that had an aggregate worldwide market value of the voting and non-
voting common equity held by non-affiliates of more than $5 billion as
of the last business day of its most recently completed second fiscal
quarter that is a foreign private issuer (Sec. 240.3b-4(c) of this
chapter) that prepares its financial statements in accordance with
generally accepted accounting principles as used in the United States
and the filing contains financial statements of the registrant for a
period that ends on or after December 15, 2008;
(ii) A large accelerated filer not specified in paragraph (a)(i) of
this instruction but is a foreign private issuer that prepares its
financial statements in accordance with generally accepted accounting
principles as used in the United States and the filing contains
financial statements of the registrant for a period that ends on or
after December 15, 2009;
(iii) A filer not specified in paragraph (a)(i) or (ii) of this
instruction that is a foreign private issuer that prepares its
financial statements in accordance with generally accepted accounting
principles as used in the United States and the filing contains
financial statements of the registrant for a period that ends on or
after December 15, 2010; and
(iv) A foreign private issuer that prepares its financial
statements in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board,
and the filing contains financial statements of the registrant for a
period that ends on or after December 15, 2010.
(b) Permitted to be submitted to the Commission in the manner
provided by Rule 405 of Regulation S-T (Sec. 232.405 of this chapter)
if the registrant:
(i) Prepares its financial statements
(A) In accordance with either
(1) Generally accepted accounting principles as used in the United
States; or
(2) International Financial Reporting Standards as issued by the
International Accounting Standards Board; and
(B) Not in accordance with Article 6 of Regulation S-X (17 CFR
210.6-01 et seq.); and
(ii) Is not required to be submitted to the Commission under
paragraph (a) of this Instruction 101.
(c) Not permitted to be submitted to the Commission if the
registrant prepares its financial statements in accordance with Article
6 of Regulation S-X (17 CFR 210.6-01 et seq.).
* * * * *
27. Amend Form 6-K (referenced in Sec. 249.306) by revising
paragraph (5) to General Instruction C to read as follows:
Note: The text of Form 6-K does not and this amendment will not
appear in the Code of Federal Regulations.
Form 6-K
* * * * *
General Instructions
* * * * *
C. * * *
(5) XBRL-Related Documents. Only a registrant that prepares its
financial statements in accordance with Article 6 of Regulation S-X (17
CFR 210.6-01 et seq.) is permitted to participate in the voluntary XBRL
(eXtensible Business Reporting Language) program and, as a result, may
submit XBRL-Related Documents (Sec. 232.11 of this chapter). XBRL-
Related Documents submitted as an exhibit to a Form 6-K must be listed
as exhibit 100. Rule 401 of Regulation S -T (Sec. 232.401 of this
chapter) sets forth further details regarding eligibility to
participate in the voluntary XBRL program.
* * * * *
By the Commission.
Dated: May 30, 2008.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-12596 Filed 6-9-08; 8:45 am]
BILLING CODE 8010-01-P