[Federal Register: October 1, 2004 (Volume 69, Number 190)]
[Notices]
[Page 59111-59117]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01oc04-139]
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SECURITIES AND EXCHANGE COMMISSION
[Release Nos. 33-8497; 34-50454; 35-27895; 39-2429; IC-26623; File No.
S7-36-04]
Enhancing Commission Filings Through the Use of Tagged Data
AGENCY: Securities and Exchange Commission.
ACTION: Concept release.
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SUMMARY: Data tagging provides a method for searching, retrieving, and
analyzing information through automated means. As part of our
initiative to improve the filing, information collection and disclosure
process, we are seeking to determine the impact and usefulness of
tagged data generally and, more specifically, the adequacy and efficacy
of Extensible Business Reporting Language (XBRL) as a format for
reporting financial information. This concept release seeks comment on
the use of tagged data in certain Securities Exchange Act and
Investment Company Act filings.
DATES: Comments should be received on or before November 15, 2004.
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/concept.
); or Send an e-mail to rule-comments@sec.gov. Please include
File Number S7-36-04 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 Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609.
All submissions should refer to File Number S7-36-04. 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/concept).
Comments are also available for public inspection and copying in the
Commission's Public Reference Room, 450 Fifth Street, NW., Washington,
DC 20549. 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: Questions about this release should be
referred to Brigitte Lippmann or Steven Hearne, Division of Corporation
Finance (202-942-2910), Brian Bullard or Toai Cheng, Division of
Investment Management (202-942-0590), or Eric Schuppenhauer, Office of
the Chief Accountant (202-942-4400), Securities and Exchange
Commission, 450 Fifth Street, NW., Washington, DC 20549.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Overview
II. Tagged Data as Part of Our Initiative To Improve Analysis and
Disclosure
A. Development of Data Tagging at the Commission
B. Essential Elements of Data Tagging
C. Impact on Disclosure
III. XBRL and XBRL Tagged Data
A. Technology Specification
B. Taxonomies
C. Presentation and Analysis of Tagged Data
D. Attestation/Validation of Tagged Data
IV. Information for and Filing of Tagged Data
A. Information Appropriate for Data Tagging
B. Filing of Tagged Data
V. Impact on Various Parties
A. Investors
B. Registrants
C. Accountants
D. Other Parties
VI. General Request for Comment
I. Overview
On July 22, 2004, we issued a Press Release announcing that the
Commission was undertaking an initiative to assess the benefits of
tagged data and its potential for improving the timeliness, accuracy,
and analysis of financial and other filed information.\1\ Data tagging
uses standard definitions to translate text-based information, such as
information contained in Commission filings, into files that can be
retrieved, searched, and analyzed through automated means. Data tags
may enable investors and other market participants to more efficiently
and effectively analyze data from different sources and automatically
exchange financial information across various software platforms,
including web services.
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\1\ Press Release No. 2004-97 (July 22, 2004).
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Data tagging appears to be gaining prominence as a format for
enhancing financial reporting data. Substantial progress has been made
in the private sector over the past five years in developing a data
tagging language known as eXtensible Business Reporting Language, or
XBRL.\2\ XBRL is an open source specification for software that uses
tags to identify and describe financial and other information and
facilitate the preparation, publication, and analysis of that
information.\3\ In late 1999, the American Institute of Certified
Public Accountants, or AICPA, along with development partners from the
accounting, technical, and securities sectors, launched the XBRL
initiative.\4\ Today, XBRL International, the consortium developed to
build the XBRL language and promote and support its adoption, claims
more than 250 companies and organizations as members.\5\
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\2\ See http://www.xbrl.org for a more detailed description of
XBRL.
\3\ ``Open source'' means that the software can be used by
anyone without charge and is being developed in an open and
collaborative setting. ``Closed source'' reporting standards are
developed for proprietary or private purposes, and the code is not
publicly available.
\4\ According to http://www.xbrl.org, the AICPA hosted the first
meeting of the XBRL Steering Committee in October 1999.
\5\ XBRL-US is the jurisdiction of XBRL International in the
United States. XBRL International is made up of companies,
associations, and agencies involved in providing or using business
information and XBRL-US is composed of a subset of those
organizations active in the United States. See ``About the
Organization'' on http://www.xbrl.org for a discussion of the
jurisdictions, steering committees and a list of members of XBRL
International. XBRL International and its local jurisdictions have
funded the development of XBRL through grants and annual fees
provided by its members. See http://www.xbrl.org.
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Financial regulators have begun to assess the potential of XBRL to
improve the timeliness and accuracy of reported financial information
as well as the analysis of such information. The Federal Financial
Institutions Examination Council, or FFIEC, which is the U.S.
interagency bank regulatory standard-setting body, has undertaken a
Call Report Modernization Initiative and developed a set of data
standards using XBRL for the information that financial institutions
must include in their Call Reports.\6\ Moreover, in June 2004, the
European Commission demonstrated its interest in the development of
XBRL by signing a contract with XBRL International to accelerate the
development and adoption of XBRL in the European Union.\7\
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\6\ See http://www.ffiec.gov/FIND. The FFIEC originally
scheduled roll-out of the new XBRL-based data repository for October
1, 2004. While roll-out has been delayed, the FFIEC is moving
forward with the initiative and announced that it will target
implementation for one of the first two Call Report periods of 2005.
See FDIC Press Release PR-90-2004 (Aug., 2004).
\7\ See XBRL Press Release ``European Businesses Take Step
Closer to Efficient Reporting'' (June 24, 2004).
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Since adopting rules to implement the operational phase of our
Electronic Data
[[Page 59112]]
Gathering, Analysis and Retrieval system, or EDGAR, we have continually
sought to make EDGAR more useful to investors. XBRL provides a
sophisticated system of data tagging that may offer an opportunity to
improve the transparency and enhance the analysis of information filed
with us. Throughout this release, we solicit comment on many issues to
help us determine whether identifying or tagging specific information
would improve the accuracy of, access to, and timely analysis of the
information that registrants are required to include in their filings
under the federal securities laws. We are seeking comment from
investors, registrants, accountants, and any other parties that may be
affected by the use of XBRL or other data tagging technologies in
Commission filings. Commenters need not respond to all of the questions
raised in this release--we welcome comment letters addressing some or
all of these questions.
In a companion release also being issued today, we are proposing a
voluntary program that would allow registrants to furnish financial
information tagged using XBRL as an exhibit to specified Securities
Exchange Act of 1934 \8\ and Investment Company Act of 1940 \9\
filings, enabling Commission staff to further evaluate the use of XBRL
tagged data.\10\ If, based on the public comment we receive in response
to this release and our experience with the proposed voluntary program,
we decide to propose rules relating to data tagging outside of the
voluntary program, we will issue a subsequent proposing release that
describes the specific requirements and provides an opportunity for
public comment.
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\8\ 15 U.S.C. 78a et seq.
\9\ 15 U.S.C. 80a-1 et seq.
\10\ Release No. 33-8496 (September 27, 2004).
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II. Tagged Data as Part of Our Initiative To Improve Analysis and
Disclosure
Investors, large and small, seek out and analyze information about
companies in which they have invested or in which they are considering
investing. In response, many registrants, in addition to required
filings with us, make information available to the public through
dedicated sections of their Web sites, investor conference calls, Web
casts, press releases, and earnings releases. Other parties provide
services that aggregate and analyze registrant information and
disseminate that information via e-mail, specialized software, and the
Internet. While electronic media have increased the accessibility of
registrant information, that information is generally not available in
a format that investors and other users who wish to perform technical
data analyses can easily download and process using software
applications or Web services. In order to analyze financial
information, these users of the information generally must either copy
data from financial documents into spreadsheets or rely upon data that
has been copied or otherwise extracted and summarized by third-party
sources. In addition, if material financial information is contained in
the narrative of a filing, such as in Management's Discussion and
Analysis,\11\ Management's Discussion of Fund Performance,\12\ or in
the notes to a registrant's financial statements,\13\ users of the
information may have to search through filings to retrieve the
information they need to perform technical data analyses.\14\ These
activities may take time, result in additional cost, and cause errors
through the inaccurate compilation of data.
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\11\ Item 303 of Regulation S-K [17 CFR 229.303].
\12\ Item 22(b)(7) of Form N-1A [17 CFR 239.15A and 17 CFR
274.11A].
\13\ 17 CFR 210 et seq. and 17 CFR 229.302.
\14\ Examples of these users include, among others, financial
analysts, investment advisors, institutional investors, mutual
funds, and others who routinely use software and other technical
tools to analyze companies, to compare specific companies to indices
or peer groups, or to screen groups of companies for specific
characteristics. The analyses performed by these users can have a
significant impact on the capital markets due to the amount of funds
managed by such users and the number of investors who rely on their
advice. Making tagged data more accessible to users who perform
technical data analyses will affect all investors, large or small,
including investors who do not directly use the tagged data.
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We are considering the potential for the use of tagged data in
registrants' EDGAR filings to improve the timeliness and accuracy of
financial information included in those filings and to facilitate the
analysis of such information. As part of our evaluation, we are
requesting comment on the essential elements of data tagging, the
impact of data tagging on disclosure, and its impact on users of the
financial information included in Commission filings, as well as the
type of information and specific filings that may be appropriate for
data tagging. We are also exploring specific aspects of XBRL as a data
tagging technology. While we are not aware of a more developed tagging
technology for business and financial information than XBRL, we are
requesting information and comments on other tagging technologies that
may be used.
A. Development of Data Tagging at the Commission
We have relied upon data tagging to identify and extract
information from our EDGAR system since its inception.\15\ In 1984, the
EDGAR pilot program required registrants to include tagged data in
document headers to assist in accurately organizing filings.\16\ These
tagged headers used SGML, Standard Generalized Markup Language, to
segregate data about the filing and the registrant from the underlying
text. SGML tagging allowed us to automatically perform basic
validations, store tagged data, and process filings. Following our
adoption of EDGAR, we required electronic filers to furnish Financial
Data Schedules as exhibits to their filings containing financial
statements.\17\ The Schedules required registrants to provide and tag a
specified set of financial information essentially identical to certain
items included in registrants' financial statements.\18\ We permitted
registrants to ``furnish'' rather than file the tagged financial data
included in the Schedules, thereby limiting registrants' liability with
regard to the tagged data.\19\
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\15\ Release No. 33-6977 (Feb. 23, 1993) [58 FR 14628].
\16\ See Release No. 33-6977 and the EDGAR Filer Manual.
\17\ Id. The Financial Data Schedule requirement initially was
to become effective on November 1, 1993. The effective date was
delayed, however, until September 1, 1994 to provide additional time
to establish the EDGAR system's capacity to accept and process the
Schedules. Release No. 33-7072 (July 8, 1994) [59 FR 36258].
\18\ Release No. 33-6977.
\19\ Id. The rules required electronic filers to furnish the
Schedules, but did not deem them ``filed'' under the federal
securities laws. Though the Schedules remained subject to the anti-
fraud provisions of the federal securities laws, electronic filers
that submitted Schedules were not otherwise liable under the federal
securities laws to the extent their Schedules contained data
accurately extracted from their financial statements and the
underlying financial statements were not materially false or
misleading.
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As part of an initiative to modernize and improve EDGAR in the late
1990s, we decided to eliminate the requirement to furnish Financial
Data Schedules.\20\ While registrants were required to furnish the
Schedules until the end of 2000, the requirement was eliminated due to
concerns over the reliability and usefulness of the tagged data
included in the Schedules. The problems with the reliability of tagged
data appeared to result primarily from the fact that data tagging was
not fully integrated into the
[[Page 59113]]
financial reporting process, creating difficulties for some registrants
in determining which Financial Data Schedule tags to use for particular
financial statement items.\21\ In contrast, if, in the future, we
required registrants to tag financial information using technology such
as XBRL, we expect that such tagged information would become an
integral part of the financial reporting process. Further, we
anticipate that if we ever required the tagged data to be part of the
registrant's official filings, it would become subject to all relevant
liability provisions of the federal securities laws.
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\20\ Initially, Financial Data Schedules were removed from
investment company registration forms in 1999. Release No. 33-7684
(May 17, 1999) [64 FR 27888]. The Schedules were subsequently
eliminated from all Commission rules and forms, including Form N-
SAR, in early 2000. Release No. 33-7855 (Apr. 24, 2000) [65 FR
24788].
\21\ Release No. 33-7684. In determining to eliminate the
Schedules, we also noted that the Schedules were adopted primarily
for the staff's use and that the staff increasingly relied on
outside sources for the information provided by the Schedules. While
acknowledging the concerns of some commenters who used the Schedules
to analyze registrants, we determined to eliminate the requirement.
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The initiative to modernize EDGAR was not limited to adjusting the
Schedule requirement; it also sought to make better use of improved
technology. As part of the initiative, we began to accept filings
submitted to EDGAR using HTML, HyperText Markup Language.\22\ By 1999,
HTML had become a widely accepted standard for tagging data and text to
present information on the Internet, and we began accepting filings
using HTML with the expectation that HTML would eventually replace
ASCII, American Standard Code for Information Interchange, for most
filings.\23\
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\22\ Id.
\23\ Id. HTML provides a superior standard for the presentation
of information and promotes the concept of a single-use document, in
which filers are able to avoid creating separate documents for
dissemination to investors, posting on their Web sites, and
submission to the Commission.
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Since the EDGAR modernization initiative in the late 1990s, market
participants have further developed and are continuing to improve data
tagging technology. Today, data tagging primarily relies on XML,
eXtensible Mark-up Language, and other XML-based standards. XML is a
versatile, open source standard developed to assist in the automatic
processing of data and to define and name data and text through
tags.\24\ XML tags give data an identity and context and organize it in
a format that can be more easily read by software programs and analyzed
across multiple companies and time periods.\25\ In order to continue
and expand on the benefits provided by tagged data, the EDGAR system
changed document header tagging from SGML to XML in May 2000.\26\ Since
then, we have increased our use of XML for internal processing as well
as for the document headers filed on EDGAR and Section 16(a) \27\
beneficial ownership reports.
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\24\ See http://www.w3.org/XML and http://www.xml.org.
\25\ Tags are standardized through the development of
taxonomies, which are essentially data dictionaries that describe
individual pieces of information and mathematical and definitional
relationships among the pieces, identify text labels, and refer to
authoritative sources for that information. See discussion in
Section III.B. of this release.
\26\ EDGAR Release 7.0 marked our initial use of XML to present
header information in XFDL, Extensible Forms Description Language, a
derivative of XML using certain tags dedicated to screen
presentation and validation, rather than SGML format.
\27\ 15 U.S.C. 78p(a).
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XML-based standards currently are being developed and used for a
variety of data tagging purposes, such as FIXML, Financial Information
Exchange Markup Language, to tag transaction-specific data, MDDL,
Market Data Definition Language, to exchange market information
regarding financial instruments, and XBRL to tag business and financial
reporting information. XBRL allows users to prepare, publish in a
variety of formats, exchange, and analyze information such as that
contained in financial statements prepared in accordance with Generally
Accepted Accounting Principles in the United States (``GAAP'').\28\
XBRL has been developed to allow tagging of all of a company's
financial information, allowing it to extend from a standard set of
tags to meet its particular reporting needs. The extensions are able to
connect back to, and collapse into, the more general, standard tags
provided for all registrants, thereby mitigating a concern noted with
respect to Financial Data Schedules, that data would be placed under an
inappropriate, general tag.\29\
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\28\ See http://www.xbrl.org.
\29\ See the discussion of XBRL in Section III.B. where
taxonomies and extension taxonomies are more fully discussed.
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B. Essential Elements of Data Tagging
In order to be able to tag and use tagged data for disclosure and
analysis, a data tagging system must include:
The technology to administer the tags--a technology
specification that provides the system's core concepts and language;
Standard definitions to describe the tags--a set of tags
agreed upon by users and preparers of information that give data an
identity and context by providing an unique label to each specific data
element; and
A means of presenting and analyzing the tagged data--
software programs that process the tagged data for presentation and
analytical purposes.
Data tags can be applied through fixed field technology or through
actively pairing data and tags. Fixed field technology requires
preparers of information to provide data in a specialized form or
template. Using fixed field technology, preparers fill out a form and
each cell within the form is assigned a tag by the filing system. In
this way neither preparers nor users actively participate in tagging
the data. Our electronic filing system for Section 16(a) beneficial
ownership reports relies in part on the use of fixed field technology
to tag data.\30\ An alternative approach requires preparers of
information to actively pair data in a filing with tags, based on
standardized definitions that have been agreed upon by both preparers
and users of information.\31\ This provides preparers with the
opportunity to apply a greater degree of professional judgment
regarding the items to be tagged. The proposed voluntary program would
allow the submission of financial information using XBRL in reliance on
an active pairing approach.
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\30\ Section 16(a) beneficial ownership reports lend themselves
to this type of data tagging since the underlying forms are highly
structured. See Release No. 33-8230 (May 7, 2003) [68 FR 25788]
(mandating electronic filing and Web site posting of Forms 3, 4, and
5).
\31\ In XBRL, these definitions are known as taxonomies.
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Questions for Commenters:
What are the advantages and disadvantages of using the
active pairing approach as compared with the fixed field technology
approach? Are there Commission filings, in addition to Section 16(a)
beneficial ownership reports, that would better rely on fixed field
technology? If so, which filings or forms would best use that
technology?
C. Impact on Disclosure
Investors frequently analyze information reported by registrants
when making their investment decisions. We are considering whether and
how tagged data would affect registrants' disclosure and the way
investors use that disclosure. Until now, data tagging of financial
information has generally occurred after a registrant has prepared its
disclosure, as was the case with Financial Data Schedules. When third-
party financial data providers tag data, the tagging is based on the
registrants' reports filed with us. Using data tagging technology,
information can be tagged by registrants at the source, improving the
efficiency of the financial reporting process. Provision of such tagged
data by registrants may
[[Page 59114]]
increase the quality of that disclosure and better facilitate analysis
of disclosure. The tagged data may enable registrants, as well as
investors and regulators, to more easily examine the component parts of
financial statement line items and view elements of the line items that
are found in the notes to the financial statements. Registrant tagged
data may also generally improve the ability to search for and locate
particular data items by simply calling up the specified tags.
While tagged data has the potential to improve transparency and
enhance analysis, the use of tagged data could result in investors'
receiving less detailed disclosure. Any use of data tagging, no matter
how detailed, might have the effect of causing registrants and users to
focus on the tagged data and miss information that is not tagged or
fail to take into account the aggregate or cumulative effect of the
tagged information. Further, if registrants were to prepare and file
their financial data based on a set of standard tags, they could limit
their disclosure to the classifications under the standard tags,
failing to disclose more detailed information that might otherwise have
been presented. Data tagging using technology such as XBRL may mitigate
this concern because, unlike Financial Data Schedules that were limited
to a set of specified tags, XBRL is capable of being extended to
provide more detailed information than that provided in a set of
standard tags.
Questions for Commenters:
What effect would tagged data have on the ability to use
and analyze registrants' disclosure? Is the provision of tagged data in
Commission filings preferable to the current system?
Would tagged data have an effect on the quality of
disclosure in Commission filings?
Can the usefulness of disclosure be improved in ways other
than the application of tagging technologies? For instance, are there
alternative solutions (e.g., software products) that reliably
facilitate analysis of the text-based information contained in filings
today?
III. XBRL and XBRL Tagged data
XBRL is an XML-based standard for use in business and financial
reporting that was developed and is supported by XBRL
International.\32\ We are aware that XBRL data tagging initiatives are
currently underway in a number of regulatory contexts, including
initiatives by the FFIEC in the United States, the Financial Services
Authority in the United Kingdom,\33\ and the Australian Prudential
Regulatory Authority.\34\ Our proposed voluntary program to accept data
tagged using XBRL as an exhibit to Commission filings would permit us
to evaluate the XBRL technology specification, the standard taxonomies,
and the types of extension taxonomies used by registrants and assess
the feasibility of XBRL tagged data in Commission filings. While the
voluntary program would only encompass registrants' financial
information, taxonomies also could be developed to include labels for
other non-financial information.
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\32\ We are not a member of XBRL International and have not
served in an oversight role over XBRL International or its
development of XBRL.
\33\ See Financial Services Authority Press Release No. FSA/PN/
031/2004 (Mar. 31, 2004) and Policy Statement No. PSO 4/9 (Mar.
2004).
\34\ See http://www.apra.gov.au.
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Although we are seeking comment on the ability of XBRL to add value
to Commission filings, we are interested generally in the ability of
data tagging to meet our objectives and are interested in receiving
comments on alternative XML-based or other languages that we should
consider. When commenting on other languages, please address the same
general questions that we have outlined below for XBRL. Specifically,
please address whether standard taxonomies have been developed, how
they are maintained, who is responsible for updating the taxonomies,
and whether extensions or some other mechanism can be used to allow
flexibility in providing detailed financial information.
A. Technology Specification
XBRL International has developed XBRL specification 2.1 using XML
and other World Wide Web Consortium specifications.\35\ XBRL
specification 2.1 was released in December 2003 and is the foundation
upon which the consortium and third parties are currently developing
software and taxonomies.\36\ According to XBRL International, XBRL
specification 2.1 will remain current until at least December 2005.\37\
XBRL specification 2.1 is an open standard, available on a royalty-free
basis allowing software providers to use the technology specification
to develop XBRL-enabled products.\38\ In the event that the technology
specification changes, XBRL International has stated that it would
propose changes to the specification and make those proposed changes
available for public comment.\39\
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\35\ See XBRL International, ``XBRL International White Paper:
Improving XBRL Implementation & Interoperability, The Case for XBRL
2.1 Today'' (Mar. 23, 2004). According to the Web site, XBRL
specification 2.0 was released by XBRL International in December
2001 and subsequently refined based on experience with the
specification.
\36\ Id.
\37\ Id. XBRL International has expressed its intention to
develop modules to improve the ability of XBRL to transition data
prepared in prior versions of the specification and run more complex
validation routines.
\38\ See http://www.xbrl.org/Specification/XBRL-RECOMMENDATION-2003-12-31+Corrected-Errata-2004-04-29.doc
for details relating to
the specification.
\39\ See http://www.xbrl.org/Specifications.
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Questions for Commenters:
Is the XBRL specification 2.1 sufficiently developed to
support the tagging of financial information? Explain whether the
specification provides an effective and efficient means for tagging
data in Commission filings.
Although XBRL specification 2.1 is an open standard
available on a royalty-free basis, are there limitations on the ability
of filers, software providers or others to freely use the
specification?
B. Taxonomies
An XBRL taxonomy is a standard description and classification
system for business reporting and financial data. Tags consist of:
Specific financial data, such as the line items presented
in the financial statements; and
Words or labels, such as headers in the notes to the
financial statements.
For example, a taxonomy may include a tag for the balance sheet
line item ``inventory'' as well as tags for inventory's component
accounts, ``raw materials,'' ``work in process,'' and ``finished
goods,'' which often are disclosed in the notes to the financial
statements. Any item that is tagged can be retrieved and analyzed
across multiple registrants and time periods by using software. In
addition to being readily accessible for financial analysis, by using
software, tagged information can be retrieved and formatted in any
desired presentation, such as a traditional balance sheet and income
statement or as a chart or graph.
XBRL-US, the jurisdiction of XBRL International in the United
States, has developed the United States Financial Reporting Taxonomy
Framework.\40\ The taxonomy framework provides the foundation on which
others can build taxonomies to meet their specific reporting and
analytic needs. On September 20, 2004, using the taxonomy framework and
XBRL specification 2.1, XBRL-US proposed for public comment three
comprehensive industry-level
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taxonomies for tagging financial information:
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\40\ For more information see the discussion on http://www.xbrl.org
under Technical Information relating to the US
Financial Reporting Taxonomy Framework.
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Commercial and industrial companies;
Banking and savings institutions; and
Insurance companies.\41\
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\41\ See http://www.xbrl.org.
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These standard taxonomies were developed by XBRL-US based on input
from accounting firms, technology companies, and other participants in
XBRL-US that have financial reporting knowledge.\42\ Neither the Public
Company Accounting Oversight Board, the Financial Accounting Standards
Board, nor the Commission participated in the taxonomy development.
While the content of the standard taxonomies is based on GAAP and
registrant disclosure practices, the taxonomies are not intended to be
accounting standards or to require changes to current accounting
standards or the content of reported information.\43\ In developing the
taxonomies, we understand that XBRL-US considered the following:
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\42\ For more information see the discussion on http://www.xbrl.org
under Technical Information relating to the United
States Taxonomies and the Explanatory Notes to each of the US GAAP
taxonomies.
\43\ See http://www.xbrl.org/faq.aspx#33.
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Disclosure indicated in various financial reporting
checklists prepared by the AICPA and major national accounting firms;
Disclosure in sample financial statements included in
accounting and auditing industry guides published by the AICPA; and
Disclosure frequently found in financial statements filed
by registrants.\44\
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\44\ See note 42 above.
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XBRL-US also has under development additional industry-specific
taxonomies, including taxonomies for investment companies, broker-
dealers, and oil and gas companies.\45\
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\45\ According to XBRL-US, standard taxonomies are generally
developed by national jurisdictions, such as XBRL-US, and sent to
XBRL International for comment. While XBRL International does not
have a required notice and comment period and is not bound to
consider comments, we understand its practice includes the
circulation of a working draft of a standard taxonomy to members of
XBRL International for a 30-day comment period and, once revised,
the publication of a working draft on its Web site for a 60-day
public comment period. While this practice could change, XBRL
International has indicated that it will actively publicize and
solicit public comment on the specification 2.1 taxonomies. Public
comment is solicited on the Web site and comments are made available
on request, but are not published. More information is available at
its Web site at http://www.xbrl.org.
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In order for the standard taxonomies to provide the market with
useful tagged data, the standard taxonomies must provide an appropriate
level of detail for financial statement presentation and analytic
purposes. The taxonomies' tags, definitions, and classifications also
must conform to established standards (i.e., GAAP and Commission
rules). For example, a taxonomy would contain inaccuracies if ``raw
materials,'' ``work in process,'' and ``finished goods'' were not
classified as components of ``inventory'' or their definitions did not
conform to GAAP. If additional tags are needed to satisfy a
registrant's specific data requirements, a registrant using XBRL would
be able to expand the standard taxonomy through what is known as an
extension taxonomy.\46\ Extension taxonomies enable any registrant or
group of registrants to refine the standard taxonomy by creating
additional tags to fit their particular circumstances. If a group of
registrants all require similar additional data elements, an extension
taxonomy could be created for the group or a new standard taxonomy
could be developed.\47\ Where a data element does not have a
corresponding tag included in the standard or extension taxonomy, that
item would not be able to be retrieved, analyzed or separately
presented as a line item in the financial statements.
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\46\ See the discussion of Technical Information relating to the
US Financial Reporting Taxonomy Framework and the US GAAP Commercial
and Industrial extension taxonomy at http://www.xbrl.org.
\47\ Id.
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Questions for Commenters:
What should the Commission's role be in taxonomy
development? How could the taxonomies be assessed to determine whether
they include the disclosures required by GAAP and Commission rules?
Are the standard taxonomies sufficient for registrants to
submit data tagged using XBRL without extensions? If not, should
standard taxonomies be expanded to make extensions unnecessary? If
standard taxonomies were expanded to make extensions unnecessary, would
the standard taxonomies still be manageable, efficient and useful?
What would be the advantages or disadvantages of
permitting registrants (either individually or as part of an industry
group) to develop, use, and submit their own extensions? If registrants
were permitted to use their own extensions, would it result in better
financial reporting with greater detail than reliance solely on
standard taxonomies? Is there any potential that investors could be
confused or misled by registrant-developed extensions?
C. Presentation and Analysis of Tagged Data
Data tagged using XBRL consists of tags paired with values in a
computer readable document, known as an instance document. Software
programs are able to read an instance document, analyze and manipulate
the data, and display it in a desired format. For example, a style
sheet can render an instance document into a traditional balance sheet
and income statement or into a chart or graph. Other software programs
are able to use the instance document and analyze the data.
Questions for Commenters:
Would it be preferable for registrants to develop and
submit their own style sheets to render tagged data into a specific
format or for the Commission to provide a standard style sheet? Why or
why not?
What is the appropriate level of detail to be provided in
rendered financial statements? What standards should be established to
ensure a sufficient level of detail in the rendered financial
statements?
Are software analytical tools sufficiently developed to
analyze the data? What are the fundamental features of such tools?
D. Attestation/Validation of Tagged Data
Under a tagged reporting system, it is important that filers
properly tag items included in the standard and extension taxonomies.
If items are not tagged properly, financial information generated from
the instance document could be misleading or inaccurate and the ability
to perform analysis on the tagged data could be impaired. An example of
forms of accountant attestation that can be performed on tagged data is
in the AICPA's interpretation to Section 101 of the Statements on
Standards for Attestation Engagements titled, ``Attest Engagements on
Financial Information Included in XBRL Instance Documents.''\48\
Specifically, this interpretation sets forth procedures an accountant
should consider when engaged to examine and report on the accuracy and
completeness of an XBRL instance document.
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\48\ See Interpretation No. 5 of Chapter 1, Attest Engagements,
of Statement on Standards for Attestation Engagements (SSAE) No. 10:
Attestation Standards: Revision and Recodification (AT Section 101),
as amended, available at http://www.aicpa.org/members/div/auditstd/announce/XBRL_09_16_03_FINAL.htm.
Its interpretation has not
been adopted by the Public Company Accounting Oversight Board as
part of their auditing standards.
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Questions for Commenters:
[[Page 59116]]
If we require or accept tagged data in Commission filings,
should accountants attest to the accuracy and completeness of the
tagged data? If so, what form should such an attestation take?
IV. Information for and Filing of Tagged Data
In a companion release, we are proposing a voluntary program to
permit certain registrants to furnish financial information using XBRL
in order to evaluate data tagging of financial statement information in
general and the use of XBRL in particular.\49\ In this release, we are
considering the more general question of the usefulness of tagged data
formats, like XBRL, in electronic filings and reports made by
registrants under the federal securities laws. As part of our
evaluation, we are considering whether tagged data should supplement
text-based filings, currently provided in either ASCII or HTML formats,
or replace them. The proposed voluntary program is the first step in
evaluating this technology and determining its usefulness to investors.
After reviewing the comments on this release and the proposed voluntary
program release, we will consider whether to implement the voluntary
program to permit electronic filers to furnish financial statement
information using XBRL as an exhibit to certain Exchange Act and
Investment Company Act filings on EDGAR.
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\49\ Release No. 33-8496.
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A. Information Appropriate for Data Tagging
It is our understanding that it is possible for all information
contained in Commission filings to be tagged. We wish to determine
which information in those filings is most appropriate for such
tagging. Currently, the standard taxonomies developed by XBRL-US
provide tags and related definitions for registrants' financial
statements, notes to the financial statements, industry guides and
certain elements of management's discussion and analysis.\50\ In the
future, registrants may be able to tag not only particular line items
from their financial statements and the notes to the financial
statements but also relevant data from the body of a filed document
(e.g., executive compensation, fund performance information, beneficial
ownership, legal proceedings, and risk factors).
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\50\ See the discussion under Technical Information relating to
the United States Taxonomies at http://www.xbrl.org.
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Questions for Commenters:
What information contained in Commission filings would be
appropriate for tagging? Only the financial statements? The financial
statements and the notes to the financial statements? Should
management's discussion and analysis or management's discussion of fund
performance also be included? Should Commission industry guide
information be included? Should financial schedules be included? What
about other information included in the periodic or current reports or
other information collected by the Commission? Please provide an
explanation for the information that you believe is appropriate for
tagging.
Are there specific industries for which data tagging would
be easier to implement or the tagged data would be more useful?
Should we consider tagging investment company information
other than financial statements, such as the prospectus fee table or
the table of sales loads and breakpoints? Should we consider tagging
registrant or depositor financial statements for insurance company
separate accounts issuing variable insurance products?
B. Filing of Tagged Data
If, after reviewing the comments on this release and the proposed
voluntary program, we determine that the use of XBRL tagged data in
Commission filings is in the interest of investors, we will need to
determine how the tagged data should be provided and treated for
liability purposes. Under the proposed voluntary program, we are
considering whether to permit electronic filers to ``furnish'' rather
than file the exhibit containing their XBRL tagged financial
information, providing electronic filers with limited relief from
liability under the federal securities laws.\51\ We have proposed this
limited relief due to the experimental nature of the voluntary program
and to encourage registrants to volunteer to provide XBRL tagged data
with their filings. We expect that the voluntary program will allow us
to gather and analyze data and make conclusions regarding the
feasibility and desirability of using XBRL tagged data in Commission
filings. Experience with a voluntary program would better enable us to
evaluate data tagging and determine whether to propose additional data
tagging rules for electronic filers.
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\51\ See Section IV. E. of the XBRL Voluntary Financial
Reporting Program on the EDGAR System Proposing Release. Release No.
33-8496.
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Any additional data tagging rules would be developed in a series of
steps based upon our experience with the voluntary program. We may
determine to extend the acceptance of voluntary filings of tagged
information indefinitely, in which case we would need to determine
whether to accept the tagged data as an alternate official filing
similar to the approach used in accepting either ASCII or HTML, or to
accept documents using tagged data as an unofficial part of the filing,
similar to the way we currently accept PDF files.\52\ We also may
determine to require registrants to file the tagged information as
their sole official filing. In any event, we would consider the
liability that should attach under the federal securities laws to
promote the reliability of tagged information provided by registrants.
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\52\ See Release No. 33-7684 and Release No. 33-7855.
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Questions for Commenters:
If we were to extend the acceptance of voluntary filings,
would it be preferable to accept documents using tagged data as an
alternate official filing similar to our current approach of accepting
either ASCII or HTML formats? Would it be preferable for us to accept
documents using tagged data as an unofficial part of the filing,
similar to what is currently done with PDF files?
Should tagged data be applied to only certain types of
forms? If so, which forms? Should tagged data be applied only to
periodic reports? If so, should it be applied only to annual reports on
Forms 10-K \53\ and N-CSR? \54\ Should application extend to quarterly
filings on Forms 10-Q \55\ and N-Q? \56\ Aside from periodic reports,
should it be applied to information filed or furnished on Form 8-K?
\57\ Should it be applied to reports by investment companies on Form N-
SAR? \58\ Should tagged reporting for investment companies be different
than for operating companies?
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\53\ 17 CFR 249.310.
\54\ 17 CFR 249.331 and 274.128.
\55\ 17 CFR 249.308a.
\56\ 17 CFR 249.332 and 274.130.
\57\ 17 CFR 249.308.
\58\ 17 CFR 249.330 and 274.101.
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What are the specific implications for the use of tagged
data in filings made pursuant to the Securities Act of 1933?\59\ Would
using tagged data affect an issuer's ability to access the market or
the timing of its offerings? If so, how?
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\59\ 15 U.S.C. 77a et seq.
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V. Impact on Various Parties
We are requesting comments on how various parties may be affected
by a decision to pursue data tagging in Commission filings, including
the impact on: investors, registrants, accountants, and other parties
generally
[[Page 59117]]
involved in the financial reporting process.
A. Investors
Registrants provide their financial data in EDGAR text filings. As
a result, anyone wishing to translate that data into spreadsheet or
database software in order to analyze the data must either copy the
data into a more usable form or purchase a subscription from a third-
party financial data provider that has already tagged the data. If the
data is purchased from a third party, the data provided may have been
modified from the information filed by the registrant in order to
conform it to the third party's database system.
Tagged data provides financial information in a format that is more
readily usable for standard quantitative financial analysis. Investors
and other parties who are interested in using tagged data to calculate
financial ratios, compare companies to peers or indices, or otherwise
use software to perform sophisticated technical analyses are likely to
prefer tagged data provided directly by the registrant. Even investors
that do not use the tagged data may receive better access to registrant
information based on the provision of the tagged data to those parties
who will undertake the detailed technical analysis and disseminate
their results.
Questions for Commenters:
What are the likely impacts of the provision of tagged
data by registrants on financial analysts, institutional investors, or
individual investors?
Would the provision of tagged data by registrants result
in time and cost savings to investors, such as through reduced data
entry or formatting?
B. Registrants
In order to create a data tagging system, a registrant likely would
incur expenses for software creation or acquisition, software
customization and other start-up costs, such as training personnel and
hiring consultants. While technology specifications, such as those
provided by XBRL, are often in the form of an open standard that is
available at minimal or no cost, registrants may need to upgrade their
systems to use the new software, customize the open standard, or add
extensions. Registrants may, however, benefit from the provision of
tagged data to investors by improving the transparency of the
information and investors' access to information for analytical
purposes. This may, in turn, result in broader analyst coverage,
increased liquidity of registrants' securities, and decreased price
volatility.
Further, some registrants already may have acquired internal
financial reporting software with data tagging capabilities. According
to the Financial Executives Research Foundation, those registrants may
be able to use that existing software to improve their internal
financial reporting and controls by enhancing transparency of financial
information and integrating disparate systems.\60\
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\60\ See, e.g., Financial Executives Research Foundation, Inc.,
Everything You Wanted to Know About XBRL but Were Afraid to Ask: A
CFO's Guide (2003) and Financial Executives Research Foundation,
Inc., Corporate Reporting and the Internet--Understanding and Using
XBRL (2002).
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Questions for Commenters:
Are current accounting or reporting software programs able
to tag data? Are the programs able to tag data using XBRL?
What impact would data tagging have on a registrant's
financial reporting process? What additional costs would a registrant
incur to tag their financial reporting data?
What would be the advantages and disadvantages of
requiring small business issuers to tag data in their Commission
filings? Should we exempt small business issuers from any data tagging
initiatives? Alternatively, should small business issuers be given more
time than larger issuers to transition to the use of tagged data?
What would be the advantages and disadvantages of
requiring foreign private issuers to tag data in their Commission
filings? Are the implications different if the foreign private issuer
reports using home country Generally Accepted Accounting Principles or
International Financial Reporting Standards with a reconciliation to
U.S. GAAP? Should we exempt foreign private issuers from any data
tagging initiatives? Alternatively, should foreign private issuers be
given more time to transition to the use of tagged data?
What would be the advantages and disadvantages of
requiring investment companies to tag data in their Commission filings?
Are there types of investment companies that should be exempt from any
data tagging initiatives? Alternatively, should certain investment
companies be given more time than other investment companies to
transition to the use of tagged data?
C. Accountants
Data tagging may be integrated with internal accounting software
packages, performed by third parties, or performed manually. In order
to tag data and audit tagged data technology, internal control
procedures and related audit procedures may need to change. Accountants
may be affected by such changes due to the types of incremental
assurance that they may be required to provide with respect to tagged
data included in Commission filings.\61\
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\61\ See also the discussion and questions in Section III.D. of
this release.
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Question for Commenters:
What effect, if any, would the use of tagged data have on
the quality of and the time required to conduct audits and test
internal controls?
D. Other Parties
Currently, many registrants use intermediaries, such as financial
publishers and filing agents, to assist them in making their EDGAR
filings. These intermediaries ensure that the filing is properly
formatted and transmitted. Registrants similarly may choose to rely on
third parties to assist them with data tagging. Other companies convert
EDGAR filings into a database format, offering services to standardize
disclosures, calculate financial ratios, filter and sort financial
data, as well as provide data in a tagged format. If we were to require
the submission of tagged data, the scope and value of the services
provided by financial publishers, filing agents, data aggregators, and
other parties may be affected.
Question for Commenters:
What effect, if any, would the submission to and
availability of tagged data on EDGAR have on other parties?
VI. General Request for Comment
Any interested person wishing to submit written comments on any
aspect of the concept release, as well as on other matters that might
have an impact on our consideration of the use of tagged data in
Commission filings, is requested to do so.
By the Commission.
Dated: September 27, 2004.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-22035 Filed 9-30-04; 8:45 am]
BILLING CODE 8010-01-P