SEC Changes IFRS XBRL Rules for Foreign Private Issuers

The Securities and Exchange Commission said Tuesday that foreign private issuers who prepare their financial statements in accordance with International Financial Reporting Standards do not have to submit interactive data files until the SEC decides on a suitable XBRL taxonomy.

The SEC began mandating the submission of XBRL-formatted financials, short for Extensible Business Reporting Language, for filings by publicly traded companies in recent years, starting in 2009 for the largest companies and 2010 and 2011 for smaller companies. XBRL makes use of interactive data tags that promise to make it easier for investors and financial analysts to compare financial statements across companies and industries.

There have been many problems with the accuracy of the XBRL tags by corporate filers, however, making the technology less useful than originally envisioned. An easier to use version of XBRL, known as Inline XBRL, appears to be making headway in some countries such as the United Kingdom, and the SEC is reportedly examining the use of Inline XBRL as an alternative to the current system. But in the meantime the U.S. GAAP Financial Reporting Taxonomy that is maintained by the Financial Accounting Standards Board currently relies on the traditional XBRL technology.

The SEC announced Tuesday that foreign private issuers that prepare their financial statements in accordance with IFRS as issued by the International Accounting Standards Board are not required to submit interactive data files, as defined in Rule 11 of Regulation S-T, to the SEC until the Commission specifies on its Web site a taxonomy for their use in preparing interactive data files.

By way of explanation, the SEC referred to an April 2011 letter from former officials in its Division of Corporation Finance and the SEC Office of the Chief Accountant in response to an inquiry from the Center for Audit Quality. In that letter, the SEC acknowledged that it has not specified on its Web site a taxonomy for use by foreign private issuers that prepare financial statements in accordance with IFRS as issued by the IASB, and it is not possible for such foreign private issuers to comply with Rule 405 of Regulation S-T, which requires issuers to prepare interactive data files in accordance with the EDGAR filer manual, until the Commission does so.

“Accordingly, we are of the view that foreign private issuers that prepare their financial statements in accordance with IFRS as issued by the IASB are not required to submit to the Commission and post on their corporate websites, if any, Interactive Data Files until the Commission specifies on its website a taxonomy for use by such foreign private issuers in preparing their Interactive Data Files,” former SEC CorpFin director Meredith Cross and OCA chief accountant James Kroeker wrote at the time.

The SEC said Tuesday its staff is continuing to review taxonomies for use by foreign private issuers. An Exposure Draft Interim Release Package on the IFRS Taxonomy 2013 has been published for comment by the IFRS Foundation, the SEC noted, adding that the public comment period for the draft taxonomy will end on Nov. 11, 2013. Comments on this taxonomy should be submitted directly to the IFRS Foundation, the SEC noted.

The SEC staff is encouraging filers, investors, analysts, software service providers and other interested parties to participate in the public review to help the IFRS Foundation continue to develop the IFRS Taxonomy.