SEC Adopts Inline XBRL Requirements for Financial Data

On June 28, 2018, the Securities and Exchange Commission adopted amendments to eXtensible Business Reporting Language (XBRL) requirements for operating companies and mutual funds. The amendments, which were originally proposed in March 2017, require the use of Inline XBRL for financial statement information submitted to the SEC by operating companies and risk/return summaries submitted to the SEC by mutual funds. As of the effective date of the amendments, operating companies and funds will also no longer be required to post XBRL data on their websites and the SEC’s interactive data voluntary program originally established in 2005 with respect to financial statement information, which is currently available primarily only to investment companies, will be terminated. 

The amendments are effective 30 days after publication in the federal register. The SEC’s adopting release is available here. 

Inline XBRL technology allows the XBRL data to be embedded directly into an HTML version of an SEC filing, making it both human-readable and machine-readable. Inline XBRL also eliminates the need to copy and tag the required information with XBRL in a separate instance document included as an exhibit with the filing. According to SEC Chairman Jay Clayton, “The amendments are part of the Commission’s continued efforts to modernize reporting and to improve the accessibility and usefulness of disclosures to investors, including our Main Street investors.”

The new Inline XBRL requirements will be phased-in as follows: 

* Filers will be required to comply beginning with their first Form 10-Q filed for a fiscal period ending on or after the applicable compliance date.

** Funds that, together with other investment companies in the same group of related investment companies, have net assets of $1 billion or more as of the end of their most recent fiscal year.

As part of the above phase-in, the 15-business-day filing period for the submission of mutual fund risk/return summary data in XBRL format will be eliminated, as Inline XBRL reduces the need for this filing delay. Companies also will be permitted to file in Inline XBRL in advance of the above mandated phase-in periods once the SEC’s EDGAR system has been modified to accept submissions in Inline XBRL for all applicable forms, which is expected to occur in March 2019. Operating companies may also continue to voluntarily submit certain required filings under the Securities Exchange Act of 1934 in Inline XBRL pursuant to an exemptive order issued by the SEC in July 2016.

The amendments apply to all operating company filers, including smaller reporting companies, emerging growth companies, and foreign private issuers, that are required to submit XBRL data and do not change the categories of filers otherwise subject to the SEC’s XBRL requirements.

The amendments do not impact existing SEC rules that exclude the financial statement information XBRL data from the officer certification requirements under the Securities Exchange Act of 1934 and auditor assurance requirements under applicable auditing standards. Consistent with existing requirements, companies are not required to obtain assurance with respect to their XBRL data or involve third parties, such as auditors or consultants, in the creation of their XBRL data, although the preparation and submission of XBRL data will continue to be a part of a company’s disclosure controls and procedures. Companies are also not prohibited, if desired, from indicating in the financial statements (such as in a footnote) the degree or lack thereof of auditor involvement related to the financial statement information XBRL data.

The XBRL amendments were adopted with the intent of modernizing existing financial statement XBRL requirements and incorporating the latest developments in XBRL technology since the SEC’s 2009 adoption of the initial XBRL rules. The SEC believes that these amendments will improve the data’s usefulness, timeliness, and quality, benefiting investors, other market participants, and other data users, and will decrease, over time, the cost of preparing the data for submission to the SEC.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Shelly Heyduk, an O'Melveny partner licensed to practice law in California, Robert Plesnarski, an O'Melveny partner licensed to practice law in the District of Columbia and Pennsylvania, and Sarah J. Levesque, an O'Melveny counsel licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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