XBRL Rule Catches Up With Foreign Filers

We missed an important detail in last week’s news that the SEC plans to modernize corporate filings with Inline XBRL technology: for the first time, foreign private issuers trading on U.S. markets will need to start using XBRL as well.

XBRL is a technology that allows computers to read and interpret the financial data companies submit in their quarterly and annual filings. U.S. filers have had to submit their data “tagged” in XBRL since 2009, but foreign private issuers have dodged that requirement because the SEC never designated an XBRL taxonomy for use with International Financial Reporting Standards.

Well, the SEC designated one last week. That means all foreign private issuers filing financial statements in IFRS will need to climb aboard the XBRL express starting with the 2018 filing season.

For consumers of financial data, this is a good thing. XBRL is a tremendous tool to help data research firms and investors (institutional or otherwise) do benchmarking or other sophisticated analytics. But data from foreign issuers has been excluded from those efforts, because those financial filings—typically a Form 20-F or Form 40-F—weren’t part of the XBRL-tagged world. Now they will be.

For preparers of financial data at foreign private issuers, the new rule could be a bit of a scramble. Some FPIs are large companies with complicated financial statements: GlaxoSmithKline and Sanofi in Europe, for example, or Rogers Communications in Canada. Filers that big do have robust financial reporting teams and are not strangers to SEC filings—but they will have only 12 months to implement any new XBRL procedures they might need. That’s not much time, especially for smaller foreign issuers.

Winners in this situation: vendors that help companies prepare and submit SEC filings, such as Donnelley Financial Services or Workiva. Plus U.S. filers, who can feel a bit of smug glee that their overseas counterparts will evade XBRL no more.

Inline XBRL? Not Quite Yet

This new rule for foreign private issuers should not be confused with the other decision the SEC made last week about XBRL: a proposal to update how companies submit XBRL-tagged filings.

Right now, a company must submit its filings to the SEC EDGAR database in the usual HTML format, and file XBRL documents as accompanying exhibits. Last week the SEC proposed to replace that with a more modern technology, Inline XBRL, where the XBRL tags are embedded directly into the company’s standard filings.

That idea is a good one, but it’s still only a proposal. So foreign issuers now subject to the XBRL requirement (Rule 405 of Regulation S-T, for those who care) must comply with the current rule until it goes away. Whenever that may be.

And just to keep things fun, earlier this year the SEC authorized a voluntary pilot program, where filers could experiment with submitting their filings using Inline XBRL. That pilot is supposed to run through 2020, although at the rate the SEC is going, it’s likely to be superseded before then with a rule mandating Inline XBRL for all filers.