SEC proposes mandatory use of XBRL tagging of financial statements

Abstract

Purpose

The purpose of this paper is to explain the SEC's proposal to require domestic and foreign public companies that prepare their financial statements in accordance with US GAAP to file financial statements contained in registration statements and periodic reports in an interactive data format using XBRL, or “eXtensible Business Reporting Language”.

Design/methodology/approach

The paper explains the purpose of XBRL, provides an overview of the SEC's proposal, discusses the consequences of noncompliance, and explains the SEC's “bifurcated” approach to filers' liability for the interactive data they are required to provide.

Findings

XBRL, like the other electronic formats currently used by registrants in their SEC filings, defines or “tags” data using standard definitions. The SEC believes that financial reporting based on the XBRL format would create new ways for investors, analysts, and others to retrieve and use financial information in documents filed with the SEC. XBRL tagging of financial statements most likely represents only the SEC's first step in moving toward more widespread adoption of XBRL reporting.

Originality/value

The paper contains practical guidance by experienced securities lawyers.

Citation

Romeo, P.J., Parrino, R.J. and Bell, J.A. (2008), "SEC proposes mandatory use of XBRL tagging of financial statements", Journal of Investment Compliance, Vol. 9 No. 4, pp. 22-26. https://doi.org/10.1108/15285810810922224