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Guidance for the Application and Conversion Capabilities of XBRL

PRESENTED BY

Foreword
Dear Financial Executive, We are on the threshold of a revolution in corporate reporting. That is how SEC Chairman Christopher Cox describes the use of interactive data to improve internal and external financial reporting. One important tool for interactive data is eXtensible Business Reporting Language (XBRL). I know something about XBRL because I helped implement it at Microsoft. We were the first U.S. company to submit our annual report in XBRL. This reference guide is intended to give you some background on XBRL, and has been prepared to show you how you can implement XBRL in your company. It includes the following documents: An SEC transcript of Chairman Coxs remarks at the 12th XBRL International Conference; The SECs final rule on XBRL, dated February 3, 2005, XBRL Financial Reporting Program on the EDGAR System; Financial Reporting in the XBRL Age: A Step-by-Step XBRL Implementation, a FERF Executive Report that I co-authored; EDGAR Online Provides New Investment Analysis Capabilities with XBRL-Tagged Data, a Gartner white paper dated December 1, 2005; and A Revolution in Corporate Reporting? from the January/February issue of Financial Executive magazine. This reference guide will provide you with all that you need to get started. Best wishes,

Taylor Hawes Controller, Global Platforms and Operations Microsoft Corporation Chairman FEIs Committee on Finance and Information Technology (CFIT)

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Table of Contents
1. 2. SEC TRANSCRIPT OF CHAIRMAN COXS REMARKS AT THE 12TH XBRL INTERNATIONAL CONFERENCE SEC FINAL RULES ON XBRL I. BACKGROUND 1 4 5 6 6 6 7 8 8 11 12 13 14 16 16 18 19 19 19 20 20 21

II. THE AMENDMENTS A. B. C. Form of XBRL Submissions Description of XBRL Data Timing of XBRL Submissions

D. Official Filings Still Required E. F. Voluntary Program Content and Format XBRL Data Must Correlate to Standard XBRL Taxonomies

G. Use of Tagged Data H. Liability Issues III. PAPERWORK REDUCTION ACT IV. COST-BENEFIT ANALYSIS A. B. V. Benefits Costs

FINAL REGULATORY FLEXIBILITY ANALYSIS A. B. Reasons for, and Objectives of, the Amendments Significant Issues Raised by Public Comment

C. Small Entities Subject to the Amendments D. Projected Reporting, Recordkeeping, and Other Compliance Requirements E. VI. Agency Action to Minimize Effect on Small Entities

CONSIDERATION OF IMPACT ON THE ECONOMY, BURDEN ON COMPETITION AND PROMOTION OF EFFICIENCY, COMPETITION, AND CAPITAL FORMATION

21 22 23 44

VII. STATUTORY BASIS AND TEXT OF AMENDMENTS VIII. EXHIBITS 3. SEC PRESS RELEASE OFFERING INCENTIVES FOR COMPANIES TO FILE FINANCIAL REPORTS WITH INTERACTIVE DATA

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Table of Contents
4. 5. SEC PRESS RELEASE EXTENDING THE DEADLINE FOR COMPANIES TO JOIN INTERACTIVE DATA TEST GROUP OCTOBER 2005 FERF EXECUTIVE REPORT: FINANCIAL REPORTING IN THE XBRL AGE: A STEP-BY-STEP XBRL IMPLEMENTATION I. PURPOSE AND INTRODUCTION II. XBRLS ADOPTION EVOLUTION III. EXTERNAL REPORTING AND XBRL IV. V. VI. Internal Reporting and XBRL Taking XBRL to the Next Level Whats in a Number? The Specifics of XBRL A. An XBRL Item B. XBRL Financial Reporting Taxonomies Architecture An XBRL Implementation; Step-by-Step Project Plan A. Step 1-Identify a Team: Accountant and XML Developer B. Step 2-Assess Scope of Reporting and Determine Taxonomy C. Step 3-Compare and Map 10-K/10-Q to Taxonomies D. Step 4-Extend the Taxonomy as Necessary E. Step 5-Create an Instance Document and Validate Calculations F. Step 6-Review and Validate Instance Document G. Step 7-Publish the Instance Documents and Taxonomy About the Authors, CFIT and FERF

45 46 47 48 48 51 53 53 54 55 57 58 58 59 60 60 61 62 63 64 66 75

VII.

VIII. Conclusion IX. 6. 7. DECEMBER 2005 GARTNER WHITE PAPER A REVOLUTION IN CORPORATE REPORTING

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Speech by SEC Chairman: Remarks at the 12th XBRL International Conference


by Chairman Christopher Cox U.S. Securities and Exchange Commission Tokyo, Japan November 7, 2005 Good afternoon. This is an exciting conference about some exciting opportunities. We really are on the threshold of a Revolution in Corporate Reporting, which is, appropriately, the title of this program. In my tenure as Chairman of the Securities and Exchange Commission, I intend to bring our system of corporate disclosure and financial reporting into the 21st century. And while I must tell you that the views I express here are my own, and do not necessarily represent those of the Commission or its staff, you should know that every appointment I make as Chairman will be consistent with this vision of tapping the possibilities of interactive data. Interactive data promises more than simply a revolution in corporate reporting. For the SEC as well as for financial regulatory agencies around the world, corporate reporting is not an end in itself, but a means to achieving our missions. Those missions include protecting investors, encouraging capital formation, and promoting healthy markets. Every one of those missions will be better achieved with the widespread adoption and use of interactive data. Interactive data will also make disclosures more useful to investors, and to every market participant. The information contained in SEC reports could be made instantly searchable by analysts and investors alike. Because not just the disclosure documents, but the data within them will be searchable and retrievable, interactive data will dramatically improve the usefulness of the entire disclosure exercise. In our capital markets, better information usually makes for better choices. It can also help to promote honesty and integrity. As Justice Brandeis opined many years ago, sunlight is the best disinfectant. He made that statement in an influential book credited for inspiring the creation of the Securities and Exchange Commission. Interactive data could make it possible for issuers to reduce the cost of substantiating the numbers that appear in their financial statements. It would assist regulators in maintaining the integrity of the markets. In the academic realm of economics, scholars often assume the ideal of perfect information in an effort to explain the workings of a well-functioning market. Interactive data will help us take a giant step toward realizing that ideal. Interactive data promises yet another revolution in the field of international accounting standards.

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The global debates over the right way to do accounting might never be settled. We may never have a global accounting Esperanto. But if the development of taxonomies for data tagging progresses sufficiently, some day in the future it may well be possible for the users of financial information to render it according to any accounting regime they choose: US GAAP, IFRS, or any other system. Instead of being forced to resolve genuinely difficult financial issues on a Procrustean bed of arbitrary rules which dont suit the users analytical purpose, accountants, analysts and investors around the world could all view that information from multiple perspectives. At the SEC, our assessment of interactive data began in July of last year. But the Commissions interest in using technology in our disclosure program has a much longer history. The EDGAR system, our core technology, was originally designed in the late 80s. Over time, the EDGAR system has become out of date. Its essentially the same now as it was a decade ago. It goes without saying that there have been tremendous advances in computer technology and electronic communications since EDGAR was born. During the time that EDGAR has stood still, a single 3 minute recording of music that used to require a cassette or a compact discs has been shrunk to near invisibility, so that today literally thousands of songs can fit on a device the size of a credit card. When EDGAR was born, the way most people searched the news was to manually go through huge stacks of newspapers and magazines. Today, almost anyone at home or in any public library can not only search the entire planet for news that is seconds old, but also have the news robotically sorted for them in real time via the Internet, based on their specific interests. In the EDGAR era, business correspondence was delivered by mail which took days to arrive or, if it was truly important, it came by overnight express. That same urgent correspondence today can be transmitted instantly to any country on earth, at virtually zero marginal cost, from a handheld device. Technology is fueling a radical change in the way that business and individuals receive, process, and interact with data. Its high time that the SECs financial reporting caught up with the information revolution. Indeed, my hope is that together we can all help lead a new revolution. In the global business environment of the 21st century, people and firms need to communicate 24/7. They need to find seamless ways to accommodate different reporting systems, different languages, and different regulatory environments. Not just businesses and regulators, but investors, too, want faster access to more and better information than ever before. At the SEC, our XBRL Voluntary Program was launched earlier this year as a tentative first step. The program was designed to encourage all of the participants to help us assess the potential for using interactive data both within and outside the Commission. For our registrants, its an opportunity to explore the costs and benefits of using interactive data. Theyre helping us understand the impact of using XBRL on their financial reporting systems,
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and on their internal financial controls and processes. Were also learning how XBRL can help companies communicate with their shareholders and the markets generally. In the months ahead, I expect that investors and analysts will continue to pilot the use of interactive data applications. That will help us assess how this new flexible format might help them to improve their own analyses and decisions. For software providers and other technology providers, this is an opportunity to showcase the capabilities of XBRL and interactive data and tangibly demonstrate the impact to the aforementioned parties. For the SEC, this is our opportunity to assess how the use of interactive data can help us improve our internal review of information, and how it can help us make it available in more useful form to the public. Its fitting that this 12th XBRL International Conference is taking place in Japan. After all, XBRL has already received significant support from the Japanese government. In fact, as many of you know, the Bank of Japan plans to implement a voluntary XBRL filing program for over 500 regulated entities, possibly as early as next January. In addition, the counterpart of the SEC in Japan the Financial Services Agency has already formed a committee to accelerate the use of XBRL in financial disclosure. The FSA anticipates introducing an XBRL-based filing system for financial statements in the near future. The SEC and the FSA have a bilateral Memorandum of Understanding that permits us to partner on issues such as this, and so I expect that Japans experiences using XBRL will form an important part of our dialogue in the months ahead. As we progress with the SECs own assessment of interactive data, we will continue to work closely with all of you. Because of the leadership that youve shown over the past 5 years, we now stand on the threshold of some truly breathtaking changes in our global financial markets. Id especially like to thank those of you who have provided feedback to the Commission during our Voluntary Program. We need your continued support. Going forward, the single most significant way you can help is to participate in the XBRL filing program at the SEC. Keep in mind that the program isnt limited to registrants that file reports with the SEC. We are anxious to receive XBRL documents of any kind, both for our own internal assessment, and for publication to the market at large via our website. And keep providing us with feedback on your experiences. The comments we receive will be instrumental in determining the next steps in our implementation of XBRL disclosure. So let us know whats working for you, and where change is required. If you havent seen it, the latest opportunity for your feedback is in the form of a Request for Information that the SEC issued last month. Were looking for specific information on XBRL-enabled software, and wed very much appreciate your views. Above all, continue with your enthusiastic contributions to the global development of the XBRL standard. Have no doubt you are changing the world ... for the better.

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SEC FINAL RULES ON XBRL SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts 228, 229, 232, 240, 249 and 270 Release Nos. 33-8529, 34-51129, 35-27944, 39-2432, IC-26747; File Number S7-35-04 RIN 3235-AJ32 XBRL Voluntary Financial Reporting Program on the EDGAR System AGENCY: Securities and Exchange Commission. ACTION: Final rule. SUMMARY: We are adopting rule amendments to enable registrants to submit voluntarily supplemental tagged financial information using the eXtensible Business Reporting Language (XBRL) format as exhibits to specified EDGAR filings under the Securities Exchange Act of 1934 and the Investment Company Act of 1940. Registrants choosing to participate in the voluntary program also will continue to file their financial information in HTML or ASCII format, as currently required. To participate in the program, volunteers need to submit their XBRL formatted information in accordance with the amendments. The voluntary program is intended to help us evaluate the usefulness of data tagging and XBRL to registrants, investors, the Commission and the marketplace. EFFECTIVE DATE: March 16, 2005. FOR FURTHER INFORMATION CONTACT: If you have questions about the amendments, please contact one of the following members of our staff: Brigitte Lippmann or Mark W. Green, Division of Corporation Finance (202-942-2910), Jeffrey W. Naumann, Office of the Chief Accountant (202-942-4400), or Toai P. Cheng (202-942-0590) or David S. Schwartz (202-942-0721), Division of Investment Management, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549. If you have technical questions about the EDGAR system, please contact the EDGAR Filer Support Office (202-942-8900) or Richard Heroux, EDGAR Program Manager (202-942-8800), in the Office of Information Technology. We also invite public inquiries and comments regarding the voluntary program through the use of an Internet electronic mailbox at http://www.sec.gov/spotlight/xbrl.htm . Because electronic mail (e-mail) on the Internet is not secure, you should not send confidential or sensitive information. SUPPLEMENTARY INFORMATION: We are adopting1 amendments that will add Rules 4012 and 4023 to Regulation S-T, revise Rules 114 and 3055 under Regulation S-T,6 Item 6017 under Regulation S-K,8 Item 6019 under Regulation S-B,10 Rules 13a-1411 and 15d-1412 under the Securities Exchange Act of 1934 (Exchange Act)13 and Rules 8b-1,14 8b-215 and 30a-216 under the Investment Company Act of 1940 (Investment Company Act).17 We also are adopting amendments that revise Forms 20-F18 and 6-K19 under the Exchange Act and add new Rule 8b-33 under the Investment Company Act.
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I. BACKGROUND
On September 27, 2004, we proposed to adopt amendments to Regulation S-T to allow registrants to supplement their Commission filings by furnishing financial data on the Commissions Electronic Data Gathering, Analysis and Retrieval System (EDGAR) as an exhibit using eXtensible Business Reporting Language (XBRL),20 beginning with the 2004 calendar year-end reporting season. All registrants who file with the Commission are generally required to file electronically on EDGAR.21 The EDGAR database, accessible on our Web site at http://www.sec.gov, provides ready access to a broad range of registrant information. Electronic submissions are governed by Regulation S-T, in conjunction with the EDGAR Filer Manual22 and the electronic filing provisions of applicable rules, regulations, and forms. Since we first adopted rules to implement the operational phase of EDGAR, we have continually sought to make EDGAR more useful to the investing public. Proponents of the XBRL reporting standard assert that it offers benefits for all participants in the financial information supply chain, from registrants, who would benefit from potential efficiencies in preparing their filings, and improved transparency of their filings, resulting in broader analyst coverage, more market exposure and greater investor confidence, to regulators and investors, who would benefit from ready access to tagged financial data for analytical and review purposes.23 The amendments that we adopt today will permit volunteers to submit on EDGAR supplemental exhibits using XBRL for the purpose of allowing registrants, the Commission and others to test and evaluate tagging technology. The voluntary program will permit any registrant to participate merely by submitting an XBRL exhibit in the required manner. The XBRL exhibits will be publicly available but will be considered furnished rather than filed. Although XBRL exhibits will be required to accurately reflect the information that appears in the corresponding part of the official filing, the purpose of submitting XBRL data is to test the related format and technology and, as a result, investors and others should continue to rely only on the official version of a filing and not rely on the XBRL data in making investment decisions. We will include cautionary language to this effect on the Commissions Web site. We received 28 comment letters relating to the Proposing Release from various constituencies, including issuers, accounting firms, financial analysts, filing agents and associations representing the interests of such constituencies.24 Commenters expressed general overall support for the Commissions approach to implementing the voluntary program and investigating tagged data. Commenters also supported our approach of not limiting the program by size or specific industry.25 The final rules include a number of changes from the proposed rules to address the comment letters, including commenters recommendations to encourage participation in the program and provide volunteers with greater flexibility. For example, we have addressed commenters requests to allow volunteers the option of whether to submit the notes to the financial statements in XBRL in the voluntary program.26 There were many additional comments addressing the development of the voluntary program and the XBRL technology, including taxonomy development, auditor attestation and audit opinions. We discuss specific comments where appli-

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cable in this release; otherwise we may consider these comments in the future based on our experience with the voluntary program. We emphasize that we are in the preliminary phases of testing XBRL and we may amend the voluntary program as the technology becomes more mature and based on our experience with the program.

II. THE AMENDMENTS


In conjunction with establishing the voluntary filing program, we are adding new Rule 401 to Regulation S-T that will allow filers, on a voluntary basis, to furnish supplemental financial information using XBRL. The revision to Rule 11 of Regulation S-T, adopted as proposed, makes XBRL-Related Documents a defined term that means documents related to presenting financial information in XBRL format that are part of a voluntary submission in electronic format in accordance with new Rule 401. New Rule 401 generally provides that a registrant participating in the voluntary program (a volunteer) may submit XBRL-Related Documents in electronic format if they meet all the conditions of the rule. Appendix L to the EDGARLink Filer Manual will provide instructions and guidance on the preparation, submission, and validation of EDGAR-acceptable electronic filings with attached XBRL-Related Documents.27 The EDGAR system upgrade to Release 8.10 is scheduled to become available on February 7, 2005 to, among other things, enable EDGAR to process XBRL-Related Documents when the voluntary program becomes effective on March 16, 2005.28

A. Form of XBRL Submissions


The amendments require that volunteers furnish XBRL-Related Documents as an exhibit to either the Exchange Act or Investment Company Act filing from which they were derived, or as an exhibit to a filing on Form 8-K29 or Form 6-K,30 as applicable, that references, and is submitted no earlier than, the related filing.31 The Forms 8-K and 6-K alternative does not apply to volunteers that are registered management investment companies because they are generally not eligible to file those forms.32 XBRL-Related Documents will be identifiable as Exhibit 100 to the corresponding filing.

B. Description of XBRL Data


Rule 401, as adopted, contains three requirements for disclosure that must appear in the filing with which the XBRL-Related Documents are submitted. These requirements were not included in the rule as proposed. First, Rule 401 requires volunteers to describe the XBRL-Related Documents (whether they are filed as an exhibit to the related official filing or to a Form 8-K or Form 6-K that references such filing) either as unaudited or, for quarterly financial statements, unreviewed. Second, Rule 401 requires volunteers to provide cautionary language advising investors that the purpose of furnishing XBRL data is to test the format and the technology and, as a result, investors should not rely on the XBRL data in making investment decisions. This
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additional disclosure will complement the similar cautionary statements we plan to add to our Web site as described in the Proposing Release. Finally, Rule 401 provides that, if a reason to file a Form 8-K or Form 6-K or an amendment to a Form 8-K or Form 6-K is to submit as an exhibit XBRL-Related Documents that present information related to financial information filed as part of a different filing (e.g., a Form 8-K that references a previously filed Form 10-Q33), volunteers must reference the official filing from which the data in the XBRL-Related Documents was derived.34 These disclosures should be provided, as applicable, in: the exhibit index of the Forms 10-K,35 10-Q, 10,36 10-SB,37 10-KSB,38 10-QSB39 or 20-F, Item 2.02 or 8.01 of Form 8-K, or the body of the Forms 6-K, N-CSR40 or N-Q.41 We received several comments and recommendations regarding disclosure about furnishing XBRL data.42 One commenter agreed that it is reasonable to require registrants to describe the official filings to which the XBRL exhibits correspond because investors may not be aware that Exhibit 100 reflects XBRL data.43 Another commenter44 recommended that volunteers submit a letter describing managements basic decisions involving the use of taxonomies and policies about creating instance documents, including the correlation to printed financial statements and other relevant resources, the selection of taxonomies, additions and adjustments to the base taxonomy or taxonomies, and the level of tagging detail.45 Another commenter believed that volunteers should be encouraged to disclose: that the financial information in the XBRL-Related Documents is appropriately tagged, the source of the tagged information (e.g., the financial statements, MD&A), the extent of tagging used, including whether there have been any changes in the extent of tagging or the use of extensions as compared to XBRL-Related Documents furnished for previous fiscal periods, and whether any extensions meet the XBRL International technical specification.46 To facilitate participation, we have decided not to require such disclosure for the voluntary program; however, we encourage volunteers to provide the additional disclosure recommended by the commenters.

C. Timing of XBRL Submissions


The XBRL-Related Documents may be submitted at the same time as the official EDGAR filing to which they relate, either as an exhibit to the official filing or, for operating companies, as an exhibit to a Form 8-K or Form 6-K47 filed simultaneously. Alternatively, the XBRL-Related Documents may be filed subsequent to the official EDGAR filing to which they relate, either in a later amendment to the official filing or, for operating companies, as an exhibit on Form 8-K or

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Form 6-K. Volunteers will not be permitted to submit the XBRL-Related Documents before they file the related official document. Although the amendments do not establish a deadline for submitting or amending XBRL data, volunteers are encouraged to submit the XBRL-Related Documents with the official document or shortly after the official document is filed. Volunteers will be free to submit their XBRL exhibits regularly or from time to time and can stop or start as they choose. If a volunteer amends the XBRL-Related Documents it submitted earlier, it should amend the filing to which the XBRL-Related Documents are attached as an exhibit.48 Many commenters asserted that allowing volunteers to submit their XBRL-tagged financial statements after they file the related official filing will be important to securing volunteers.49 Commenters recommended that a reasonable period of time be allowed for submitting XBRL-Related Documents and suggested periods typically ranging from 30 days up to 90 days.50 One commenter recommended that no deadline be required.51 Other commenters approved of a delay, but did not specify a time period.52 As proposed, we have not implemented a submission deadline for furnishing XBRL data. One of the reasons for this decision is that volunteers may wish to furnish XBRL-Related Documents that relate to historical financial information from their previous Commission filings. While it would be preferable for registrants to submit all XBRL-Related Documents promptly, data elements in the submission would include date information and the voluntary program includes safeguards against reliance on the data. In addition, we recognize that registrants may be discouraged from participating in the voluntary program if we impose deadlines, especially during the early stages of the program when volunteers are testing the technology. Some commenters recommended that rather than amend submissions, the volunteers be allowed to withdraw them from EDGAR.53 However, submissions to EDGAR cannot, as a practical matter, be withdrawn after public dissemination.

D. Official Filings Still Required


The XBRL-Related Documents submitted in the voluntary program will be supplemental submissions and will not replace the required HTML or ASCII version of the financial information they contain. Volunteers will be required to continue to file their official EDGAR filings.

E. Voluntary Program Content and Format


XBRL-Related Documents must contain only voluntary program content (Voluntary Program Content) that appears in voluntary program format (Voluntary Program Format) as further described below. Voluntary Program Content must consist of mandatory content (Mandatory Content) and may be accompanied by optional content (Optional Content).
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Mandatory Content consists of a complete set of information for all periods presented in the corresponding official EDGAR filing from one or more of the following categories (as filed in the corresponding official EDGAR filing):54 the complete set of financial statements (the only exceptions are that notes to the financial statements and schedules related to the financial statements may be omitted55 unless the volunteer is a registered management investment company, in which case it must include Schedule I Investments in Securities of Unaffiliated Issuers);56 earnings information set forth in Form 6-K or Items 2.02 or 8.01 of Form 8-K (whether contained in the body of the Form 8-K or Form 6-K or in an exhibit, and whether filed or furnished); or financial highlights or condensed financial information57 (if the volunteer is a registered management investment company). Optional Content can consist only of a complete set of information that is: for all periods presented in the corresponding official EDGAR filing; related to financial information in the corresponding official EDGAR filing that is simultaneously submitted as Mandatory Content; and from one or more of the following categories (as filed in the corresponding official EDGAR filing):58 audit opinions;59 interim review reports;60 reports of management on the financial statements; certifications; or Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A),61 Managements Discussion and Analysis or Plan of Operation,62 Operating and Financial Review and Prospects63 or Managements Discussion of Fund Performance (MDFP).64 Voluntary Program Content is in Voluntary Program Format if: each data element (i.e., all text and all line item names and associated values, dates and other labels) contained in the XBRL-Related Documents reflects the same information in the corresponding official EDGAR filing (i.e., the HTML or ASCII version); no data element in the corresponding official EDGAR filing is changed, deleted or summarized in the XBRL-Related Documents; the XBRL-Related Documents correlate to the appropriate version of a standard taxonomy, supplemented with extension taxonomies as specified in the EDGAR Filer Manual;

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each data element contained in the XBRL-Related Documents is matched with the appropriate tag in accordance with any applicable taxonomy; and the XBRL-Related Documents contain any additional mark-up related content (e.g., the XBRL tags themselves, identification of the core XML documents used and other technology related content) not found in the corresponding official EDGAR filing that are necessary to comply with the EDGAR Filer Manual requirements. We had proposed to require volunteers to furnish in XBRL format a complete set of financial statements, including notes to the financial statements. This approach would have provided a comprehensive test of the capacity of the XBRL format for financial information to replicate the HTML and ASCII versions. The proposal also asked for comment on whether volunteers should be permitted to omit the notes to the financial statements. Many commenters disagreed with the proposal to require a complete set of the notes to the financial statements in XBRL format.65 Several commenters expressed the view that the taxonomy development of the notes to the financial statements is not detailed enough in the standard taxonomies to facilitate easy tagging.66 As a result, commenters generally believed that volunteers would need to create substantial extensions, which would be burdensome and could discourage registrants from participating in the program.67 Several commenters recommended allowing volunteers to submit financial statements in XBRL format that omit the notes to the financial statements.68 Other commenters indicated that the notes to the financial statements should be included in XBRL format, noting, however, that the Commission could limit the notes required to be tagged or allow the use of a single tag for all notes.69 Some commenters recommended that volunteers be afforded flexibility in determining the level of detail to which the notes to the financial statements are tagged.70 Although we consider the notes to the financial statements to be an integral part of the financial statements for filing purposes, we have determined not to mandate them for purposes of the voluntary program. Recognizing the technical issues presented by tagging the notes to the financial statements, and in light of the other safeguards in the rules, we are providing volunteers with additional flexibility to determine whether or not to include the notes to the financial statements. If volunteers do choose to tag the notes to the financial statements in their XBRL-Related Documents, they must tag all the notes so that they meet the requirements of Voluntary Program Content. Representing the entire set of notes to the financial statements with a single tag does not appear to be useful to users because of the difficulty of consuming such a large volume of data in that format. Consequently, we encourage volunteers that choose to tag the notes to the financial statements to tag at a level that provides practical data to users and furthers the goal of testing the capabilities of the XBRL technology. As proposed, investment company volunteers would have been required to submit the schedules related to the financial statements when submitting the financial statements in XBRL format. One commenter voiced the concern that, because the XBRL taxonomy for investment companies may not be sufficiently developed to support tagging of these schedules, requiring inclusion of the related schedules would force investment company volunteers to create a substantial set of taxonomy extensions, which would discourage participation in the program.71 We generally
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agree and have modified the rules to limit the related schedules that registered management investment company volunteers must submit in XBRL format with the financial statements to Schedule I Investments in Securities of Unaffiliated Issuers.72 We believe that this schedule must be provided in XBRL format because the information is critical to an understanding of investment company financial statements and to testing the XBRL program with regard to investment company filings. Some commenters requested clarification of the requirement to provide XBRL data containing the same information as in the official filing to which it relates.73 In response to these comments, as discussed above, we have revised proposed Rule 401 to provide more detailed specification of the various respects in which the information in the XBRL-Related Documents must be the same as that in the official filing to which it relates. We have explained that no information in the corresponding official filing may be deleted, changed or summarized in the XBRL format. For example, if the revenue line item in the related official filings income statement is broken down into different segments, the XBRL data must also contain the revenue line items for each segment; the volunteer cannot only include the total revenue line item. If a volunteer submits MD&A or MDFP in XBRL format, all text in addition to the tables and schedules must be tagged. We did not take the approach suggested by some commenters to require that the XBRL data be consistent with74 or materially the same75 as the official filing because we believe that this could cause uncertainty, reduce the disclosure provided in an XBRL format, and impair our pursuit of the objectives of the voluntary program. One commenter recommended that the voluntary program exclude XBRL tagging of earnings releases, selected financial data and schedules of ratio of earnings to fixed charges because there are no clear standards regarding the content and presentation of such information.76 This commenter also was concerned that some volunteers may interpret the proposed rule to allow XBRLRelated Documents to contain partial financial presentations so long as the elements of such a presentation are the same information as presented in (i.e., consistent with) the complete set of annual or interim financial statements or in MD&A. As noted above, we have clarified that partial financial presentations are not permissible content for XBRL submissions. Also, in view of the goals of the voluntary program to test and evaluate data tagging, we would like to test a wide variety of XBRL data. Therefore, volunteers will be able to present, among other information, earnings information, MD&A, MDFP, financial highlights, management or accounting reports and certifications77 in XBRL format.

F. XBRL Data Must Correlate to Standard XBRL Taxonomies


The voluntary program requires all volunteers to use the appropriate version of a standard taxonomy, supplemented with extension taxonomies as specified by the EDGAR Filer Manual. The XBRL Consortium has publicly announced that it will finalize the following standard taxonomies, which have all completed at least one review and comment period, by the end of the first quarter of 2005:78 Commercial and Industrial;79 Banking and Savings Institutions;

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Insurance; and Investment Companies.80 We have chosen March 16, 2005 as the effective date for the program, since this is the date by which accelerated filers with December 31 fiscal year ends are required to file their Form 10-Ks. We will provide notice on our Web site of the taxonomies supported for the voluntary program and expect that additional standard taxonomies will be permitted on the EDGAR system as they are finalized.81 The final standard taxonomies will be incorporated into the EDGAR system and volunteers may not attach the standard taxonomies to filings made on EDGAR. Commenters generally believed that the draft U.S. GAAP taxonomies are sufficiently developed for use in the voluntary program, but acknowledged that most volunteers will need to create extensions to meet their reporting requirements.82 Some commenters believed there are sufficient software tools available in the market to create such extensions, but noted that the software requires further development for satisfactory end-user implementation.83 One commenter, while strongly supporting the voluntary program, recommended that the XBRL specification for the standard taxonomies be changed to eliminate the required use of what the commenter described as its complex proprietary structure.84 This commenter believed that the full XBRL specification will not be useful to financial analysts because the customized extensions must be analyzed to determine comparability among companies. We expect that the voluntary program will enable us to better analyze the adequacy of the standard taxonomies and whether it would be desirable to develop our own taxonomy for some or all regulatory reporting requirements.85

G. Use of Tagged Data


As discussed in the Proposing Release, we had considered developing an application, such as a standard style sheet, so that users would be able to view XBRL data in a human readable format on our Web site. This application would have converted XBRL files into a document that would have the appearance of traditional financial information, such as a balance sheet or income statement. Commenters generally did not support a standard style sheet.86 Some commenters believed that a standard style sheet was not feasible because it would not be able to render extensions.87 A style sheet that could not render extensions would not display all the information tagged from the corresponding official EDGAR filing. We have decided to commence the voluntary program without providing a style sheet or other rendering application on our Web site. Users of EDGAR data on http://www.sec.gov will be able to download the XBRL data to perform their own financial analysis if they have appropriate software.88 We plan to continue to analyze rendering and other capabilities and we may add these features in the future. Users will continue to be able to view the official filing in ASCII or HTML format, as they can today.
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H. Liability Issues
Because the voluntary program is experimental, contains other appropriate safeguards, and should not unnecessarily deter volunteers from participating, the revised rules provide limited protections from liability under the federal securities laws. Commenters generally supported the proposed liability protections;89 however, several commenters requested clarification as further discussed below. Accordingly, we are adopting Rule 402 as proposed with minor clarifying revisions.90 Rule 402(a) generally will provide that XBRL-Related Documents submitted in the program: are not deemed filed for purposes of Section 18 of the Exchange Act91 or Section 34(b) of the Investment Company Act92 or otherwise subject to the liability of these sections;93 are not deemed incorporated by reference;94 are subject to all other liability and anti-fraud provisions of the Exchange Act and Investment Company Act;95 and are deemed filed for purposes of Rule 103 of Regulation S-T.96 Rule 402(b) provides additional relief from liability under the Securities Act, Exchange Act, Public Utility Holding Company Act, Trust Indenture Act and Investment Company Act for information in a volunteers XBRL-Related Documents that complies with the content and format requirements of Rule 401, to the extent that the information in the corresponding portion of the official EDGAR filing was not materially false or misleading.97 Rule 402(b) also provides additional relief from liability to volunteers that fail to comply with the content and format requirements of Rule 401 if: the volunteer has made a good faith and reasonable attempt to comply with the content and format requirements, as soon as reasonably practicable after the volunteer becomes aware that the information in the XBRL-Related Documents does not comply with the content and format requirements, the volunteer amends the XBRL-Related Documents to correct the problem, and the information in the corresponding official EDGAR filing was not materially false or misleading. As discussed earlier, several commenters asked us to clarify the reference in proposed Rule 402(b) to presenting information in the XBRL-Related Documents that reflects the same information as appears in the corresponding portion of the official version of the filing to which they relate.98 Accordingly, Rule 402(b), as adopted, clarifies the reference by specifying that the information must comply with the content and format requirements of Rule 401.

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One commenter asserted that proposed Rule 402(b) established a negligence standard and suggested that we establish an actual knowledge standard instead. We have decided to adopt the standard as proposed. A volunteer that fails to satisfy Rule 402(b) still may rely on the liability protections of Rule 402(a). In addition, the Commission has provided similar protections to those in Rule 402 in other appropriate circumstances and it appears that these protections are workable for filers in those circumstances.99 Finally, for purposes of the voluntary program, new paragraph (f) of Rules 13a-14 and 15d-14 under the Exchange Act and new paragraph (d) of Rule 30a-2 under the Investment Company Act provide that XBRL-Related Documents are not subject to the certification requirements of these rules.100 One commenter voiced concern that investment companies would be discouraged from participating in the voluntary program if they were required to provide additional certifications when filing amendments whose sole purpose was to submit XBRL-Related Documents attached as exhibits.101 The commenter emphasized that the concern applied to investment companies in particular because operating companies can file a Form 8-K rather than an amendment to submit XBRL-Related Documents after the corresponding official EDGAR filing has been filed. Rule 12b-15 under the Exchange Act102 and Rule 8b-15 under the Investment Company Act103 generally provide that any amendment to a filing that required a certification must contain another certification. We clarify that, consistent with the exclusion of XBRL-Related Documents from the disclosure certification requirements discussed above, an amendment whose sole purpose is to submit XBRL-Related Documents attached as exhibits for the voluntary program is not subject to the certification requirements of Rule 12b-15 under the Exchange Act and Rule 8b-15 under the Investment Company Act. Two of the items these certifications must address are internal control over financial reporting and disclosure controls and procedures.104 In this regard, several commenters asked us to clarify that XBRL-Related Documents are not subject to the internal control over financial reporting and disclosure controls and procedures provisions105 that we have adopted after passage of the Sarbanes-Oxley Act.106 We clarify that, for purposes of the voluntary program and consistent with the exclusion of XBRL-Related Documents from the disclosure certification requirements discussed above, XBRL-Related Documents are not subject to any of the internal control over financial reporting provisions adopted under Section 404 of the Sarbanes-Oxley Act or the disclosure controls and procedures provisions.107

III. PAPERWORK REDUCTION ACT


The new and amended rules contain collection of information requirements within the meaning of the Paperwork Reduction Act of 1995 (PRA).108 We published a notice requesting comment on the collection of information requirements in the Proposing Release, and submitted a request to the Office of Management and Budget (OMB) for review in accordance with the PRA.109 OMB approved the request on a pilot basis. An agency may not conduct or sponsor, and
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a person is not required to respond to, an information collection unless it displays a currently valid OMB control number. The title of the new collection of information is Voluntary XBRL-Related Documents (OMB Control No. 3235-0611). This collection of information stems from already existing regulations and forms adopted under the Exchange Act and Investment Company Act that set forth financial disclosure requirements for annual and periodic reports as well as current reports.110 The new and amended rules will allow registrants to furnish specified financial information in XBRLRelated Documents as exhibits to their current or periodic reports filed on EDGAR. The specified financial information already is required under existing periodic and annual report requirements, but will be tagged using XBRL. During the voluntary program, registrants will continue to include this information in ASCII or HTML format in their official EDGAR filings, but also will furnish the XBRL tagged data as exhibits to these filings. The XBRL-Related Documents will consist of an instance document, a schema file,111 and linkbase files.112 Submission of XBRLRelated Documents will be voluntary and the information submitted will not be kept confidential. We estimate for PRA purposes that each of 80 participants will submit four sets of XBRLRelated Documents per year that will result in an internal preparation burden of 60 hours per year and an external cost of $6,333 per year.113 We base this estimate on discussions regarding XBRL and data tagging in general.114 Two commenters responded to our request for comments on the PRA.115 Neither commenter addressed specifically our actual estimates. One commenter stated that our cost estimates are based on current manual processes, ignore costs to those other than preparers and do not address the cost savings the commenter expects will accrue in connection with preparation, distribution and analysis of financial information over time as XBRL and the process efficiencies it enables take hold. As to non-preparer costs, the commenter asserted that public accounting firms will need to invest in training and skill development to enable them to provide the assurance on XBRL data that the public ultimately will expect.116 These comments do not raise issues for our PRA estimates because our estimates are based on registrant costs. Similarly, the other commenter asserted that our cost estimates fall short because they are based on the need of most registrants to automate what are today almost entirely manual reporting processes, take into account the cost to prepare but not consume information and omit anticipated cost savings over time as adoption of XBRL spreads to more internal and external processes of information exchange.117 We note that for PRA purposes we estimate the average yearly cost to a registrant that participates in the voluntary program over a three-year period.118 Consequently, our estimates are intended to reflect both initial cost and on-going cost over a three-year period. In calculating these costs, we have tried to take into account, among other things, the current state of reporting

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process automation, automation that likely would be introduced in connection with the initial cost incurred and the efficiencies that likely would be realized over the course of three years. As reflected throughout this release, we also received comments, not specifically in response to the PRA, directed at the substance of the new and amended rules. As previously discussed, we have revised the proposals in response to these comments. As noted earlier, we are adding to proposed Rule 401 requirements to label XBRL data as unaudited or unreviewed, provide cautionary language concerning reliance on XBRL-Related Documents and, in some cases, reference the official filing from which XBRL data was derived. In this regard, we note the revision to proposed Rule 401 to make it optional, rather than required, to tag financial statement footnotes would reduce the burden.119 Therefore, on balance, we do not change our estimates. Compliance with the amendments is mandatory for those who wish to participate in the voluntary program. There is no retention period for the information disclosed.

IV. COST-BENEFIT ANALYSIS


The adopted voluntary program reflects our desire to increase EDGARs efficiency and utility. The tagging of financial and other information submitted to us through EDGAR has the potential to improve the analysis of that information. In order to evaluate data tagging, we are allowing registrants to furnish XBRL-Related Documents as exhibits to their official EDGAR filings.

A. Benefits
We believe that tagged financial information may allow more efficient and effective retrieval, research and analysis of financial information through automated means. The adopted voluntary program will assist us in assessing whether using XBRL tagged financial information enhances the analysis of financial information included in Commission filings. The voluntary program also will facilitate our ability to assess the technical requirements of processing XBRL-Related Documents using EDGAR. Today, a number of companies use the financial information provided on EDGAR to create databases of tagged information that they resell to users of the information. Allowing registrants to tag their own financial data has the potential to reduce third party participation in the tagging process and may reduce the cost of access to tagged information. Data tagging by registrants may make the tagging process more accurate. Additionally, the voluntary program may benefit registrants and the public by permitting experimentation with data tagged using XBRL. In the future, increased availability of accurate, tagged financial information could reduce the cost of research and analysis and create new opportunities for companies that compile, provide and analyze data to provide more value added services. Enhanced access to tagged information has the potential to increase analyst coverage and investor interest in a registrants securities, which could increase liquidity in the market and
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lower the cost of capital. These benefits, however, are difficult to quantify and may only be realized if a significant number of registrants provide data in XBRL format. Many of the commenters cited one or more of these or related potential benefits. As to related benefits, commenters stated, among other things, that: XBRL will lower the cost of producing information through automation;120 XBRL will free resources from manual reporting to do work that adds value to the business;121 XBRL-tagged data will motivate registrants to provide comparable information;122 registrants that use XBRL internally will have improved internal reporting processes;123 and tagged data may assist auditors.124 One commenter asserted that, in order to realize the benefit of enhanced financial analysis, XBRL must be revised by: restructuring the taxonomies to break down items into a more hierarchical format without alternative classification locations that can lead to non-comparable data; enabling end-users to validate and read the level of adherence to the standard industrial taxonomies without high-level XBRL processing; and eliminating duplicate elements in the standard industrial taxonomies so end users can map to a spreadsheet template or EDGAR web site/style sheet without complex programming code.125 Another commenter stated that the Commission should be able to assess more effectively whether the benefits of full-scale implementation justify the costs by taking steps in the initial implementation of XBRL to assess: how XBRL is being used by investors and analysts; whether the structure of the XBRL specification facilitates broad-based use by sophisticated users and third-party software developers; and whether adequate safeguards are in place to ensure that the data is prepared and disseminated correctly.126 We acknowledge these commenters concerns and suggestions. We plan to monitor the voluntary program accordingly.

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B. Costs
The voluntary program will lead to some additional costs for registrants choosing to furnish XBRL-Related Documents as exhibits to their periodic and current reports. Some companies may already tag their financial information using XBRL, in which case the additional cost of submitting XBRL-Related Documents will be minimal. The proposals do not dictate that companies follow any particular procedure; however, some participants may choose to acquire additional software or hire consultants to assist them with data tagging. Based on discussions with software providers and others familiar with XBRL, we estimate that between 60 and 100 registrants will participate in the voluntary program at an annual cost per registrant based on our PRA estimates.127 Based on the foregoing discussion, we estimate the aggregate cost to registrants that choose to participate in the voluntary program will be between $1,009,980 and $1,683,300 in the first year.128 Due to the recent development of the technology, we have had limited data to quantify the cost of implementing data tagging using XBRL. Further, methods of tagging data may vary considerably, making accurate cost estimates difficult. In the future, there may be additional costs to participants in the EDGAR data stream, including lower demand for data tagging and data dissemination. The availability of registrant tagged data, however, may provide these participants with alternative business opportunities.129 In the Proposing Release, we sought comments and supporting data on our estimates. We received no comments specifically on the estimates we provided in our cost-benefit discussion.130 Three commenters expressly cited software and personnel costs as we did in the Proposing Release.131 Some commenters cited other specific types of costs. For example, two commenters suggested that the initial cost of participating in the voluntary program would be significant.132 Two commenters suggested that costs would go down over time,133 while one commenter stated that the costs would remain significant.134 Two commenters emphasized that XBRL is complex. One commenter asserted that its complexity has the potential to cause errors in both preparation and dissemination of financial data.135 The other commenter stated that the XBRL specification, though openly disclosed, is so complex that it virtually requires use of specialized software tools to create, access and validate data and, as a result increases costs, reduces transparency, raises the potential for erroneous data use, unduly complicates the analytical process, restricts analytical creativity and violates the easy equal access nature of EDGAR.136 One commenter suggested that registrants that participate in the voluntary program at the outset may face a costly reworking of their XBRL implementation as methods and procedures are refined and, to minimize this, the Commission could encourage experimentation but should oversee full implementation of XBRL by a small subset of registrants to make any appropriate adjustments before broad implementation.137 We intend to monitor the voluntary program as to complexity, ongoing adjustments and other matters.
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V. FINAL REGULATORY FLEXIBILITY ANALYSIS


We prepared this Final Regulatory Flexibility Analysis (FRFA), in accordance with the Regulatory Flexibility Act.138 This FRFA relates to amendments we are adopting that allow registrants, on a voluntary basis, to tag financial information in specified filings using XBRL. The amendments set forth the method by which a registrant participating in the voluntary program may furnish XBRL-Related Documents as an exhibit to its official EDGAR filing.

A. Reasons for, and Objectives of, the Amendments


The purpose of the amendments is to further our ability to assess the feasibility and desirability of using tagged data on a more widespread basis in EDGAR filings. We believe the program to accept XBRL-Related Documents through EDGAR on a voluntary basis will better enable us to study the extent to which XBRL enhances the comparability of that data, its usefulness for financial analysis, and our staffs ability to review and assess filings. In addition, the voluntary program will help us assess the effect of XBRL data tagging on the quality and transparency of financial information as well as the compatibility of XBRL data tagging with the Commissions financial reporting requirements.

B. Significant Issues Raised by Public Comment


The Initial Regulatory Flexibility Act Analysis (IRFA) appeared in the Proposing Release. We requested comment on any aspect of the IRFA, including the number of small entities that would be affected by the proposals, the nature of the impact, and how to quantify the impact of the proposals. Two commenters specifically responded to our request.139 Both commenters stated that: it is difficult to quantify the impact of the proposed rules on small entities; the impact will include the initial investment for first-time creation of an instance document followed by more efficient creation of subsequent instance documents; small entities that participate will benefit from greater market visibility due to the ability of analysts to incorporate their results quickly into their analysis; and additional exemptions should not be required during the early stages of the voluntary program and the extension of the program throughout calendar 2005 will enable more small entities to participate after their initial reporting under the Sarbanes-Oxley requirements. One of the commenters asserted that many small entities may choose to defer participation until system developers provide the ability to create XBRL documents as a standard output option, thereby making the process much easier and cheaper.140 Similarly, the other commenter stated that it expected small entities, having documented their reporting processes and controls, to

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automate their systems and in doing so implement XBRL-enabled streamlining of their reporting.141

C. Small Entities Subject to the Amendments


The voluntary program may have an impact on three broad categories of small entities: all filers; participants in the voluntary program; and non-filers that interact with EDGAR. Filers include operating companies and investment companies. Under Exchange Act Rule 0-10, for purposes of the Regulatory Flexibility Act, an issuer, other than an investment company, that on the last day of its most recent fiscal year, has total assets of $5 million or less is a small business or small organization.142 We estimate there are approximately 2500 small operating company issuers. Under Rule 0-10 under the Investment Company Act, an investment company is a small entity if it, together with other investment companies in the same group of related investment companies, has net assets of $50 million or less as of the end of its most recent fiscal year.143 We estimate that there are approximately 186 investment companies that file reports on Forms N-CSR and N-Q that meet this definition. These and other filers may be affected by any change to the EDGAR system. A small subset of these operating and investment company issuers may voluntarily participate in the program; however, we estimate that number will be very low. Finally, the dissemination of XBRL data may have an impact on those entities that interact with the EDGAR data stream. We are aware that entities have developed certain products and services based on data in EDGAR; many entities disseminate, re-package, analyze and sell the information. The Commission does not regulate all these entities and therefore it is currently not feasible to accurately estimate the number or size of these potentially affected entities. We sought comment on the number of small entities that would be impacted by the proposal and did not receive any additional information that would allow us to accurately estimate the number or size of these potentially affected entities.

D. Projected Reporting, Recordkeeping, and Other Compliance Requirements


The voluntary program is an experiment to determine the feasibility of using XBRL on a broader basis. Therefore, the cost of participating, the burden on the EDGAR system and the possible effect on those entities that use the EDGAR data stream are somewhat speculative at this point. As the amendments relate to a voluntary filing program, no registrant is required to file XBRLRelated Documents. If a voluntary participant already uses XBRL to tag data, it may incur minimal additional cost to participate. Other participants who wish to volunteer may have to purchase software or retain a consultant to assist in tagging data. The inclusion of XBRLRelated Documents on EDGAR may also have effects on other filers, including small entities, who use the system. The voluntary program may have some effect on any entity that interacts with the data dissemination stream. Allowing filers to submit information in XBRL, even voluntarily, may have an
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impact on entities providing EDGAR-based services and products. The limited, voluntary nature of the program will help the Commission assess the impact, if any, on these entities.

E. Agency Action to Minimize Effect on Small Entities


The Regulatory Flexibility Act directs us to consider significant alternatives that would accomplish the stated objective, while minimizing any significant adverse impact on small entities. The purpose of the proposals is to further our ability to assess the feasibility and desirability of using tagged data on a more widespread basis. Provision of the XBRL-Related Documents is voluntary. We have considered different or simpler requirements for small entities. For tagged data to provide benefits such as ready comparability, however, the data tagging system cannot have alternative requirements. Similarly, in order to achieve the benefits of data tagging, use of a single data tagging technology is necessary. If we determine to require data tagging in the future, we will look to the results of the voluntary program to find alternatives to minimize any burden on small entities. Two commenters stated that additional exemptions should not be required for small entities during the early stages of the voluntary program.144

VI. CONSIDERATION OF IMPACT ON THE ECONOMY, BURDEN ON COMPETITION AND PROMOTION OF EFFICIENCY, COMPETITION, AND CAPITAL FORMATION
Section 23(a)(2) of the Exchange Act145 requires us, when adopting rules under the Exchange Act, to consider the impact that any new rule would have on competition. In addition, Section 23(a)(2) prohibits us from adopting any rule that would impose a burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act. Furthermore, Section 2(b)146 of the Securities Act, Section 3(f)147 of the Exchange Act, and Section 2(c)148 of the Investment Company Act require us, when engaging in rulemaking where we are required to consider or determine whether an action is necessary or appropriate in the public interest, to consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation. In the Proposing Release, we considered the amendments in light of the standards set forth in the above statutory sections. We requested comment on whether the proposals, if adopted, would promote efficiency, competition and capital formation or have an impact or burden on competition. We also requested commenters to provide empirical data and other factual support for their views if possible. No commenter addressed anti-competitive effects.149 Some commenters addressed efficiency and capital formation which we considered and addressed in the cost-benefit section. The adopted amendments seek to implement a voluntary program and are intended to help us evaluate the usefulness to registrants, investors and the Commission of data tagging in general, and XBRL in particular. We believe that the amendments will promote efficiency because tagged data may allow more efficient and effective retrieval, research and analysis of financial information through automated means. Because the program is voluntary and the amendments

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are designed to permit filers to provide information in a format that we believe has the potential to be more useful to investors, we believe the amendments do not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act.

VII. STATUTORY BASIS AND TEXT OF AMENDMENTS


We are adopting the amendments outlined above under Sections 19(a) and 28 of the Securities Act, Sections 3, 12, 13, 14, 15(d), 23(a), 35A and 36 of the Exchange Act, Section 20(a) of the Public Utility Holding Company Act, Section 319(a) of the Trust Indenture Act, Sections 8, 30 and 38 of the Investment Company Act and Section 3(a) of the Sarbanes-Oxley Act. List of Subjects in CFR Parts 228, 229,232, 240, 249 and 270 Reporting and recordkeeping requirements, Securities. For the reasons set forth above, we amend title 17, Chapter II of the Code of Federal Regulations as follows:

PART 228 INTEGRATED DISCLOSURE SYSTEM FOR SMALL BUSINESS ISSUERS


1. The authority citation for Part 228 continues to read in part as follows: Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77jjj, 77nnn, 77sss, 78l, 78m, 78n, 78o, 78u-5, 78w, 78ll, 78mm, 80a-8, 80a-29, 80a-30, 80a-37, 80b-11, and 7201 et seq.; and 18 U.S.C. 1350. ***** 2. Amend 228.601 by: a. Revising the exhibit table; and b. Adding paragraph (b)(100). The revision and addition read as follows.

228.601 (Item 601) Exhibits.


(a) * * *
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EXHIBIT TABLE
SB-2 Securities Act Forms S-2 S-3 S-43 S-8 10-SB Exchange Act Forms 8-K5 10-QSB 10-KSB

(1) Underwriting agreement . . . . . . . . . X X X X (2) Plan of purchase, sale, reorganization, arrangement, liquidation or succession . . . . . . . . . . X X X X X (3) (i) Articles of Incorporation . . . . . . . X X X (ii) Bylaws . . . . . . . . . . . . . . . . . . . . . . . X X X (4) Instruments defining the rights of security holders, including indentures . . . . . . . . . . . . . . . . . . . . . . X X X X X X (5) Opinion on legality . . . . . . . . . . . . . X X X X X (6) No exhibit required . . . . . . . . . . . . . N/A N/A N/A N/A N/A N/A (7) Correspondence from an independent accountant regarding non-reliance upon a previously issued audit report or completed interim review . . . . . . . . . . . . . . . . . . . . . . . . . (8) Opinion on tax matters . . . . . . . . . . X X X X (9) Voting trust agreement and amendments . . . . . . . . . . . . . . . . . . . . X X X (10) Material contracts . . . . . . . . . . . . . X X X X (11) Statement re: computation of per share earnings . . . . . . . . . . . . . . . . . . . X X X X (12) No exhibit required . . . . . . . . . . . . N/A N/A N/A N/A N/A N/A (13) Annual report to security holders for the last fiscal year, Form 10-Q or 10-QSB or quarterly report to X X security holders1 . . . . . . . . . . . . . . . . X (14) Code of ethics . . . . . . . . . . . . . . . . . (15) Letter on unaudited interim financial information . . . . . . . . . . . . . X X X X X (16) Letter on change in certifying accountant4 . . . . . . . . . . . . . . . . . . . . X X X X (17) Letter on departure of director . . . (18) Letter on change in accounting principles . . . . . . . . . . . . . . . . . . . . . . (19) Reports furnished to security holders . . . . . . . . . . . . . . . . . . . . . . . . (20) Other documents or statements to security holders or any document incorporated by reference . . . . . . . . .

X X X

X X X

X X X

X N/A

X N/A

X N/A

X X N/A

X X X N/A

N/A

X X X X X X

X X

X
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SB-2

Securities Act Forms S-2 S-3 S-43 S-8

10-SB

Exchange Act Forms 8-K5 10-QSB 10-KSB

(21) Subsidiaries of the small business issuer . . . . . . . . . . . . . . . . . . . . . . . . . . (22) Published report regarding matters submitted to vote of security holders . . . . . . . . . . . . . . . . . . . . . . . . . (23) Consents of experts and counsel . . (24) Power of attorney . . . . . . . . . . . . . . (25) Statement of eligibility of trustee . . (26) Invitations for competitive bids . . . (27) through (30) [Reserved] . . . . . . . . . (31) Rule 13a-14(a)/15d-14(a) Certifications . . . . . . . . . . . . . . . . . . . . (32) Section 1350 Certifications . . . . . . . (33) through (98)[Reserved] . . . . . . . . . . (99) Additional exhibits . . . . . . . . . . . . . (100) XBRL-Related Documents . . . . . .
1

X X X

X X X X

X X X X

X X X X

X X X

X2 X

X X2 X

X X2 X

X X X X X X X X X X X X X

X X X X

Only if incorporated by reference into a prospectus and delivered to holders along with the prospectus as permitted by the registration statement; or in the case of a Form 10-KSB, where the annual report is incorporated by reference into the text of the Form 10-KSB. Where the opinion of the expert or counsel has been incorporated by reference into a previously filed Securities Act registration statement.
2

An issuer need not provide an exhibit if: (1) an election was made under Form S-4 to provide S-2 or S-3 disclosure; and (2) the form selected (S-2 or S-3) would not require the company to provide the exhibit.
3 4 If 5

required under Item 304 of Regulation S-B.

A Form 8-K exhibit is required only if relevant to the subject matter reported on the Form 8-K report. For example, if the Form 8-K pertains to the departure of a director, only the exhibit described in paragraph (b)(17) of this section need be filed. A required exhibit may be incorporated by reference from a previous filing. (b) * * * (100) XBRL-Related Documents. An electronic filer that participates in the voluntary XBRL (eXtensible Business Reporting Language) program may submit XBRL-Related Documents (232.11 of this chapter) in electronic format as an exhibit to: the filing to which they relate; an amendment to such filing; or a Form 8-K (249.308 of this chapter) that references such filing, if the Form 8-K is submitted no earlier than the date of that filing.
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PART 229 STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND CONSERVATION ACT OF 1975 REGULATION S-K
3. The authority citation for Part 229 continues to read in part as follows: Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77nnn, 77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78u-5, 78w, 78ll, 78mm, 79e, 79j, 79n, 79t, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-31(c), 80a-37, 80a-38(a), 80a-39, 80b-11, and 7201 et seq.; and 18 U.S.C. 1350, unless otherwise noted. ***** 4. Amend 229.601 by: a. Revising the exhibit table; and b. Adding paragraph (b)(100). The revision and addition read as follows.

229.601 (Item 601) Exhibits.


(a) * * * Webmasters note: The exhibit table that followed was too wide to fit the website page format. Click to view table. (b) * * * (100) XBRL-Related Documents. An electronic filer that participates in the voluntary XBRL (eXtensible Business Reporting Language) program may submit XBRL-Related Documents (232.11 of this chapter) in electronic format as an exhibit to: the filing to which they relate; an amendment to such filing; or a Form 8-K (249.308 of this chapter) that references such filing, if the Form 8-K is submitted no earlier than date of that filing.

PART 232 REGULATION S-T GENERAL RULES AND REGULATIONS FOR ELECTRONIC FILINGS
5. The authority citation for Part 232 continues to read as follows: Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll(d), 79t(a), 80a-8, 80a-29, 80a-30, 80a-37, and 7201 et seq.; and 18 U.S.C. 1350. *****

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6. Amend 232.11 by adding the following definition in alphabetical order.

232.11 Definition of terms used in part 232.


***** XBRL-Related Documents. The term XBRL-Related Documents means documents related to presenting information in eXtensible Business Reporting Language that are part of a voluntary submission in electronic format in accordance with 232.401. 7. Amend 232.305 by revising paragraph (b) to read as follows:

232.305 Number of characters per line; tabular and columnar information.


***** (b) Paragraph (a) of this section does not apply to HTML documents or XBRL-Related Documents (232.11). 8. Amend Part 232 by adding an undesignated center heading and text to 232.401 and 232.402 to read as follows: XBRL-Related Documents

232.401 XBRL-Related Document submissions.


(a) An electronic filer that participates in the voluntary XBRL (eXtensible Business Reporting Language) program may submit XBRL-Related Documents (232.11) in electronic format as an exhibit to: the filing to which they relate; an amendment to such filing; or, if the electronic filer is eligible to file a Form 8-K (249.308 of this chapter) or a Form 6-K (249.306 of this chapter), a Form 8-K or a Form 6-K, as applicable, that references the filing to which the XBRL-Related Documents relate if such Form 8-K or Form 6-K is submitted no earlier than the date of that filing. The XBRL-Related Documents must comply with the content and format requirements of this section, be submitted as an exhibit to a form that contains the disclosure required by this section and be submitted in accordance with the EDGAR Filer Manual and, as applicable, one of Item 601(b)(100) of Regulation S-K (229.601(b)(100) of this chapter), Item 601(b)(100) of Regulation S-B (228.601(b)(100) of this chapter), Form 20-F (249.220f of this chapter), Form 6-K or 270.8b-33 of this chapter. (b) XBRL-Related Documents must consist of mandatory content and may consist of optional content but only if the optional content accompanies the mandatory content in the same submission.
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(1) Mandatory content consists of a complete set of information for all periods presented in the corresponding official EDGAR filing from one or more of the following categories (as filed in the corresponding official EDGAR filing): (i) The complete set of financial statements (the only exceptions are that notes to the financial statements and schedules related to the financial statements may be omitted unless the electronic filer is a registered management investment company in which case it must include Schedule I Investments in Securities of Unaffiliated Issuers (210.12-12 of this chapter)); (i) Earnings information set forth in Form 6-K or Items 2.02 or 8.01 of Form 8-K (whether contained in the body of the Form 6-K or Form 8-K or in an exhibit, and whether filed or furnished); or (ii) Financial highlights or condensed financial information set forth in Item 8(a) of Form N-1A (239.15A and 274.11A of this chapter), Item 4.1 of Form N-2 (239.14 and 274.11a-1 of this chapter) or Item 4(a) of Form N-3 (239.17a and 274.11b of this chapter), as applicable. (2) Optional content can consist only of a complete set of information that is: (i) For all periods presented in the corresponding official EDGAR filing; (ii) Related to financial information in the corresponding official EDGAR filing that is simultaneously submitted as mandatory content (as specified in paragraph (b)(1) of this section); and (iii) From one or more of the following categories (as filed in the corresponding official EDGAR filing): (A) Audit opinions (as specified by Rule 2-02 of Regulation S-X (210.2-02 of this chapter)); (B) Interim review reports (as specified by Rule 10-01(d) of Regulation S-X (210.10-01(d) of this chapter)); (C) Reports of management on the financial statements; (D) Certifications; (E) Managements discussion and analysis of financial condition and results of operations (as specified by Item 303 of Regulation S-K (229.303 of this chapter)); (F) Managements discussion and analysis or plan of operation (as specified by Item 303 of Regulation S-B (228.303 of this chapter)); (G) Operating and financial review and prospects (as specified by Item 5 of Form 20-F); or (H) Managements discussion of fund performance (as specified by Item 22(b)(7) of Form N-1A).

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(c) XBRL-Related Documents must appear in voluntary program format. XBRL-Related Documents appear in voluntary program format if: (1) Each data element (i.e., all text and all line item names and associated values, dates and other labels) contained in the XBRL-Related Documents reflects the same information in the corresponding official EDGAR filing (i.e., the HTML or ASCII version); (2) No data element contained in the corresponding official EDGAR filing is changed, deleted or summarized in the XBRL-Related Documents; (3) The XBRL-Related Documents correlate to the appropriate version of a standard taxonomy, supplemented with extension taxonomies as specified in the EDGAR Filer Manual (232.11); (4) Each data element contained in the XBRL-Related Documents is matched with an appropriate tag in accordance with any applicable taxonomy; and (5) The XBRL-Related Documents contain any additional mark-up related content (e.g., the XBRL tags themselves, identification of the core XML documents used and other technology related content) not found in the corresponding official EDGAR filing that are necessary to comply with the EDGAR Filer Manual requirements. (d) The filing with which XBRL-Related Documents are submitted as an exhibit must contain the disclosures specified in paragraph (d)(1) of this section in the location specified in paragraph (d)(2) of this section. (1) The filing must disclose: (i) That the financial information contained in the XBRL-Related Documents is unaudited or unreviewed, as applicable; (ii) That the purpose of submitting the XBRL-Related Documents is to test the related format and technology and, as a result, investors should not rely on the XBRL-Related Documents in making investment decisions; and (iii) The identity of the corresponding official EDGAR filing (but only if the filing is a Form 8-K or Form 6-K or an amendment to a Form 8-K or Form 6-K and a purpose of filing the form was to submit as an exhibit XBRL-Related Documents that present information related to financial information filed as part of a different form in the corresponding official EDGAR filing). (2) The disclosures required by paragraph (d)(1) of this section must appear, as applicable, in: (i) The exhibit index of a Form 10-K (249.310 of this chapter), 10-Q (249.308a of this chapter), 10 (249.210 of this chapter), 10-SB (249.210b of this chapter), 10-KSB (249.310b of this chapter), 10-QSB (249.308b of this chapter) or 20-F; (ii) Item 2.02 or 8.01 of a Form 8-K; or (iii) The body of a Form 6-K, N-CSR (274.128 of this chapter) or N-Q (274.130 of this chapter).
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Note to 232.401: Although XBRL-Related Documents are required by this section to comply with content and format requirements related to the corresponding official EDGAR filing, the purpose of submitting the XBRL-Related Documents is to test the related format and technology and, as a result, investors and others should continue to rely on the official version of the filing and not rely on the XBRL-Related Documents in making investment decisions.

232.402 Liability for XBRL-Related Documents.


(a) Not deemed filed for liability purposes. XBRL-Related Documents, regardless of whether they are exhibits to a document incorporated by reference into a filing: (1) Are not deemed filed for purposes of section 18 of the Exchange Act (15 U.S.C. 78r) or section 34(b) of the Investment Company Act (15 U.S.C. 80a-33(b)) or otherwise subject to the liabilities of these sections; (2) Are not deemed incorporated by reference; (3) Are subject to all other liability and anti-fraud provisions of these Acts; and (4) Are deemed filed for purposes of Item 103 of Regulation S-T (232.103). (b) Accurate reflection of underlying documents. An electronic filer is not liable under the Securities Act, Exchange Act, Public Utility Act, Trust Indenture Act or Investment Company Act for information in its XBRL-Related Documents that complies with the requirements of Item 401 of Regulation S-T (232.401) to the extent that such information was not materially false or misleading in the corresponding official EDGAR filing. To the extent the information in an electronic filers XBRL-Related Documents does not comply with the requirements of Item 401, the information in the XBRL-Related Documents will be deemed to comply with Item 401 for purposes of this paragraph if the electronic filer makes a good faith and reasonable attempt to comply with Item 401 and, as soon as reasonably practicable after the electronic filer becomes aware that the information in the XBRL-Related Documents does not comply with Item 401, the electronic filer amends the XBRL-Related Documents and, as a result, the information complies with Item 401.

PART 240 GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934
9. The authority citation for Part 240 continues to read in part as follows: Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 80b-11, and 7201et seq.; and 18 U.S.C. 1350, unless otherwise noted. *****

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10. Amend 240.13a-14 by adding paragraph (f) to read as follows:

240.13a-14 Certification of disclosure in annual and quarterly reports.


***** (f) The certification requirements of this section do not apply to XBRL-Related Documents, as defined in 232.11 of this chapter. 11. Amend 240.15d-14 by adding paragraph (f) to read as follows:

240.15d-14 Certification of disclosure in annual and quarterly reports.


***** (f) The certification requirements of this section do not apply to XBRL-Related Documents, as defined in 232.11 of this chapter.

PART 249 FORMS, SECURITIES EXCHANGE ACT OF 1934


12. The authority citation for Part 249 continues to read in part as follows: Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; and 18 U.S.C. 1350, unless otherwise noted. ***** 13. Amend Form 20-F (referenced in (249.220f) by reserving paragraphs 16 through 99 and adding paragraph 100 at the end of Instructions as to Exhibits to read as follows:

Note The text of Form 20-F does not and this amendment will not appear in the Code of Federal Regulations.
FORM 20-F ***** INSTRUCTIONS AS TO EXHIBITS ***** 16 through 99 [Reserved] 100. XBRL-Related Documents. XBRL-Related Documents (232.11 of this chapter). *****
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14. Amend Form 6-K (referenced in (249.306) by adding paragraph (5) to General Instruction C to read as follows:

Note The text of Form 6-K does not and this amendment will not appear in the Code of Federal Regulations.
Form 6-K ***** GENERAL INSTRUCTIONS ***** C. * * * (5) XBRL-Related Documents. XBRL-Related Documents (232.11 of this chapter) can be submitted if listed as exhibit 100. *****

PART 270 GENERAL RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940
15. The authority citation for Part 270 continues to read in part as follows: Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, and 80a-39, unless otherwise noted. ***** 16. Revise 270.8b-1 to read as follows:

270.8b-1 Scope of 270.8b-1 to 270.8b-33.


The rules contained in 270.8b-1 to 270.8b-33 shall govern all registration statements pursuant to section 8 of the Act (15 U.S.C. 80a-8), including notifications of registration pursuant to section 8(a), and all reports pursuant to section 30(a) or (b) of the Act (15 U.S.C. 80a-29(a) or (b)), including all amendments to such statements and reports, except that any provision in a form covering the same subject matter as any such rule shall be controlling. 17. Amend 270.8b-2 by revising the phrase 270.8b-1 through 270.8b-32 to read 270.8b-1 through 270.8b-33 in the introductory text of the section. 18. Add 270.8b-33 to read as follows:

270.8b-33 XBRL-Related Documents.


A registrant that participates in the voluntary XBRL (eXtensible Business Reporting Language) program may submit, in electronic format as an exhibit to a filing on Form N-CSR (249.331

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and 274.128 of this chapter) or Form N-Q (249.332 and 274.130 of this chapter) to which they relate, XBRL-Related Documents (232.11 of this chapter). A registrant that submits XBRL-Related Documents as an exhibit to a form must name each XBRL-Related Document EX-100 as specified in the EDGAR Filer Manual and submit the XBRL-Related Documents in such a manner that will permit the information for each series of an investment company registrant and each contract of an insurance company separate account to be separately identifiable. A registrant may submit such exhibit with, or in an amendment to, the filing to which it relates. 19. Amend 270.30a-2 by adding paragraph (d) to read as follows:

270.30a-2 Certification of Forms N-CSR and N-Q.


***** (d) The certification requirements of this section do not apply to XBRL-Related Documents, as defined in 232.11 of this chapter. ***** By the Commission. Margaret H. McFarland Deputy Secretary February 3, 2005 The amendments were proposed in Release No. 33-8496 (Sept. 27, 2004) [69 FR 59094] (Proposing Release).
1 2 17 3 17 4 17 5 17 6

CFR 232.401. CFR 232.402. CFR 232.11. CFR 232.305.

17 CFR 232.10 et seq. We also are adopting an amendment to add a heading for Rules 401 and 402.
7 17 8 17 9 17

CFR 229.601. CFR 229.10 et seq. CFR 228.601. CFR 228.10 et seq.

10 17

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11 17 12 17 13 15 14 17 15 17 16 17 17 15 18 17 19 17

CFR 240.13a-14. CFR 240.15d-14. U.S.C. 78a et seq. CFR 270.8b-1. CFR 270.8b-2. CFR 270.30a-2. U.S.C. 80a-1 et seq. CFR 249.220f. CFR 249.306.

20 XBRL is an open standard that provides a format for tagging financial information and allows users to extract, exchange, analyze and display financial information. XBRL was developed and continues to be supported by XBRL International, a collaborative consortium of approximately 250 organizations representing many constituents of the financial reporting community. Organizations in the consortium include issuers, public accounting firms, software companies, filing agents, data aggregators, stock exchanges, regulators, financial services companies, and industry associations. The Commission is not a member of the consortium. XBRL International and its related entities have been developing standard taxonomies that they state classify and define financial information in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and our regulations. 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. See http://www.xbrl.org. and Release No. 33-8497 (Sept. 27, 2004) [69 FR 59111] (Concept Release) for a further description of XBRL. 21 Rules 22

100 and 101 of Regulation S-T (17 CFR 232.100 and 232.101).

See Rule 301 of Regulation S-T (17 CFR 232.301). We originally adopted the EDGAR Filer Manual on July 1, 1993, with an effective date of July 26, 1993. Release No. 33-6986 (Apr. 1, 1993) [58 FR 18638]. We most recently updated the EDGAR Filer Manual on August 6, 2004, the current version of which can be found at http://www.sec.gov/info/edgar.shtml . See Release No. 33-8454 (Aug. 6, 2004) [69 FR 49803].
23 See 24

http://www.xbrl.org.

See letters from American Accounting Association (AAA); American Institute of Certified Public Accountants (AICPA); Arbortext XML Solutions; Blastradius; Business Wire (Bus Wire); Capricorn Research; The Consortium of EDGAR Filing Agents and Software Developers

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(CEFASD); Steve Cushing; Deloitte & Touche LLP (D&T); EDGAR Online, Inc.; Ernst & Young LLP (E&Y); Federal Deposit Insurance Corporation; Federal Financial Institutions Examination Council; Financial Executives International (FEI); C.R. Fonseca; Grant Thornton LLP (Grant Thornton); Institute of Management Accountants (IMA); Investment Company Institute (ICI); KPMG LLP (KPMG); Eric Paul Linder (Linder); Microsoft Corporation (MSFT); James L. Nesfield; New York Society of Security Analysts (NYSSA); New York State Bar Association (NYSBA); PricewaterhouseCoopers LLP (PWC); PR Newswire Association LLC; Barry J. Reischling; and Spredgar Software (Spredgar). The public comments we received and a summary of the comments prepared by our staff are available for inspection in our Public Reference Room at 450 Fifth Street, NW, Washington, D.C. 20549, in File No. S7-35-04, or may be viewed at http://www.sec.gov/rules/proposed/s73504.shtml .
25 See, 26 See, 27

for example, the letters from AAA, AICPA, CEFASD, E&Y, FEI, IMA and PWC. for example, the letters from AAA, AICPA, D&T, IMA, KPMG and MSFT.

Rule 301 of Regulation S-T, the regulation that governs the preparation and transmission of electronic filings on the Commissions EDGAR system, requires electronic filings to be prepared in accordance with the provisions of the EDGAR Filer Manual. The Filer Manual contains the technical formatting requirements for electronic submissions. Filers must comply with those requirements to ensure the timely receipt and acceptance of documents submitted to the Commission in an electronic format. See the companion EDGAR Filer Manual adopting release (Release No. 33-8528 (Feb. 3, 2005)) updating the EDGAR Filer Manual to reflect EDGAR Release 8.10. These submissions will be required to be made in accordance with the EDGAR Filer Manual and the exhibit provisions of Item 601(b) (100) of Regulation S-K or S-B, revised Form 20-F, revised Form 6-K or Rule 8b-33 under the Investment Company Act, as applicable. As proposed, the items and rule will list the Exchange Act and Investment Company Act filings, in addition to Forms 20-F and 6-K, with which volunteers can submit XBRL-Related Documents. We are adopting as proposed revisions to Rules 8b-1 and 8b-2 under the Investment Company Act to reflect the addition of Rule 8b-33. Finally, we are adopting as proposed the revision to Rule 305(b) of Regulation S-T to exempt the submissions from the formatting requirements of Rule 305(a) because the formatting requirements are unnecessary in this context.
28

17 CFR 249.308. Commenters supported allowing volunteers to furnish XBRL data in a Form 8-K. See, for example, the letters from CEFASD and KPMG.
29

As proposed, we are revising Form 6-K to permit submission of XBRL-Related Documents as Exhibit 100.
30

As noted in the Proposing Release, in addition to domestic issuers, the voluntary program is available to foreign private issuers that otherwise file their primary financial statements in accordance with U.S. GAAP.
31

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See Rules 13a-11(b) and 15d-11(b) under the Exchange Act. [17 CFR 240.13a-11(b) and 240.15d-11(b)].
32 33 17 34

CFR 249.308a.

The disclosure requirement also addresses the concern of one commenter (CEFASD) about a Form 8-K whose sole purpose is to accompany an XBRL Exhibit 100. The commenter noted that in such circumstances, if the exhibit were removed, the surviving, disseminated cover page would contain no useful information. The commenter recommended that in such circumstances, the Commission should suspend the entire filing. Although it would not be feasible to suspend the entire filing, the required disclosures would clearly identify the purpose of the filing. In this regard, we note that even without the purpose disclosure requirement, a form with an exhibit list would refer to Exhibit 100 and that would identify the intent to submit XBRL data.
35 17 36 17 37 17 38 17 39 17 40 17 41 17 42 See 43 See 44 See 45

CFR 249.310. CFR 249.210. CFR 249.210b. CFR 249.310b. CFR 249.308b. CFR 249.331 and 274.128. CFR 249.332 and 274.130. the letters from AICPA, E&Y and PWC. the letter from AICPA. the letter from PWC.

As noted in Section I of this release, an XBRL taxonomy is intended to be a standard description and classification system for business reporting and financial data. An instance document, which is a machine readable form, pairs a tag from the taxonomy with the related piece of financial information. For additional detail regarding instance documents, see Section II.C.1 of the Proposing Release.
46 See 47

the letter from E&Y.

As further discussed below, XBRL-Related Documents will not be deemed filed or incorporated by reference regardless of whether they are exhibits to a document incorporated by reference into another filing (e.g., an XBRL exhibit to a Form 10-K filing will not be incorporated into a Form S-3 [17 CFR 239.13] registration statement even though other portions of the Form 10-K are so incorporated).

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For example, if the volunteer submitted XBRL data with a Form 8-K, it should amend the Form 8-K. A volunteer must amend XBRL-Related Documents it submitted earlier if they did not comply with the content and format requirements of new Rule 401.
48

See, for example, the letters from AAA, AICPA, Blastradius, CEFASD, E&Y, IMA, KPMG, MSFT and PWC.
49 50 See, 51 See 52 See, 53 See 54

for example, the letters from AAA, Blastradius and IMA. the letter from MSFT. for example, the letter from D&T. the letters from AICPA, E&Y and NYSBA.

Although volunteers may furnish data as Mandatory Content from certain specific categories of financial information in the corresponding official EDGAR filing in XBRL format (e.g., financial statements only, omitting notes), the financial information in the specific category provided in XBRL format must be complete (e.g., if the financial statements are provided, income statement, balance sheet, cash flows and equity statements must all be submitted). In the Proposing Release at note 47, we stated that financial statements other than those for investment company volunteers should not include the related schedules when submitted as XBRL-Related Documents in the voluntary program. In order to provide additional testing opportunities, however, we are permitting operating companies to provide these schedules in the voluntary program. We further discuss below related schedules of investment companies.
55 56 Rule 57

12-12 of Regulation S-X [17 CFR 210.12-12].

Item 8(a) of Form N-1A, Item 4.1 of Form N-2 and Item 4(a) of Form N-3 [17 CFR 274.11A, 274.11a-1 and 274.11b]. Forms N-1A, N-2 and N-3 also are authorized under the Securities Act of 1933 (Securities Act) [15 U.S.C 77a et seq.] under 17 CFR 239.15A, 239.14 and 239.17a. Although volunteers may furnish data as Optional Content from certain specific categories of information in the corresponding official EDGAR filing in XBRL format (e.g., MD&A), the information in the specific category provided in XBRL format must be complete (e.g., if MD&A is provided, all the MD&A in the corresponding official EDGAR filing must be submitted).
58 59 Rule 60 Rule 61 Item 62 Item 63 Item

2-02 of Regulation S-X [17 CFR 210.2-02]. 10-01(d) of Regulation S-X [17 CFR 210.10-01(d)]. 303 of Regulation S-K [17 CFR 229.303]. 303 of Regulation S-B [17 CFR 228.303]. 5 of Form 20-F.

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64 Item 65 See 66 See, 67 See, 68 See, 69

22(b)(7) of Form N-1A.

the letters from AAA, AICPA, D&T, IMA, KPMG and MSFT. for example, the letters from AICPA, D&T, KPMG and PWC. for example, the letters from D&T and KPMG. for example, the letters from AICPA, D&T, KPMG and MSFT.

See, for example, the letters from CESFASD (allow a single tag for all notes) and PWC (limit the notes required to be tagged).
70 See, 71 See 72

for example, the letters from AICPA, D&T, E&Y and KPMG. the letter from ICI.

Registered management investment company volunteers may, but are not required to, submit other related schedules in XBRL format with financial statements in XBRL format including the following: Schedule II Investments other than securities [17 CFR 210.12-13]; Schedule III Investments in and advances to affiliates [17 CFR 210.12-14]; Schedule IV Investments securities sold short [17 CFR 210.12-12A]; Schedule V Open option contracts written [17 CFR 210.12-12B]; and Schedule VI Summary schedule of investments in securities of unaffiliated issuers [17 CFR 210.12-12C].
73 See, 74 See 75 See 76 See 77

for example, the letters from AICPA, D&T, NYSBA and PWC. the letters from D&T and PWC. the letter from NYSBA. the letter from E&Y.

Commenters generally supported not requiring certifications. See, for example, the letters from AAA, AICPA, CEFASD, D&T, E&Y, FEI, IMA, KPMG, MSFT, NYSBA, and PWC. Several commenters further suggested that volunteers should be allowed to submit certifications. See, for example, the letters from AICPA, D&T, IMA and PWC. The XBRL Consortium has publicly announced that it will finalize the Commercial and Industrial, Banking and Savings Institutions and Insurance standard taxonomies by February 28, 2005. It also has publicly announced that it will finalize the Investment Company taxonomy by March 31, 2005. See http://www.xbrl.org.
78

This taxonomy has detailed financial reporting elements specific to commercial and industrialtype companies. If a registrant is not a bank, savings institution, insurance company, brokerdealer or investment company, it would likely use the commercial and industrial standard taxonomy. See http://www.xbrl.org.
79

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The investment companies taxonomy was released for public comment on December 21, 2004 with a request for comments to be submitted by January 20, 2005.
80

Commenters noted that they were unaware of any other standard taxonomies that are sufficiently developed to support Commission submissions. Some commenters noted that the Commission may wish to consider allowing volunteers to use International Financial Reporting Standards, formerly known as International Accounting Standards, taxonomies as a means of encouraging non-U.S. issuers to participate. See the letters from AAA, CEFASD, FEI, IMA, MSFT and PWC. We are continuing to consider this suggestion.
81 82 See, 83 See, 84 See

for example, the letters from AAA, AICPA, FEI, IMA, KPMG, MSFT and PWC. for example, the letters from AAA, AICPA, IMA, MSFT and PWC. the letter from Linder.

85 The letter from AAA noted that the Commission should develop a small taxonomy that covers the key reporting elements.

See, for example, the letters from AAA, CEFASD, IMA, KPMG and PWC. One commenter, however, stated that the Commission should provide a standard template to render information and allow participants to provide their own company specific presentation template. See the letter from Grant Thornton.
86 87 See 88 See 89 See, 90

the letters from CEFASD, IMA and KPMG. the letters from Blastradius and FEI. for example, AAA, AICPA and FEI.

This rule will not affect in any way participants existing obligations with respect to official filings. The official financial information required to be filed by participants in HTML or ASCII will continue to be subject to the liability provisions of the federal securities laws.
91 15 92

U.S.C 78r.

15 U.S.C. 80a-33(b). We modified proposed Rule 402(a) by omitting references to the XBRLRelated Documents as not deemed filed under Section 16 of the Public Utility Holding Company Act of 1935 (Public Utility Holding Company Act) [15 U.S.C. 79p] and Section 323 of the Trust Indenture Act of 1939 (Trust Indenture Act) [15 U.S.C. 77www]. We omitted these references as unnecessary because XBRL-Related Documents only will be submitted as exhibits to filings under the Exchange Act and the Investment Company Act.
93 We will caution users on the Commissions Web site that, although XBRL-Related Documents are required to comply with format and content requirements related to the corresponding official filing, the purpose of submitting the XBRL-Related Documents is to test the related format

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and technology and, as a result, investors and others should continue to rely on the official version of the filing and not rely on the XBRL-Related Documents in making investment decisions. Because the XBRL-Related Documents will not be filed under the Exchange Act, they will not be incorporated by reference into registration statements filed under the Securities Act or prospectuses they contain. These protections will apply regardless of whether the documents are exhibits to a document otherwise incorporated by reference into a filing.
94

For example, material misstatements or omissions in an XBRL submission will continue to be subject to liability under Section 10(b) [15 U.S.C. 78j(b)] and Rule 10b-5 [17 CFR 240.10b-5] under the Exchange Act.
95

17 CFR 232.103. Rule 103 generally provides that an electronic filer is not subject to liability as to an error or omission in an electronic filing resulting solely from electronic transmission errors beyond the control of the filer if the filer corrects the problem through an amendment as soon as reasonably practicable after the filer becomes aware of the problem.
96

XBRL-Related Documents that do not meet the requirements for the relief provided by Rule 402(b) still would receive the relief provided by Rule 402(a). In adopting Rule 402(a) we changed our proposal to remove references to liability relief under the Securities Act, Public Utility Holding Company Act and Trust Indenture Act because XBRL-Related Documents cannot be submitted under those Acts. We maintained these references in Rule 402(b), however, because, unlike Rule 402(a), Rule 402(b)s protections are not tied to filing status.
97 98 See, 99

for example, the letters from AICPA, D&T, NYSBA and PWC.

See, for example, General Instruction B.2 of Form 8-K (The information in a report furnished pursuant to Item 2.02 (Results of Operations and Financial Condition) or Item 7.01 (Regulation FD Disclosure) shall not be deemed to be filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section unless the registrant specifically states that the information is to be considered filed under the Exchange Act or incorporates it by reference into a filing under the Securities Act or Exchange Act.). As a result of recently adopted rule revisions, we are adopting new paragraph (f) rather than the proposed new paragraph (h) of Rules 13a-14 and 15d-14. After we issued the Proposing Release, we adopted amendments to Rules 13a-14 and 15d-14, effective March 8, 2005, that, among other things, remove paragraphs (f) and (g) of these rules. Consequently, in order to add a new last paragraph to each of these rules, we add paragraph (f). See Release No. 33-8518 (Dec. 22, 2004) [70 FR 1506].
100 101 See 102 17 103 17

the letter from ICI. CFR 240.12b-15. CFR 270.8b-15.

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104 See, 105

for example, Item 601(b)(31)(i) of Regulation S-K [17 CFR 229.601(b)(31)(i)].

See Exchange Act Rule 13a-15(e) and Investment Company Act Rule 30a-3(c) (defining disclosure controls and procedures) and Exchange Act Rule 13a-15(f) and Investment Company Act Rule 30a-3(d) (defining internal control over financial reporting) [17 CFR 240.13a15(e), 270.30a-3(c), 240.13a-15(f) and 270.30a-3(d)]. See, for example, the letters from E&Y (addressing internal control over financial reporting) and NYSBA (addressing internal control over financial reporting and disclosure controls and procedures).
106

Section 404 and the rules we have adopted under that section do not apply to registered management investment companies.
107 108 44 109 44 110

U.S.C. 3501 et seq. U.S.C. 3507(d) and 5 CFR 1320.11.

The proposed voluntary program allows for XBRL-Related Documents to be furnished in connection with Exchange Act registration through Forms 10, 10-SB and 20-F. We expect, however, that volunteers for the program will already be subject to Exchange Act reporting requirements and, as a result, do not include an analysis relating to Forms 10 and 10-SB or, to the extent it can be used to for Exchange Act registration, Form 20-F. The XBRL data file that a participant creates can adhere to either a standard taxonomy or a standard taxonomy with extensions. Extensions to the standard taxonomy further refine the data contained in the standard taxonomy so that the XBRL data can present the information in the corresponding official EDGAR filing. Such extensions would be included in a schema file. For additional detail regarding schema files, see Section II.C.2 of the Proposing Release.
111

Linkbase files, in general, manage references, labels and relationships for an instance document. For additional detail regarding linkbase files, see Section II.C.3 of the Proposing Release.
112

In our initial PRA request, our external cost estimate of $6,000 focused on the cost of professionals and consultants. It is our understanding that many participants will also have annual software licensing costs. From further discussions with software providers and others familiar with XBRL, we estimate that the cost of licensing software will range from $200 to $3,000 each year, with the majority of companies licensing less complex XBRL software in the $200 to $500 range. We also understand from these discussions that software providers have indicated that they intend to provide these products for free in the initial stages of the voluntary program. In order to determine a price estimate, we base our software cost estimate at $500, which is the highest cost for the simpler XBRL software license. We have further assumed that the first year license fee will be waived. Because the PRA estimates represent the average burden over a threeyear period, we estimate the average burden for software license costs to be $333 per year.
113

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See Proposing Release Section VII.A.1 for a further description of our PRA estimate. We note that we expect 80 participants per year. The calculations presented in the description in the Proposing Release based on the expected number of participants per year were based on 80 participants a year.
114 115 See 116 See 117 See 118

the letters from AICPA and PWC. the letter from AICPA. the letter from PWC.

While the PRA requires an estimate based on a hypothetical three years of participation, as noted earlier, a registrant could participate in the voluntary program by submitting XBRL data over a shorter period or even just once as the registrant chooses. See Proposing Release, Part VII for a description of, and the burden estimates for, the voluntary program. We note that we expect 80 participants per year. The calculations presented in the description based on the expected number of participants per year were based on 80 participants a year.
119 120 See 121 See 122

the letters from AICPA and PWC. the letter from PWC.

See the letters from AAA, D&T (market demand will encourage registrants to adopt financial reporting practices that increase comparability) and Spredgar (XBRL would produce comparable data across companies). See the letters from AAA, Bus Wire and IMA (creation of financial data in an XML-based language will prepare the registrant to re-use the data for internal reporting activities that might help the registrant improve its internal controls).
123

See the letter from D&T (tagged data allows auditors to do better risk assessment and analytics and may allow systematic identification of unusual transactions the net result of which may be a more effective and efficient audit process).
124 125 See 126 See 127

the letters from Linder and NYSSA (supports these changes). the letter from NYSSA.

To determine the annual cost, assuming 80 registrants will participate, we estimate that the incremental burden would result in 4800 internal burden hours and $506,640 in external costs including $26,640 in software licensing costs. Assuming a cost of $175 per hour for in-house professional staff, the total cost associated with internal burden hours would be $840,000. Consequently, the PRA cost estimate is $1,346,640 or $16,833 per registrant. Proposing Release note 87 inadvertently overestimated the number of internal burden hours and, as a result, also

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overestimated the total in-house professional staff cost and the aggregate cost estimate on both per registrant and gross bases. Based on discussions with software providers and other familiar with XBRL, we believe that our initial estimate of software costs at $3,000 per registrant is not an accurate assumption of the average cost to participants. We currently understand that annual software licensing costs will likely range between $200 and $3,000 and that a number of software providers intend to provide XBRL software free in the initial stages of the program. We have revised our PRA estimates to account for software licensing costs and no longer treat them separately in the costbenefit analysis. The figures in this release correct the estimates provided in the Proposing Release.
128

For example, an entity that traditionally has focused on data dissemination might be able to re-direct its data processing abilities to perform and sell analyses of registrant-tagged data.
129

We note, however, the estimates we provided in our cost-benefit discussion were based on our PRA estimates that two commenters questioned as previously discussed in Section III.
130 131 See 132

the letters from AAA, D&T and IMA.

See the letters from D&T and NYSSA. One commenter stated that it believed the assumed investment in training and workload to produce the first filing has been underestimated. See the letter from Grant Thornton. See the letters from D&T and PWC. Another commenter addressing costs over time stated that the cost of capital will be reduced in relation to improved transparency and timeliness and this reduction would more than offset the costs of XBRL if XBRLs potential benefits were realized. See the letter from AAA.
133 134 See 135 See

the letter from NYSSA. the letter from NYSSA.

136 See the letters from Linder and NYSSA (some of its members are concerned that XBRL is so complex that it would be difficult and costly for even sophisticated users to create applications). Another commenter stated, however, that unless taxonomies are a good fit with companies reporting practices, there will be a potential loss of data that would force the capital markets to process two sets of data with a negative effect on trust that increases relational risk and, consequently, the cost of capital. See the letter from AAA. 137 See 138 5

the letter from NYSSA.

U.S.C. 603. the letters from AICPA and PWC.

139 See

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140 See 141 See 142 17 143 17 144 See 145 15 146 15 147 15 148 15

the letter from AICPA. the letter from PWC. CFR 240.0-10. CFR 270.0-10. the letters from AICPA and PWC. U.S.C. 78w(a)(2). U.S.C. 77b(b). U.S.C. 78c(f). U.S.C. 80a-2(c). discuss efficiency-related issues in Section IV.

149 We

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SEC Offers Incentives for Companies to File Financial Reports with Interactive Data FOR IMMEDIATE RELEASE 2006-7
Washington, D.C., Jan. 11, 2006The Chairman of the U.S. Securities and Exchange Commission today announced that the Commission staff will offer expedited reviews of registration statements and annual reports to companies that volunteer for a test group as part of the Commissions interactive data initiative. Interactive data holds the promise of transforming the static, text-only documents companies file with the SEC into dynamic financial reports that can be quickly and easily accessed and analyzed. SEC Chairman Christopher Cox said, The best way for filers to understand how interactive data works is to participate in the voluntary program. The filers will have an opportunity to share with the SEC their individual experiences with preparing, making and analyzing their interactive filings. They will also better understand how interactive data can help streamline their financial reporting process. In April 2005, the Commission began a voluntary program for receiving financial information using eXtensible Business Reporting Language (XBRL)a computer language that makes financial data interactive. This program allows for the voluntary submission of XBRL documents as exhibits to periodic reports from corporate issuers and Investment Company Act reports. Companies that participate in the voluntary programs new test group will furnish financial data contained in their periodic and investment company reports in XBRL format for at least one year and provide feedback on their experiences, including the costs and benefits associated with reporting in the interactive data format. Because of the efficiencies staff anticipates in reviewing their filings prepared in XBRL and to encourage participation in the test group, the Commission staff will offer volunteers expedited reviews of registration statements under the Securities Act of 1933 that the staff has selected for review. For well-known seasoned issuers, the Division of Corporation Finance staff will offer to inform volunteers whether or not the staff will select their annual reports on Form 10-K for review. The staff will notify each well-known seasoned issuer volunteer whether it will select the volunteers Form 10-K for review within 30 days after filing and will undertake to provide any comments on that filing within 45-60 days of filing. The Commission staff is seeking test group participants that will use the commercial and industrial, banking, insurance, or investment management industry classifications in XBRL. Companies interested in participating in the test group should contact Jeffrey Naumann in the Office of the Chief Accountant (naumannj@sec.gov) or Brigitte Lippmann in the Division of Corporation Finance (lippmannb@sec.gov) by Feb. 10, 2006, for more information. The staff expects to have the group set by some time in February.
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SEC Extends Deadline for Companies to Join Interactive Data Test Group FOR IMMEDIATE RELEASE 2006-20
Washington, D.C., Feb. 13, 2006The staff of the U.S. Securities and Exchange Commission today announced that the deadline for companies to join the Commissions Interactive data test group has been extended until March 10, 2006, in response to requests for more time from potential participants. Since it was first announced January 11, several companies have already signed up to participate in the test group. The extension responds to numerous requests from the filing community for additional time for filers and service providers to investigate and prepare for participation. The four-week extension also recognizes the demands of year end reporting requirements. Under the test program, Commission staff will offer expedited reviews of registration statements or annual reports to registrants that participate in the test group as part of the Commissions interactive data initiative. Interactive data holds the promise of transforming the static, text-only documents companies file with the SEC into dynamic financial reports that can be quickly and easily accessed and analyzed. Companies interested in participating in the test group have until March 10, 2006, to contact Jeffrey Naumann in the Office of the Chief Accountant (naumannj@sec.gov) or Brigitte Lippmann in the Division of Corporation Finance (lippmannb@sec.gov).

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Financial Reporting in the XBRL Age: A Step-by-Step XBRL Implementation

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Executive Report

October 2005

Financial Reporting in the XBRL Age: A Step-by-Step XBRL Implementation


Purpose
The purpose of this paper is to explain how the eXtensible Business Reporting Language (XBRL) can be used to improve internal and external financial reporting and where XBRL is in its adoption evolution. To move XBRL to broad adoption, participation and input from finance executives in every part of the financial reporting chain and every industry is required. For financial statement preparers, one way to participate is through the Securities and Exchange Commissions (SEC) voluntary XBRL filing program. This report concludes with a step-by-step approach for first-time implementation of the SECs program.

Introduction
I used to think that cyberspace was 50 years away. What I thought was 50 years away, was only 10 years away. And what I thought was 10 years away... it was already here. I just wasnt aware of it yet. Bruce Sterling, science fiction author Just as cyberspace crept up on Mr. Sterling, eXtensible Business Reporting Language (XBRL) is creeping up on the world of finance. It is not 10 years away. Instead, it has arrived, unbeknownst to many financial executives, and it will change the way financial information is reported in the U.S. and around the world. Because XBRL is still in the early adoption phase, financial executives have the chance to shape the future by participating in XBRLs development now. XBRL is not technology, but a set of standards, called taxonomies, built using the eXtensible Markup Language (XML). Like accounting standards that direct financial executives how to account for and report business transactions and financial information, XBRL directs executives how to report financial information in the electronic age so that all constituents accessing the data understand the information they are getting. It does not replace or affect the system of accounting standards, it enables computer translation of financial information that can be interpreted by any XBRL enabled user, essentially bar coding for financial information. Financial executives face constant pressure to build a finance function that adds value by providing meaningful information to enable good business decisions. To accomplish this goal, finance personnel must spend less time keying data and more time analyzing it. Most financial analysis still uses spreadsheet programs into which the relevant financial information must be keyed. XBRL has the potential to make re-keying of data an activity of the past.

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In addition to internal reporting pressures, external reporting pressures have been at the top of the agenda over the last several years. Legislation like the Sarbanes-Oxley Act of 2002 and other laws aimed at eliminating conflicts of interest in the investment analyst industry, are forcing companies to change how and what they report to investors. With regulatory and internal pressures forcing changes to the existing financial reporting models, XBRL is emerging as an answer in the U.S. and around the globe. XBRL is a collaborative standard that requires input from industries and users of financial statements. Participation in the SECs voluntary filing program is a possible introduction for those not familiar with the standard and provides the opportunity to use and improve the standards. For those executives willing to commit time to XBRL, the impact to business reporting improvements could be great. External and internal reporting with XBRL allows for easier access by a wider range of stakeholders. Participation in XBRL today affords the rare opportunity to shape the future by working with software vendors, XBRL International, the consortium of approximately 300 companies and agencies worldwide that develop the standards, analysts and other stakeholders who are actively involved in the next stage in XBRL development.

XBRLs Adoption Evolution


In spite of attempts over the last several years to educate the financial community, according to a 2005 survey by Computer Sciences Corporation and Financial Executives Research Foundation, over 70% of financial executives have little or no knowledge about the standard. Like any new standard or technology, XBRL must pass through the various stages of an adoption curve. The first stage is characterized by small groups of users defined as enthusiasts and visionaries. Critical mass is achieved in the next stage, characterized by users defined as pragmatists.1 XBRL is still in the early stages of the adoption curve. XBRL International, the consortium that develops the standards, began work in 1998 and continues today to expand the standards and taxonomies to meet the needs of businesses worldwide. The U.S. jurisdiction of XBRL, with over 300 organization members, including Financial Executives International (FEI) and the American Institute of Certified Public Accountants (AICPA), has released approved standards that can be used by over 90% of US companies. Software companies are developing progressively better XBRL products and are integrating XBRL into existing products, but many current programs lack the ease of use necessary to bring XBRL into mainstream adoption. Several key events over the past few years have provided the impetus to bring XBRL alongthe enactment of the Sarbanes-Oxley Act of 2002 and the shakeup in the investment analyst industry that is changing how and which companies are analyzed for investors.

External Reporting and XBRL


Many investors consider investment analyst coverage essential for making informed decisions regarding their portfolio, but the analyst industry has undergone significant changes in the past
1

Crossing the Chasm by Geoffrey A. Moore 1991

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several years. In 2002, the SEC and the New York Attorney General began separate proceedings to eliminate conflicts of interest in the investment analyst industry. The results have created significant changes in the way analysis is performed, and has added to the cost of producing it. Two cost reduction measures taken by the industry were expanded use of data aggregators for data collection and a reduction in the number of companies covered. Data aggregators, an industry developed around the re-keying of public company financial information and making the data available to third party users, have a significant impact on the financial reporting chain, which begins with the company and ends with the investor. The companys financial executives prepare and submit quarterly and annual financial reports, and other regulatory disclosures, to the SEC. Once submitted, the SEC makes the information publicly available. The available information is obtained by data aggregators that tag data according to their own standards, and then sell the data to investment analysts. Investment analysts prepare their reports with this data and then provide the reports to investors. Data aggregators use a software program called a parsing tool that automatically tags financial information based upon parameters set up in the software. For standard items, parsing tools provide efficient and effective information. However, for non-standard itemswhich are often critical to how investors view a companys resultsthe data aggregator must decide on classification. Their classifications may not represent what the company had originally intended by providing the detail. With XBRL, the role of data aggregators may be affected because information received and stored by the SEC and provided to other sources is tagged by the company. If the analyst is using an-XBRL enabled software program, they can receive tagged data from the companys filings with the SEC and analyze as needed. Another key piece of the puzzle that is often missed using aggregator information is the detailed footnote information. The average parsing tool used by aggregators has about 300 standard elements, while the average set of financial statements and notes has about 3,000, said Mike Willis, Partner with PricewaterhouseCoopers LLC. With XBRL, while one company may classify items differently than another company, an analyst can easily compare the two based on common tagging. For example, work in process inventory may be on the face of the balance sheet, or disclosed in the footnotes, depending on the company. Using XBRL, it would be tagged as work in process inventory, regardless of where it is reported. XBRL creates more consistency among users of financial information, no matter where they retrieve their data. For financial executives at small and medium sized public entities (SMEs), the current external reporting structure creates other problems. Instead of having a message delivered to investors, coverage may currently be nonexistent. Cost cutting measures in the industry have reduced the number of companies covered by some Wall Street firms as much as 18% from 2000 to 2003. Small business executives argue that no coverage, translates into a permanent discount on the stock price. Many analysts agree with this negative outcome.

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The number of companies under (investment analyst) coverage shrunk as an unintended consequence of the Global Research Settlement between the New York Attorney General, the SEC, and some eleven investment banks.2 The smaller public companies with less liquidity were the worst hit in the almost immediate reduction of coverage, a kind of investment class cleansing, creating hundreds, if not thousands, of research orphans, writes Gayle Essary, managing director of Investrend Research, in a 2005 comment letter to the SEC. Dwindling coverage by Wall Street firms in 2003 versus 2000 is captured in Figure 1: Figure 1. Coverage Shrinks on Wall Street Public Companies Covered
Firm 2000 2003

Merrill Lynch CSFB Smith Barney J.P. Morgan Chase Goldman Sachs Morgan Stanley Lehman Brothers

3,500 3,077 3,000 2,400 2,315 2,150 1,650

2,469 2,373 2,300 2,260 1,950 1,925 1,605

Source: The Wall Street Journal Such research orphans often believe that their stock price is undervalued according to their financial executives. If you talk to CEOs at most small companies, they invariably claim their companys stock price has a sort of permanent discount due to lack of analyst coverage. Most small companies, even more than they want a higher stock price, want more liquidity in their stock, says David Harper, editor-in-chief of the monthly newsletter Investopedia Advisor and investment analyst for Harbinger Research. The process of research is expensive though. Prior to the Global Research Settlement, the standard practice was investment banks, by far the largest employer of investment analysts, bundled research with profitable services like underwriting and trading. Now that the bundled model is no longer acceptable, the business community is trying to figure out who will pay for pricey research services, the company or the investor. The dilemma is lessened by XBRL because the technology makes the process of analyzing financial information more accurate, more efficient and less expensive. On April 28, 2003, the Securities and Exchange Commission (SEC), the National Association of Securities Dealers (NASD), the New York Stock Exchange (NYSE), New York State Attorney General Eliot Spitzer and other state regulators announced a final $1.4 billion settlement agreement reached with 10 Wall Street firms in their investigation into Wall Street conflicts of interest. Along with the monetary settlement, the firms agreed to make significant structural changes designed to insulate their research departments from their investment banking departments.
2

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Turning to the Small Market Enterprise space of inefficient exchanges like Over-the-Counter (OTC) Bulletin Board (BB), I believe the (XBRL) cost savings for analysts that venture into this arena would be immense. For example, the Microsoft Office Tool for XBRL Prototype is a demonstration of how you can easily create or analyze XBRL documents directly from within Microsoft Office Excel 2003. For investment analysts, this prototype is a useful tool to quickly analyze data without the need to reenter or manipulate data, explains Kipley J. Lytel, Senior Partner with Montecito Capital Management, a Santa Barbara, CA based financial management firm, and senior analyst for Investrend Research. Mr. Harper explains, When I write-up a company report, crunching numbers and generating graphs occupies at least 50% of my time. What is so compelling about XBRL is that it can automate, in real-time, much of that number crunching. Therefore, I expect to reduce the time it takes to analyze a company by about 50% just by using XBRL-enabled tools. And that is before we talk about some of the long-term potential to add value with the automatic error-checking and quasi-intelligence.

Internal Reporting and XBRL


While external transparency of financial information is valuable to many, there is also significant potential to use XBRL internally. XBRL can become a valuable element in complying with the Sarbanes-Oxley Act-specifically, management assessment of internal controls (Section 404) and real-time reporting requirements of Section 409, says Mr. Lytel. Companies are spending a large amount of money to certify the effectiveness of their internal controls and have begun looking for efficiencies that will provide increased assurance at a lower cost. The next generation of internal control tools will easily connect through XBRL into the business and financial systems of a company, creating an ability to monitor the effectiveness of internal controls through tight linkage of the control system to the business/accounting systems.

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Figure 2.

The future of integration across business and accounting systems.

An example of how XBRL can seamlessly incorporate the control system with the financial system is when a particular control is over-ridden. An approval or notification can be routed to the appropriate manager or executive. If a control activity has deficiencies that need correction or additional controls to mitigate risk, the tracking and linkage of the issue from identification through resolution can be easily reported. Companies can also tightly link policies and procedures to their control activities. With XBRL, software developers can build tools that can be installed into a wide variety of systems, without the need to customize the interface to the company. Installation may require custom configuration based on how a company will want to deploy its internal control systems, however, that would likely be at a much lower cost. Additionally, because XBRL is an external standard that supports financial reporting based on U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS), companies will have the ability to respond to rapid changes in regulatory reporting requirements. The ability to consolidate acquisitions and integrate business systems has historically been challenging due to differences in data and account structures. XBRL has the potential to significantly reduce the time and effort required to integrate new acquisitions if both companies are using the
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standard. Integration would simply be a matter of consistently classifying the already tagged information. There would be little need for a large information gathering and consolidation effort that exists with acquisitions today.

Taking XBRL to the Next Level


The benefits of XBRL for financial reporting, as have been described, are likely the tip of the iceberg. The XBRL financial reporting structure will be more fluid and have fewer opportunities for error, reduce the costs of preparation and enable quicker reporting. To achieve the XBRL model requires participation by financial executives from all areas including, preparers, analysts, auditors and regulators. New products using XBRL have been introduced that make the analysts and auditors job much less labor intensive and less dependent on data aggregators. Developing a spreadsheet to model financial information is as easy as inputting the desired companys ticker symbol. For regulators who receive financial information in an XBRL format, standards tests, like checking bank capital requirements, can be performed in seconds upon receipt of the data from the bank. For preparers in public companies, one way to participate in using XBRL is through the SECs voluntary XBRL filing program. The remainder of this report is dedicated to educating the reader on the specifics of XBRL and providing an implementation plan for participation in the SECs program.

Whats in a Number? The Specifics of XBRL


XBRL is a specific schema for financial reporting based on XML that enables software to understand the content of financial reporting, the what (for example, the rowsline item description, number or valueand columns, the period or duration contexts) when a financial statement is submitted. Today when analysts want to get at the data, they interpret the line items and re-key the data. XBRL allows each of the line items, their values and the specific columnar definitions to be represented as XML data so that software can easily analyze. This is accomplished through the effort of tagging a document with XBRL tags.

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An XBRL Item
For financial reporting, the atomic level of reporting is an element, whereby each element has a single relationship to an accounting concept. In XBRL, that element is represented by an XBRL item.

LabelsFor every concept within the XBRL taxonomy, there are unique standard labels. An example of a standard label is Contingencies-Litigation. ReferencesReferences are the link to authoritative literature supporting the concept and related accounting reference where it is defined. For example, the reference for ContingenciesLitigation is FASB Statement of Financial Accounting Standard (FAS) 5, http://www.fasb.org/ pdf/fas5.pdf, 2004-08-01 PresentationPresentation is the order of elements, which makes it easy for users to find specific content within the XBRL taxonomy. CalculationThe calculation defines how an element relates to another element in terms of calculations. (I.e. Net Revenue less Cost of Goods Sold equals Gross Margin).
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Context or DefinitionIndicates for each element whether it is a special case of some other defined concept. FormulasFormula supports company-specific calculations or business rules.

XBRL Financial Reporting Taxonomies ArchitectureIn order for XBRL to span the breadth of industries and financial reporting needs of U.S. business, a working group in the U.S. jurisdiction of XBRL International, called the Domain Working Group, has focused on representing U.S. GAAP in XBRL taxonomies. To provide guidance to users for building valid taxonomies and extensions, that group also authored the Financial Reporting Taxonomies Architecture (FRTA). The result of these combined efforts was a categorized set of taxonomies that, used in combination, express complete financial reports of both public and private companies across many industry sectors. There are three categorizations of taxonomies in the framework: Stand Alone Add-ons. The stand alone add-ons are optional taxonomies that can be used by preparers to include in tagged financial statement filings. Common terms are foundational building blocks that enable industry specific taxonomies. These taxonomies include elements that are common, which ease maintenance and enable comparability across similar industries. Industry-specific. Industry specific taxonomies include the specialized concepts associated with a specific industry. Companies filing their financial statements in XBRL will select an industry specific taxonomy as a starting point, prior to any company specific extensions. Company Extensions. These are elements specific to a company not found in the stand alone or industry specific taxonomies.

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Figure 3. XBRL taxonomies: A collection of extensible, modularized taxonomies.

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The output of tagging a companys financial statements in XBRL is an instance document, an XML file type. An instance document is readable by software programs; they require access to the taxonomies used above. In fact, the instance document declares the Internet or Web locations (references) where the program can access the specific taxonomies used in the instance document. Therefore, a company filing in XBRL will need to make available their specific taxonomies if modified or extended.

An XBRL Implementation; Step-by- Step Project Plan


The SECs final rule XBRL Voluntary Financial Reporting Program on the EDGAR System (http://www.sec.gov/rules/final/33-8529.htm ) was effective on March 16, 2005. For those who decide to begin working with XBRL, participation in the SECs Voluntary Filing Program is a natural starting point. Below is a flowchart that outlines all of the steps necessary for an initial implementation.

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Step 1Identify a team: Accountant and XML Developer


Two functional skill sets are required to begin the project: An accountant who is proficient in supporting technical accounting requirements to: Match GAAP concepts used in the financial statements to supporting elements in the XBRL taxonomy, Identify gaps in financial statements and define new elements if necessary, Assist in quality assurance process to ensure correct tags are applied to financial statement data. A developer with a good working understanding of XML to: Evaluate, install and test appropriate XBRL tools, to tag the financial statements and to produce a file called the instance document, Create company-specific taxonomy extensions, Ensure that valid XML and XBRL are created, including identification of predictable errors. An example of a predictable error is a calculation error based on differences in a companys financial statements and those expected in the XBRL taxonomy.

Step 2Assess Scope of Reporting and Determine Taxonomy


The SECs final rule allows for latitude in the level of detail a company can decide to provide in XBRL. The first decision a project team must make is which SEC form to initiate their participation in the filing program (10-Q, 10-K, etc.). Obviously, the form must coincide with project timing. Once the form is decided, the team must assess and determine the level of detail to tag and furnish with filed financial statements. With the recent specification, there are taxonomies available for filing the financial statements, the SEC certification, the management report, the accountants report and the Management Discussion and Analysis. The SEC requires filers to use the appropriate version of a standard taxonomy, supplemented with extension taxonomies as specified by the EDGAR Filer Manual. Currently, there are four extension taxonomies in the EDGAR Filer Manual including, Commercial and Industrial Banking and Savings Institutions Insurance Investment Companies. However, the Commercial and Industrial Taxonomy (GAAP C&I) will cover a majority of U.S. public companies. Some companies may not be able to participate in the voluntary filing program due to lack of specialized taxonomies required for their respective industries (Oil & Gas, for example).
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Registrants choosing to file in XBRL are still required to submit their filing in ASCII or HTML. The XBRL filing does not replace the current filing method. Volunteers can choose to file only a portion of their filing in XBRL according to the SEC rules on Mandatory Content and Optional Content. The following is an excerpt from the SEC ruling: Mandatory Content consists of a complete set of information for all periods presented in the corresponding official EDGAR filing from one or more of the following categories (as filed in the corresponding official EDGAR filing): the complete set of financial statements (the only exceptions are that notes to the financial statements and schedules related to the financial statements may be omitted unless the volunteer is a registered management investment company, in which case it must include Schedule I Investments in Securities of Unaffiliated Issuers); earnings information set forth in Form 6-K or Items 2.02 or 8.01 of Form 8-K (whether contained in the body of the Form 8-K or Form 6-K or in an exhibit, and whether filed or furnished); or financial highlights or condensed financial information (if the volunteer is a registered management investment company). Optional Content can consist only of a complete set of information that is: for all periods presented in the corresponding official EDGAR filing; related to financial information in the corresponding official EDGAR filing that is simultaneously submitted as Mandatory Content; and from one or more of the following categories (as filed in the corresponding official EDGAR filing): audit opinions; interim review reports; reports of management on the financial statements; certifications; or Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A), Managements Discussion and Analysis or Plan of Operation, Operating and Financial Review and Prospects or Managements Discussion of Fund Performance (MDFP).

Step 3Compare and Map 10-K/10-Q to Taxonomies


The project team will review the original filing item-by-item, starting with the financial statements and then working through notes and managements discussion and analysis. The project team can use the presentation taxonomy in the industry taxonomy most closely aligned with

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their company. The organization of the presentation taxonomy is most familiar to financial executives because it is organized by financial statement line. The presentation taxonomy for commercial and industrial business is located at: www.xbrl.org/. A taxonomy editing tool or an instance document authoring tool are both appropriate for completing this step. Carefully document which XBRL elements refer to which line items, noting exceptions, gaps, and questions. Assessing the content of the XBRL taxonomy, such as US GAAP C&I requires reviewing all elements in the taxonomy, how the presentation language reads, calculations, and definitions, including the authoritative references. Assessing, mapping and identifying gaps are prerequisite activities to extending the primary taxonomies.

Step 4Extend the Taxonomy As Necessary


Once you have compared your 10-K or 10-Q to the presentation taxonomy and have determined that the taxonomy does need to be extended, a software program to extend the taxonomies is required. While the taxonomy can be edited and extended using a number of XML editing tools, we recommend using an evaluation copy of an available XBRL-specific tool to determine which are most usable and best fit your needs. Currently, there are a number of software choices that have varying degrees of functionality and ability to extend taxonomies. Some questions to consider: Does the presentation of the XBRL element match what my company calls the item? If not, does this require just a modification of the label or is this a new item? Here is where the technical accountant must recognize how the company reports and map to XBRL element. Do my notes and MD&A require extensions to the taxonomies? What parts of my financial reporting require additional context definitions (see Creating an Instance Document below)? For example, using segments as part of contexts requires creating the specific extensions to describe your companies segments (business units, products, and so forth). To what extent does a new element require calculation modifications?

Step 5Create an Instance Document and Validate Calculations


Creating an instance document requires authoring software, a tool that allows the user to either associate relevant data to the specific taxonomy elements used in the companys financial statements, or one that allows you to mark-up or tag another file format (such as Microsoft Word or Excel) with XBRL taxonomy elements. The latter focuses on the user scenario in which the primary financial statements are authored or assembled in Word or Excel.
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For many companies, working in Word and Excel likely matches the business process of internal and external reporting. Both application types should include the feature of exporting the financial reporting data to XML the specific organization and structure to the XML document is the instance document. Other considerations on software selection include: Does the software have adequate, good or superb documentation? Does the documentation describe not only the functionality but also how to create an instance document step-by-step? What kinds of support does the software vendor have? Can you easily find a list of known issues? Has the vendor documented common troubleshooting steps? Software integration: Does the software install and uninstall seamlessly? Does the application cause any other performance issues or other degrading effects on your computer or with other software? What kind of pre-installation components or other software does the application require? Are these publicly available, and allowed in your desktop environment?

Step 6Review and Validate Instance Document


A few software vendors specializing in XBRL have developed instance document validation tools which are useful in conjunction with your instance document to validate the XML and XBRL structure. As part of the project of authoring an instance document for your companys 10-Q or 10-K, identify several milestones to validate the tagging process and output, such as testing a few items, finishing the income statements, or combining two or more statements. After completing the instance document you should conduct a process of validation, followed by quality assurance review prior to publishing. Validation ensures that taxonomies are accessible and that software can find them. Validation tools also perform other routines to check that: Elements are fully defined, including calculations, definitions, and so forth, GAAP expected calculations resolve or ensure: the balance sheet balances, the income statement ties to the balance sheet and the cash flow agree for each specific item that can be reconciled to the balance sheet, Any company-specific extensions that involve calculations are also resolved, The XBRL instance document is well formed. For example, the instance document specification does not allow an element + context combination more than once: each must be unique. (In the example above, this forces the design of various contexts to describe revenue.)

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XBRL International created the Financial Reporting Instance Specification (FRIS) so that software application vendors can implement validation routines for authoring instance documents. As a user, you do not need to review the FRIS, however, the accountant working along side the IT resource will potentially need to address validation errors. A few things to consider: The SEC has modified the EDGAR system to accept native XML and XSD (XML schema) files; however these must contain only ASCII text. If you work with a financial publisher, they will likely use a Uuencode tool to transform the files and its characters. Because instance document authoring applications are relatively new, in the scenario of tagging Word files, rich text must be converted to ASCII text, and sometimes the XML output will convert seemingly simple characters to HTML. For example, & becomes & and may look like gibberish. Because the industry lacks tools to easily render the XML in an instance doc back into a Microsoft Word document, you may want to edit the XBRL body text in notes and MD&A, removing the HTML. XML editors still recognize non-ASCII characters such as non-breaking white spaces, em-dashes (the longer form of a dash) and these will be rejected by the EDGAR system. These considerations apply to XBRL taxonomy editing tools as well, as the submission process includes company-specific taxonomies. After technical validation of the instance document, a quality assurance review is necessary to ensure that the XBRL element, the context definitions, and the tagging correctly describe the financial data. The quality assurance process today will require reading through the instance document in XML. Once completed and all parties have signed off on the document, publication is the next and final step.

Step 7Publish the Instance Documents & Taxonomy


In the SECs voluntary program, instance documents are furnished along with the taxonomies and necessary files to complete a schema. The same effort will be required to publish on a company Website to ensure that all information furnished to the SEC is also available to shareholders. Submitting XBRL versions of a 10-K or 10-Q does not need to take place simultaneously with the financial statement filings. The final rule establishing the voluntary program states: The XBRL-Related Documents may be submitted at the same time as the official EDGAR filing to which they relate, either as an exhibit to the official filing or, for operating companies, as an exhibit to a Form 8-K or Form 6-K47 filed simultaneously. Alternatively, the XBRL-Related Documents may be filed subsequent
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to the official EDGAR filing to which they relate, either in a later amendment to the official filing or, for operating companies, as an exhibit on Form 8-K or Form 6-K. Volunteers will not be permitted to submit the XBRL-Related Documents before they file the related official document. Although the amendments do not establish a deadline for submitting or amending XBRL data, volunteers are encouraged to submit the XBRL-Related Documents with the official document or shortly after the official document are filed. Volunteers will be free to submit their XBRL exhibits regularly or from time to time and can stop or start as they choose. If a volunteer amends the XBRL-Related Documents it submitted earlier, it should amend the filing to which the XBRL-Related Documents are attached as an exhibit. For more details on the XBRL submission process, you should refer to the EDGAR filing manual, Appendix L (http://www.sec.gov/info/edgar/edmanuals810.htm ). If you work with a financial publisher, then they will need this reference.

Conclusion
Support for XBRL continues to grow nationally and internationally. Projects like the SECs Voluntary Filing program and the Federal Deposit Insurance Corporations (FDIC) project to use XBRL for bank call report filings, due for launch on October 1, 2005, have led U.S. financial executives to take notice and get involved. Executives abroad face the same pressure as government agencies jump onto the bandwagon. In the United Kingdom, plans were announced to enable filing of Corporation Tax using XBRL in 2006. Japans Financial Services Agency also said it will introduce the use of XBRL for financial statements by fiscal 2008.3 A unique opportunity is available for financial executives who want to take part in shaping XBRL. By understanding and implementing XBRL today, participants provide valuable feedback to XBRL International for building the standards, as well as to software vendors for developing products that make implementation more efficient. Today we are on the verge of a new era in financial reporting that will make the process more efficient.

Latest News About XBRL, XBRL.org

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About the Authors


This report was authored by Taylor Hawes and Tiffany McCann. Mr. Hawes is chair of FEIs Committee on Finance and Information Technology (CFIT), and Controller-Global Platforms & Operations at Microsoft Corporation. Ms. McCann is a freelance writer who follows emerging technologies in finance and accounting. The authors would like to thank CFIT & Michael Ohata, Director of Reporting Standards at Microsoft Corporation, for their review and input.

About FEIs Committee on Finance and Information Technology


FEIs Committee on Finance and Information Technology (CFIT) addresses the needs and interests of financial executives in the area of e-business technology and information management. This includes, but is not limited to, the development and application of information technology, systems and other methodologies affecting the management of business functions and interactions with customers, suppliers, and investors. The general function of CFIT encompasses research, studies or surveys, the annual FEI Technology Forum and the dissemination of knowledge. CFIT monitors information, trends, and developments from the perspective of the financial executive as: a member of management interested in the use of information for performance analysis and decision support and for e-business; the provider auditor for controls, security and reliability of information; and the administrator responsible for providing, processing and disseminating information. CFIT has the responsibility to: represent the views, attitudes and opinions of the FEI membership; maintain high standards of professional integrity and technical competence; and inform and stimulate the membership interests in the use and management of technology in finance and business functions.

About Financial Executives Research Foundation, Inc.


Financial Executives Research Foundation, Inc. (FERF) is the non-profit 501(c)(3) research affiliate of FEI. FERF researchers identify key financial issues and develop impartial, timely research reports for FEI members and non-members alike, in a variety of publication formats. FERF relies primarily on voluntary tax-deductible contributions from corporations and individuals. The views set forth in this publication are those of the author and do not necessarily represent those of the FERF Board as a whole, individual trustees, employees, or the members of the Research Advisory Council. FERF shall be held harmless against any claims, demands, suits, damages, injuries, costs, or expenses of any kind or nature whatsoever except such liabilities as may result solely from misconduct or improper performance by the FERF or any of its representatives.
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Financial Executives Research Foundation, Inc. http://www.ferf.org 200 Campus Drive Florham Park, New Jersey 07932 Copyright 2005 by Financial Executives Research Foundation, Inc. All rights reserved. No part of this publication may be reproduced in any form or by any means without written permission from the publisher. International Standard Book Number 1-933130-17-2 Printed in the United States of America First Printing Authorization to photocopy items for internal or personal use, or the internal or personal use of specific clients, is granted by Financial Executives Research Foundation, Inc. provided that an appropriate fee is paid to Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923. Fee inquiries can be directed to Copyright Clearance Center at 978-750-8400. For further information please check Copyright Clearance Center online at http://www.copyright.com.

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Gartner
Publication Date: 1 December 2005

Industry Research
ID Number: G00135713

EDGAR Online Provides New Investment Analysis Capabilities With XBRL-Tagged Data
Mary Knox Extensible Business Reporting Language (XBRL) can improve the quality and efficiency of investment analysis. What has been missing is XBRL-tagged data for analysis. EDGAR Onlines (EOLs) I-Metrix is overcoming this dilemma for corporate financial and operational data (referred to as fundamental data), beginning with U.S. Securities and Exchange Commission (SEC) filing data for 5,000 U.S. companies. I-Metrix is important as an individual product offering and as a general stimulator of XBRL adoption and maturity.

Key Findings
XBRL has the potential to improve the quality and reduce the cost of investment analysis. A lack of XBRL-tagged performance data has hindered the achievement of this potential. EOLs I-Metrix provides a source of XBRL-tagged fundamental data, overcoming this hindrance. EOLs first-to-market advantage must be cemented with continued development of highquality, value-add enhancements.

Prediction
Through application of XBRL, I-Metrix will produce a minimum of a 25 percent efficiency gain in fundamental data analysis for companies using proprietary, non-Extensible Markup Language (XML)-based fundamental data sources.

Recommendations
Investment services companies should evaluate I-Metrix for automating access and manipulation of fundamental data from SEC filings. Business intelligence (BI) tool vendors should consider how XBRL-tagged data can be leveraged in their current or potential products.

2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartners research may discuss legal issues related to the information technology business, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice. Section 6

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ANALYSIS Overview
I-Metrix is EOLs response to a need to automate the analysis of corporate performance data. Introduced in April 2005, I-Metrix offers online access to XBRL-tagged SEC filing data, including importation into Microsoft Excel. Analytical templates are also provided. Relationship to Investment Industry Enterprise Nervous System Requirements Industry-standard, format-independent fundamental data enables investment services companies to use a single source of data across multiple applications and avoid lock-in to a specific data supplier. It also improves data quality and immediacy of access and use by removing timeconsuming, error-prone manual data entry and manipulation for spreadsheet analysis.

Analysis
Company Background EOL, founded in 1994, provides financial information from SEC filings and related analytical tools through online subscriptions. EOL is based in Norwalk, Connecticut, with offices in New York and Rockville, Maryland. It has 95 employees and market capitalization of approximately $56 million. In 3Q05, EOL had a net loss of $1.5 million, compared to a net loss in 3Q04 of $720,000. The increase is largely attributed to I-Metrix development and launch costs. In contrast, revenue of $10.6 million for the nine months ending 30 September 2005 represents a 10 percent increase from the same period of a year earlier and includes an 18 percent increase in subscription value, EOLs core business. Although I-Metrix only contributed marginally to EOL revenue due to its initial introduction in April, it has achieved sales of more than $200,000 in annual contract value. Product Description I-Metrix provides access to XBRL-tagged SEC filing data within a maximum of 24 hours, and often within minutes, of the company filing with the SEC. The data is delivered online with access through Microsoft Excel, a Web site, a visualization dashboard or a direct data feed. Users can click on individual XBRL-tagged data elements in the Excel worksheet and be taken to the underlying SEC filing document for immediate verification. Standardized, customizable templates that allow analysts without explicit XBRL knowledge to work with the data are provided. There are also Excel wizards for requesting different data types and creating templates and models.

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There are three I-Metrix offerings: I-Metrix Professional: Online provision of XBRL-tagged data I-Metrix Architect: Provision of a Web service component for distribution of I-Metrixsupplied and derived data internally or to external customers I-Metrix Customization Services: Fee-based provision of services to answer complex financial questions and create custom templates and models I-Metrix Professional comes in three editions: Analyst: For investment services, banking and insurance analysts evaluating corporate performance for investment or credit decision making. It includes approximately 15 templates for valuation, discounted cash flow, peer analysis, growth analysis and anomaly detection. Corporate: To support corporate finance, strategic planning and competitive intelligence activities. It includes approximately 10 templates for benchmark analysis, company overview and forensic analysis. Auditor: For auditors, with templates similar to the corporate edition. EOL has XBRL-tagged the line items in SEC 10K, 10K/A, 10Q, 10Q/A filings and has recently introduced 8K earning releases for approximately 5,000 companies, including all with a market capitalization of at least $100 million that are covered by four XBRL taxonomies: Commercial and industrial (approximately 1,200 data elements) Banks (approximately 900 data elements) Insurance (approximately 900 data elements) Real estate (approximately 1,000 data elements) Also, I-Metrix has approximately 75 summary data elements for all publicly traded U.S. companies. Annual and quarterly data is available from 1998 onward for all covered companies. Not presently XBRL-tagged, footnotes can be viewed as text and footnote tables downloaded into Excel. Data is delivered in various formats including: 1) as reported; 2) as reported, but with U.S. generally accepted accounting principles (GAAP)-based calculations performed for missing fields that represent calculations based on other reported fields (such as total revenue or net income); and 3) as reported for noncalculated fields, with all calculated fields recalculated based on U.S. GAAP for consistent comparisons across filings. The initial filing and the most recent restatement can be selected or compared using I-Metrix.
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EOL is actively growing I-Metrix through: Coverage of more XBRL taxonomies. In 4Q05, companies covered by the Oil and Gas, Utility, and Broker Dealer XBRL taxonomies are to be added. Data for all SEC-reporting American Depository Receipts will be available in 2Q06. Inclusion of more data elements and data sources. The company is continuing to tag 8K earning releases. It plans to begin extracting and mapping data from footnote tables to the XBRL taxonomies, and to integrate global XBRL data sets in 2006. More analytic templates and tools. The company is adding analytic templates for each of the three editions, as well as working with customers to develop custom models. Early partnerships for analytical capability include ones with Microsoft, which has XBRLenabled Excel, making the seamless download and manipulation of I-Metrix data in Excel possible; Business Objects, for a reporting solution; and Theoris, for a visualization dashboard. Further development of these and other partnerships is planned. Architecture EOL extracts the line items (data elements) of filing documents received through an SEC ASCII data feed. Data elements are mapped with a proprietary rule engine to the appropriate XBRL taxonomy. Any data element that does not have an identifiable counterpart in the taxonomy is reviewed by an analyst to determine if it is an alternative naming of an established element or whether a new field needs to be added. XBRL linkbases (files that define relationships between XBRL elements) are used to validate incoming data by comparing computed figures to reported values for calculated fields. Differences are checked to see if they are due to an extraction error, a reporting error (in which case the reporting company is contacted), or U.S. GAAP standards not being followed. Validated data is made available through a Simple Object Access Protocol (SOAP)-compliant Web services interface (see Figure 1). EOLs server architecture is based on Microsoft .NET using clustered application, Web and database serverswith site redundancy for business continuity. Client-side architecture consists of: Microsoft XP or 2000 (client-supplied) Integration with Microsoft Office (client-supplied) through an Excel XBRL plug-in Connection through firewall-neutral HTTP, with integrated HTTP-based security

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Figure 1. I-Metrix Architecture

Source: EDGAR Online

Pricing Minimum three-seat licenses are approximately: Analyst Edition: $20,000 per year Corporate and Auditor Editions: $15,000 per year Comparing favorably to other fundamental data sources, pricing is set to appeal to smaller companies such as hedge funds that balk at higher prices, as well as to larger cost-conscious firms. User Experience EOL claims more than 100 users of I-Metrix as of November 2005. Most are in the U.S., with a few in Europe and Asia.
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Gartner interviewed three I-Metrix Professional users (a small hedge fund, an investment research specialist and a private investment management company, one of which receives data through a direct feed instead of through Excel. Interview findings of general interest: Labor reduction. The ability to access data directly into Excel across multiple companies and across multiple reporting periods without manual manipulation to line up columns and rows was cited as a major advantage. Before, significant time was spent cutting and pasting from different documents and aligning cells in Excel. One reference estimated that this reduced the time it took to analyze a companys fundamental data by 50 percent, while another stated that models that took a half-hour to build could now be built in five minutes. Data availability and granularity. Access to data the day after a company files is seen as a significant benefit. Desire was expressed for additional data, such as footnote and business segment table data. EOL plans to include footnote table data in a future release. Data accuracy and completeness. Data quality was cited as comparing favorably to that of other data providers. Problems noted were an occasional missing data element and a potential discrepancy in cash-flow aggregations. These problems are reportedly being addressed in future versions of I-Metrix. The ability to click on an Excel cell to see the underlying source documents to verify accuracy was cited as valuable. Ease of installation and use. Basic PC skills were reported as sufficient for installing I-Metrixs Excel version. Excel and fundamental data familiarity are reported prerequisites for users. Developing custom templates and models and using the Excel wizards were found to require knowledge of XML and XBRL taxonomies and in-depth Excel expertise. High memory requirements of the Excel XBRL add-in may cause conflicts with other applications. EOL service. References reported a very low need to call on EOL services due to ease of implementation and use; however, when support was requested, response was rapid and knowledgeable. Strategy and Outlook EOL seeks differentiation in a commoditized fundamental data market by transforming from a document-centric to an information-centric data and analytic tool supplier. Because it is based on XML, XBRL enables this transformation by the separation of data from the report format. I-Metrix targets three markets that EOL believes are underserved by competitors: Price-sensitive equity analysts at buy- and sell-side companies, including hedge funds, by competitively pricing a solution that also reduces in-house manual labor and technical expertise (and thus cost)

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Corporate finance officers Auditors, by offering tools such as benchmarking that boost analysis efficiency EOL is a charter member of the XBRL organization, and has invested in mapping SEC filing line items to XBRL taxonomies and developing tools for extracting and tagging fundamental data. Due to XBRLs complexity, EOL believes it has a substantial lead over competitors (such as Thompson, Reuters, Compustat and Global Securities Information [GSI]) that have yet to offer XBRL-compliant fundamental data. To remain competitive when XBRL-tagged fundamental data becomes more-widely available from competitors undertaking initiatives similar to EOLs or from regulators requiring XBRLcompliant reporting, making XBRL-tagged data a commodity EOL is aggressively investing in developing value-add analytical tools and services through in-house development and partnerships, and in extending the depth and breadth of supplied data. IT is also involved in industry initiatives to align U.S. and other GAAPs, and in the development of an international reporting standard. Strengths Earliness to market with an industry-standards-based product that addresses an industry need for improved quality and efficiency of fundamental data analysis; there are now referenceable sites that can attest to business benefits, including significant reduction in manual extraction and manipulation of data in preparation for analysis. Significant depth and breadth of data currently available and planned. Competitive pricing making this product attractive to small and large investment services companies. A growing array of analytical templates and related business intelligence (BI) tools for working with the data. Strong and growing partnerships, including prominent vendors (Microsoft and Business Objects) and niche providers. Industry expertise and leading-edge awareness of issues and requirements surrounding fundamental data due to involvement in industry initiatives. Challenges Commoditization of XBRL-compliant data, which can be expected to occur in the future; EOL must, with its limited staff resources: 1) aggressively develop differentiating, value-add analytical and reporting capabilities and 2) develop and maintain a reputation for data and service quality, depth and breadth to remain competitive. Questionable long-term viability, because EOL remains unprofitable; the concern for customers is mitigated to the degree that alternative sources of comparable XBRLcompliant fundamental data become available. This is because use of an industry data
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standard and access based on the near-ubiquitous Excel spreadsheet make the analytical models and interfaces developed for use with I-Metrix data portable for use with other XBRL-compliant data sources.

Recommendations
To improve quality and efficiency, investment services companies that analyze fundamental data for SEC-regulated corporations should immediately evaluate I-Metrix against their specific requirements. Companies with unmet needs should periodically re-evaluate I-Metrix as depth and breadth of data and tools expand. Adopters must recognize that use of I-Metrix will not eliminate the need to validate data and analytical results, but that substantial efficiencies can be achieved by minimizing manual data access and manipulation, enabling analysts to focus their expertise on analytical tasks. BI vendors should investigate the potential that industry-standard data presents, and develop tools and partnerships for working with and enhancing XBRL-compliant data, recognizing that the availability of I-Metrix signals increasing XBRL maturity.

RECOMMENDED READING
Extensible Business Reporting Language Will Facilitate Investment Analysis Assess Which Investment Industry Messaging and Content Standards Are Most Applicable for Your Firm Hype Cycle for Investment Technologies, 2005 Hype Cycle for XML Technologies 2005

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REGIONAL HEADQUARTERS
Corporate Headquarters 56 Top Gallant Road Stamford, CT 06902-7700 U.S.A. +1 203 964 0096 European Headquarters Tamesis The Glanty Egham Surrey, TW20 9AW UNITED KINGDOM +44 1784 431611 Asia/Pacific Headquarters Gartner Australasia Pty. Ltd. Level 9, 141 Walker Street North Sydney New South Wales 2060 AUSTRALIA +61 2 9459 4600 Japan Headquarters Gartner Japan Ltd. Aobadai Hills, 6F 7-7, Aobadai, 4-chome Meguro-ku, Tokyo 153-0042 JAPAN +81 3 3481 3670 Latin America Headquarters Gartner do Brazil Av. das Naes Unidas, 12551 9 andarWorld Trade Center 04578-903So Paulo SP BRAZIL +55 11 3443 1509

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A REVOLUTION IN CORPORATE REPORTING


By William M. Sinnett Touted by the SEC chairman as the next revolution in corporate reporting, FERF spoke with three early-adopter companies to find out why they favor this new format. Christopher Cox, the newly minted chairman of the U.S. Securities and Exchange Commission (SEC), is on a mission to improve financial reporting. We really are on the threshold of a revolution in corporate reporting, he has said. During his tenure, he intends to bring our system of corporate disclosure and financial reporting into the 21st century. He presented his vision for interactive data in a videotaped speech for the 12th XBRL International Conference, held in Tokyo on Nov. 7, 2005: Interactive data could make it possible for issuers to reduce the cost of substantiating the numbers that appear in their financial statements. It would assist regulators in maintaining the integrity of the markets. Interactive data would also make disclosures more useful to investors, and to every market participant, said Cox. Will Coxs vision evolve into reality, or is it merely a revolution of a small group of pioneers? One means to provide the interactive data Cox speaks of is by using XBRL (eXtensible Business Reporting Language), a language for the electronic communication of business and financial data. XBRL is not a technology, but a set of standards, called taxonomies, which are built using the Extensible Markup Language (XML). XBRL is being developed by an international non-profit consortium of approximately 350 major companies, organizations and government agencies. It is an open standard that is free of license fees. Last February, the SEC had announced an XBRL Voluntary Filing Program (VFP). Its primary purpose, the SEC said then, is to assess XBRL technology, including both the ability of registrants to tag their financial information using XBRL and the benefits for using tagged data for analysis. But as of Dec. 1, 2005, only nine companies were participating in the VFP (see box on next page). Financial Executives Research Foundation (FERF) spoke with financial executives at three of the nine companies: EDGAR Online Inc., Microsoft Corp. and United Technologies Corp.

EDGAR Online Inc.


EDGAR Onlines Chief Operating Officer and CFO Greg Adams says his company has been an active and enthusiastic proponent of XBRL since the founding of the XBRL consortium. Participation in the VFP was simply an extension of our commitment to fostering the adoption of XBRL and our belief that it will lead to more transparent company reporting, says Adams. Back in 1984, when the current Electronic Data Gathering, Analysis and Retrieval System (EDGAR) was adopted by the SEC, a voluntary pilot program was also established. The

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EDGAR system has been the backbone of the SECs disclosure program, says Adams. The SEC began accepting some SEC filings in electronic format in January of 1994, and since that time, the number of filing types that can be submitted electronically has grown exponentially, as has the daily volume. However, Adams says, Unfortunately, the underlying technology of the EDGAR system has not kept pace with advances in information technology (IT). What XBRL will do, he adds, is enhance the EDGAR system. XBRL submissions will provide additional transparency to the financial disclosures of U.S. public companies. The standardization of the financial statements in XBRL taxonomies will also facilitate analysis by all users of the EDGAR system, thereby increasing reliance on EDGAR, says Adams. EDGAR Online provides financial information (including EDGAR filings and XBRL financial statements) and a variety of analysis tools via online subscriptions and licensing agreements to professionals in financial institutions, corporations and accounting firms. EDGAR Onlines initial VFP effort of about 160 hours included tagging more than 200 items. However, Adams says, Because EDGAR Online has built a conversion tool and has extensive experience in industry taxonomies, the conversion of our own financial statements took relatively little time and effort. Besides its own, Adams comments that EDGAR Online has already converted to XBRL financial statements of all the companies in its database to include current financial statements as well as the last seven years and 28 quarters. These financials are available through I-Metrix, a recentlyintroduced subscription service. We have taken a leadership position by converting the financial statements of all U.S. public companies to XBRL, and we are now working closely with the consortium on the development of industry-specific taxonomies, says Adams.

Microsoft Corp.
Microsoft was the first company to furnish full financials and footnotes tagged in XBRL. Scott Di Valerio, corporate vice president, finance and administration and chief accounting officer (CAO), says of Microsofts initial effort: The first time we converted our Form 10-Q, the effort required about 175 hours75 hours for XBRL taxonomy extension and customization, 60 hours to create and validate the XBRL document and 40 hours for quality assurance review. He notes the process was the joint effort of three individuals: an accountant; an XBRL technologist to extend the taxonomy and assist with technical validation; and an external reporting team member to provide quality assurance. However, Di Valerio adds, The second time we tagged our 10-Q, we reduced the time by two-thirds, to 60 hours. In September 2005, Microsoft became the first company to submit its annual Form 10-K report (for the year ending June 30, 2005) to the SEC in XBRL format. Because of the number of disclosures and the length of the annual report, tagging our Form 10-K required additional time,
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explains Di Valerio. He says that Microsoft learned a number of important lessons during its efforts to render XBRL documents. Those include: Tagging data is a new task, and companies will need guidance on best practices. For example, companies will need to learn how to optimize context, an XBRL concept that represents time periods, business segments and reporting scenarios. Context represents one-third of the XML in the 10-Q. Financial statement preparers need software tools for rendering XBRL documents. There are tools available, but these tools are early in their product cycle, and still need enhancements to enable ease of use for tagging and extending standard taxonomies. XBRL taxonomy extensions and validation processes present a new and complex technology to preparers. So, how does Di Valerio regard the XBRL efforts, and have they been worthwhile? He says that when he meets with the finance leadership of customers and other companies, he is struck by the similarity of the business challenges we face. We are all trying to improve our financial reporting processes, from closing the books to getting information back to management in a timely manner, so that we can make better decisions. He regards XBRL as another way that technology can enable automation and efficiency, and strengthen internal controls. We are an active supporter of XBRL because we recognize its potential to help solve common business issues. We do envision the use of XBRL for internal reporting, and we are evaluating scenarios in which XBRL could help automate our processes.

United Technologies Corp.


United Technologies decided to participate in the SECs Voluntary Filing Program, believing that it is only a matter of time before XBRL will be required. Participation in the voluntary program was a great way to get introduced to the technology and begin to learn and understand the tools, the mechanics of tagging and special filing considerations, says John Stantial, director of financial reporting for United Technologies. Stantial concedes that there is an initial learning curve for some of the unique terminology and requirements of XBRL, but says, for the most part, the tagging is a fairly expeditious process after you become familiarized with the mechanics. He comments that the level of work also depends on whether the intent is to tag the basic financial data or also tag footnotes and Managements Discussion and Analysis (MD&A). In addition, another level of modification to the standard taxonomies may be required, based on the specifics of a companys financial statements. For United Technologies, Stantial and one of his managers were able to render the XBRL documents themselves, with minimal outside help. The three filings to date, and the Form 10-Q he is currently working on, have taken approximately 400 hours. The initial filing took a disproportionate amount of time as we familiarized ourselves with the tagging software, the tagging process and filing issues, he says, adding that subsequent filings

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have gone much more expeditiously. Periodic questions will arise on extensions, taxonomies, or some other aspect, for which we may consult outside expertise. Stantial advises other financial executives who are considering VFP to use this current voluntary period advantageously to become acclimated to the tagging software tools available and the mechanics of the tagging and filing processes. He says he believes that XBRL will become the standard before too long, given all that it has to offer, so the earlier companies can get up to speed and work out their issues, the better off they will be.

So, Whats the Problem?


If XBRL is the latest and greatest, why arent more companies voluntary filers, and if theyre not now, when will they join this group? In the early stages of any new technology, there are early adopters, who tend to be technologically savvy, explains Microsofts Di Valerio. Others are satisfied to use existing technology until the new technology is more widely accepted and better tools are developed. But, he argues, It is up to the early adopters, such as Microsoft, to provide leadership and pave the way for the others. Also, SEC Chairman Cox seems optimistic and not concerned with the slow pace of adoption. The reason that everyone is not doing their financial reporting using interactive data is simple: its a new concept. People will use it when they discover how much time and money it can save them, by automating and speeding up the process. Indeed, he says the SEC wants it because it will make financial reports much more useful. Companies will want interactive data for the same reason. The truth is, its inevitableand if the 21st century has shown us anything thus far, its that technological change occurs extremely quickly. Cox continues: Its not surprising that were hearing from both filing agents and accounting firms that their clients are suddenly showing greater interest in interactive data. Given its enormous potential, theres no doubt this increased interest in interactive data will soon translate into widespread adoption. William M. Sinnett (bsinnett@fei.org) is Director of Research at Financial Executives Research Foundation (FERF). Filers in the SEC Voluntary Filing Program, as of Dec. 1, 2005 Adobe Systems Inc. Bowne & Co. Inc. Business Objects S.A. RR Donnelley & Sons Co. EDGAR Online Inc. EMC Corp. InfoSys Technologies LTD Microsoft Corp. United Technologies Corp.
Section 7

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NOTES

NOTES

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