Neal Hannon is an XBRL nsultant and the former Director, Financial Reporting Technologies for the Financial Acunting Foundation (FAF). Prior to joining the FAF, Neal was a member of the acunting departments at the University of Hartford and Bryant University. Active in the XBRL mmunity since 2000, he served on the first XBRL US steering mmittee and has written over 60 articles on XBRL. You can ntact him by email.

When the final rule Interactive Data to Improve Financial Reporting was published in the Federal Register on February 10, 2009, it was pretty much in line with the proposed rule that was published on May 30, 2008. In Part I of this post, I vered many of the outstanding questions, such as how exactly to qualify a mpany for each of the three mandatory start periods, what levels of tagging are required in the rule, and more specifics on the liability issue. The final rule did, however, ntain a few things that surprised me and may catch some mpanies off guard.

The Shortened Grace Period

The proposed rule asked the question, Would a 30 day grace period be useful to mpanies filing for the first time? The initial thought was that this grace period would extend for the filer’s entire first year in the program. When the final rule came out, page 6791 of the Federal Register ntained the following:

We acknowledge all of these ncerns and suggestions, and while we are adopting the grace periods substantially as proposed, we are deferring the start of the phase-in which we believe may help to alleviate potential burdens by giving more time to prepare the initial submission. We also believe that the eventual dropping of the grace period after the initial submissions will help to make the interactive data files more useful and relevant to investors by requiring the submissions at the same time as the related official filing. (emphasis added)

The surprise is that after the first filing of XBRL exhibits, the 30 day grace period goes away. For example, Ford Motor pany will be required to file their send quarter SEC reports with XBRL, assuming their send quarter in 2009 ends right after June 15, 2009. With the first submission, they will have a 30 day grace period in which to submit XBRL matching their 10-Q filing.  In the third quarter of 2009, the grace period will not apply and the XBRL will be due at the same time as the third quarter 10-Q filing. 

panies that have elected to use an outsource model for creating XBRL exhibits will find themselves in a time crunch, unless the process is well thought out and well tested ahead of that send XBRL filing. With only one filing to practice the ordination between outside vendor and the inside acunting experts before the 30 day grace period evaporates, mpanies should pay special attention to getting a solid process in place that won’t impact an on-time filing. Remember, late XBRL can cause a mpany to be nsidered “late".

I predict that many firms who initially outsourced their XBRL will now begin to take a send look at their decision and nsider bringing the whole process back inside the mpany. 

The New Voluntary Program

Although the SEC is officially ending the Voluntary Filing Program on April 10, 2009, they have elected to aept any mpany’s XBRL filings associated with required filings ahead of any mandatory requirements. In other words, any mpany — foreign or domestic, large or small — that is not already mandated to begin filing XBRL after June 15, 2009, can experience the joy of tagging at any time before their mandated time begins. 

From the final rule:

panies that are not required to provide interactive data until a later time will have the option to do so earlier and may provide interactive data at their discretion until required by the amendments. Such a mpany may also tag footnotes individually as a block of text until required to tag the detailed quantitative disclosures within the footnotes and schles, but otherwise must follow the same requirements as those mandated and can only use a grace period for its initial submission and the initial detail-tagged-footnote submission, whether submitted voluntarily or as required by the amendments. panies may cease voluntary submissions at any time and need not tag their financial data at a pace other than at which the rules otherwise would require. (emphasis added)

We will ntinue to nsider, however, the advisability of permissible optional or required interactive data for disclosures made outside a set of financial statements prepared in acrdance with U.S. GAAP or IFRS as issued by the IASB or related financial statement schles required under mission rules.

A new voluntary program with rules has been born. panies can elect to file XBRL schles early but need to follow all the rules set forth in the final rule, the EDGAR filing manual, and XBRL validations. No more VFP where just about anything filing would be aepted. This time if you elect to file XBRL before your mandatory date, you will be expected to mply with all the filing rules that would be in effect if your participation was mandatory.

This gives mpanies the ability to be early adopters and participate at the same time as the mandatory 500 first required filers. panies that take advantage of this option will be able to back out prior to their mandated start time. On the positive side, they will gain both experience and market exposure for their XBRL filings. On the negative side, they will lose their 30 day grace period for filing XBRL schles once they are required to file. The 30 day grace period for the first time they file detailed footnotes will still apply if, during the pre-mandatory period, they do not file detailed footnotes. Once a mpany begins to file detailed footnotes, they will only get one 30 day grace period, regardless if they are filing ahead of their mandatory time or not.

Market forces will determine how many of the send- and third-year mandatory participants will elect to begin their XBRL experience early. Bottom line is that every mpany who is required by law to file with the SEC should be preparing for XBRL submissions as soon as possible.