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Public Companies Get Permission to Embed XBRL Data in Regulatory Filings

The SEC issued an order allowing public companies to embed interactive-data tags directly into financial statements, instead of preparing them as separate exhibits. The commission believes the change will cut down on tagging errors, and increase the usefulness of eXtensible Business Reporting Language (XBRL) data.

The SEC on June 13, 2016, issued an order permitting so-called “Inline XBRL,” allowing public companies to embed required interactive-data tags directly into financial statements.

The order was issued in Release No. 34-78041, Order Granting Limited and Conditional Exemption Under Section 36(a) of the Securities Exchange Act of 1934 From Compliance With Interactive Data File Exhibit Requirement in Forms 6-K, 8-K, 10-Q, 10-K, 20-F, and 40-F to Facilitate Inline Filing of Tagged Financial Data.

Public companies have been submitting financial statements prepared in the eXtensible Business Reporting Language (XBRL) since the SEC adopted Release No. 33-9002, Interactive Data to Improve Financial Reporting . XBRL is a machine-readable format, and the rule was intended to make financial statements more useful to researchers, regulators, and investors.

The XBRL statements have been submitted as separate exhibits with their regulatory filings called “XBRL Instance Documents.” The SEC believes the two-stage financial statement process contributes to tagging errors and other data quality problems.

With the order in Release No. 34-78041, companies can embed XBRL data in financial statements under a single document filed in Hypertext Markup Language (HTML), the standard language for creating web pages.

Data quality improvements from the use of Inline XBRL “may contribute to wider use of XBRL data by market participants and may enhance the benefits that are associated with XBRL more generally,” the SEC wrote in the order. The changes, which are voluntary, apply to filings through March 2020.

XBRL advocates, as well as SEC officials, have pushed for years for the commission to adopt Inline XBRL.

In a November 2015 speech in New York, Republican Commissioner Michael Piwowar called on the SEC to “move promptly” to modify its online filing system, known as EDGAR, to allow for a pilot program for Inline XBRL. Piwowar said Inline XBRL “has the potential to improve the accuracy of structured data, ease burdens on issuers, and facilitate easier review.”

Democratic Commissioner Kara Stein, in September 2015 remarks to the Institute of Chartered Accountants in England and Wales, called for mandated Inline XBRL reporting.

The lack of such a requirement “contributes to poor data quality for investors and extra costs for companies,” Stein said. “Today’s data-driven markets are simply demanding more.”