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On May 30, 2008 the SEC proposed that issuers be required to file a supplemental exhibit which would "tag" their financial statements in an interactive data format (a.k.a. – XBRL: "Extensible Business Reporting Language"). At its December 17, 2008 open meeting, the SEC voted to require public companies and mutual funds to use interactive data for financial information, which has the potential to increase the speed, accuracy and usability of financial disclosure and eventually reduce costs for investors. The final rules were similar to the previously proposed rules with some minor amendments.

XBRL provides an identifying tag (similar to bar-coding) for each individual item of financial data. All the elements are grouped together into a collection of financial and business-reporting terms called a "taxonomy." A taxonomy is simply the collection of predefined tags that are available for registrants to "affix" to their financial data.

XBRL is not an accounting standard and will not change what is reported, only how it’s reported. The tagging means that the information in a business report is computer readable and can be more easily extracted, searched and analyzed by users of that information.

The rule calls for a three-year phase-in period for all companies and each company will have two years to fully comply with the XBRL requirements. Phase-in details are as follows:

Year 1

Large Accelerated Filers with greater than $5 billion in common equity float (as of the end of a company’s preceding second quarter) and filing under U.S. GAAP must comply beginning with their registration statements, periodic and transition reports that contain financial statements for fiscal periods ending on or after June 15, 2009.

Year 2

All remaining U.S. GAAP-based Large Accelerated Filers must comply for fiscal periods ending on or after June 15, 2010.

Year 3

All remaining filers, including International Financial Reporting Standards (IFRS)-based filers and smaller reporting companies, must comply for fiscal periods ending on or after June 15, 2011.

XBRL submissions will be provided in addition to traditional filings (e.g., EDGAR) for the duration of the phase-in period. The successor to the EDGAR database will be the IDEA system, short for Interactive Data Electronic Applications. The IDEA system was unveiled in mid-August 2008 by the SEC and Chairman Cox which is based on a completely new architecture built from the ground up. It will at first supplement and then eventually replace the EDGAR system.

XBRL tags must be applied to information contained in the primary financial statements and footnotes. For all mandated filings, a separate XBRL tag would be required for each piece of data or numeric item contained in the primary financial statements. In the first year of interactive reporting, each footnote would be required to have a single discrete XBRL tag (referred to as "block" or "summary" tagging). In the second and subsequent years, filers would be required to use discrete tagging.

Detail tagging is when specific pieces of information within a footnote or schedule are given an individual XBRL tag. This means that a single footnote will typically require the use of more than one XBRL tag in order to completely create it in XBRL format.

The final rule requires companies to provide the interactive data file at the same time as the filing to which it relates.

Companies will have limited protection from liability similar to the protections that were available for XBRL filings made under the initial voluntary program. If the interactive data file is submitted in accordance with the filing requirements of rule 405, the company will be protected from liability for making a false or erroneous interactive data filing. Rule 406 provides limited protection to a company that filed an erroneous document if the company made a good faith and reasonable effort to file correctly, and if the company corrected the filing as soon as reasonably practicable after becoming aware of the mistake. However, this protection is limited and phases out over a two-year period and terminates completely in October 2014. Just as with the traditional (HTML/ASCII) filing, it would not protect a company from liability under the anti-fraud provisions of the federal securities laws for filing materially false or misleading information or omissions.

The final rule excludes XBRL files from the officer certification requirements under Securities and Exchange Act regulations and it does not require formal auditor involvement in terms of reviewing or attesting to the XBRL submission.

The SEC is also working with key regulators and standard setters around the world, to begin aligning XBRL initiatives. Longer term, XBRL may also play a significant role in the global movement toward International Financial Reporting Standards (IFRS). The SEC, and Chairman Cox in particular, has drawn an explicit link between the SEC’s XBRL initiative and the Commission’s growing support for IFRS, convergence, and the development of one set of global standards for financial reporting.

There are two general approaches for companies to undertake this "tagging" process: a "bolt-on" approach and a "long-term" approach.

The "bolt-on" approach is the less expensive alternative as it allows the company to maintain the same financial reporting process that it currently has and once the financial statements and footnotes are completed they are then converted into XBRL format. This approach will be more attractive to companies as it will not require a significant investment to implement.

The second approach, which is more long term in nature, builds the "tagging" into the financial reporting software package so that the "tags" are maintained internally at the transaction level.

Either approach chosen to comply with this SEC mandate will require companies to modify their existing timelines for financial reporting as XBRL reporting will create an additional layer of review. The earlier companies begin thinking about and considering the implications of this SEC mandate, the easier the adoption of XBRL will be for registrants.