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SEC Improves Usability of Registration Statements and Reports

March 20, 2017
By Heyward Armstrong, Amy Batten, Gerald Roach and Margaret Rosenfeld

Overview

On March 1, 2017, the Securities and Exchange Commission (SEC) took a number of actions that will impact the filings that public companies make on EDGAR:

This Alert provides a brief summary of each of these actions and provides practical guidance for public companies so that they are prepared to comply with these requirements as they may become applicable.

Exhibit Hyperlinks

Through amendments to Regulation S-K Item 601 and Regulation S-T Rules 102 and 105, the SEC has greatly simplified users’ ability to review exhibits that are filed with registration statements and periodic and current reports by requiring the exhibits listed in the exhibit index to be hyperlinked to the text of the actual exhibit. Hyperlinked exhibits should help eliminate the time that is wasted looking for previously filed exhibits and make the filings more integrated and user friendly for investors. 

Here are the key takeaways for public companies:

As a practical matter, these new requirements should not impose a significant burden on issuers, as we understand that filing agents and providers of EDGAR filing software are prepared to assist issuers in complying with these new rules. Particularly for the first filing using hyperlinks, we recommend that issuers ensure there is a sufficient amount of time between the time the document is sent to the filing agent and when it will be filed to confirm that the exhibit hyperlinks work correctly. 

In connection with these new requirements, the SEC’s amended rules now generally require registration statements and reports that are required to have hyperlinked exhibits to be filed in HTML, as opposed to ASCII, format. As nearly all issuers now make their filings in HTML format, only a small subset of public companies will be impacted by this requirement.

Inline XBRL

On June 13, 2016, citing a number of benefits to registrants and investors alike, the SEC issued an exemptive order to permit operating companies to use Inline XBRL through March 2020. On March 1, 2017, the SEC proposed amendments to Regulation S-T Rule 405 that would require registrants to use Inline XBRL in their filings. When Inline XBRL technology is used, the filer or its filing agent tags the required financial disclosures within the HTML document itself instead of copying the tags into a separate XBRL exhibit. The SEC believes that using Inline XBRL may reduce the time and resources spent on preparing and reviewing XBRL filings, improve the quality of XBRL data, and increase the use of XBRL data by users of financial statements. 

Here are the key takeaways of the proposed amendments for public companies:

At this time, we recommend that public companies monitor developments in these proposed rules and, if they have particular experiences or concerns they desire to share with the SEC, provide them to the SEC during the comment period. We understand that filing agents and providers of EDGAR filing software are prepared to assist issuers in complying with these proposed rules, if and when they are finalized, without significant burden on public companies.

IFRS Taxonomy 

On March 1, 2017, the SEC announced that the long-awaited IFRS Taxonomy is now available for foreign private issuers to submit their financial statements in XBRL format. 

Here are the key takeaways for public companies that prepare their financial statements in accordance with IFRS as issued by the IASB:

Once this year’s Form 20-F or 40-F has been filed, we recommend that foreign private issuers begin preparing for mandatory XBRL in next year’s Form 20-F/40-F. Since the Form 20-F/40-F will be fresh in the foreign private issuer’s (and its filing agent’s) mind and likely will not change significantly the following year, the registrant (or, more likely, its XBRL advisor) can begin the XBRL tagging process by applying tags to the financial information included in the just-filed Form 20-F/40-F, and then those tags can be rolled forward later to the following year’s filing.

If you have any questions about EDGAR filing requirements or if you would like to learn more about the issues covered in this Alert, please contact your Smith Anderson lawyer.

Special thanks to Alex Bowling, contributing writer.

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