SEC Improves Usability of Registration Statements and Reports

By Heyward Armstrong, Amy Batten and Gerald Roach


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:

  • Exhibit Hyperlinks: The SEC adopted final rules that require public companies to include hyperlinks to exhibits in registration statements and periodic and current reports.
  • Inline XBRL: The SEC issued proposed rules that would require the use of Inline XBRL.
  • XBRL for IFRS: The SEC provided a notice that the IFRS Taxonomy has been published on its website, paving the way for XBRL to be used by (and ultimately required for) foreign private issuers with financial statements prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

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:

  • General rule: In general, the exhibit index must include hyperlinks to the underlying exhibits (whether attached or incorporated by reference).
  • Scope: The rule applies to nearly all registration statements (including Forms S-1, S-3, S-4, S-8, S-11, F-1, F-3, F-4, SF-1 and SF-3) and reports (including Forms 10, 10-K, 10-Q, 8-K and 10-D) that are required to include exhibits under Regulation S-K Item 601, as well as Form F-10 and Form 20-F. The rule does not require hyperlinks in other multi-jurisdictional disclosure system forms or in Form 6-K.
  • Exceptions: Hyperlinks are not required for exhibits that are filed in paper pursuant to a temporary or continuing hardship exemption under Regulation S-T Rules 201 or 202, exhibits that were originally filed only in paper and not subsequently refiled electronically or XBRL exhibits.
  • Special requirements for registration statements: In response to comments received on the proposing release, the final amendments require exhibit hyperlinks to be included in the initial registration statement filing and each pre-effective amendment, as well as the final registration statement that is declared effective.
  • Effective date: The exhibit hyperlinking requirements become effective on September 1, 2017, although the SEC encourages early compliance.
  • Inaccurate hyperlinks: The SEC provided guidance regarding correcting inaccurate hyperlinks in future filings, and confirmed that an inaccurate hyperlink alone would not impact Form S-3/Form F-3 eligibility or render the filing materially deficient.

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:

  • Applicability: The SEC proposed that the Inline XBRL requirements would apply to, among others, all operating company filers (including smaller reporting companies, emerging growth companies, and foreign private issuers).
  • Phase-in: The requirements to implement Inline XBRL and, for ASCII filers, HTML filings are subject to the following phase-in period:
    • Large accelerated filers (U.S. GAAP financials): Must comply in the second year after the rule is effective.
    • Accelerated filers (U.S. GAAP financials): Must comply in the third year after the rule is effective.
    • All other filers: Must comply in the fourth year after the rule is effective.
  • Website posting requirement to be eliminated: The requirement to post the registrant’s Interactive Data File (i.e., the machine-readable computer code that presents information in XBRL electronic format) to the registrant’s website would be eliminated.
  • 60-day comment period: The SEC has requested comment on the proposed rules, with comments due 60 days after the proposed rules are published in the Federal Register.

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:

  • Existing requirements: On January 30, 2009, the SEC adopted rules that required foreign private issuers that prepare their financial statements in accordance with IFRS as issued by the IASB to provide their financial statements in XBRL format during a three-year phase-in period. However, because the IFRS Taxonomy did not become available during the phase-in period, the requirement was stayed.
  • Effect of availability of the IFRS Taxonomy: Now that the IFRS Taxonomy is available, foreign private issuers can begin submitting their financial data in XBRL.
  • Effective date: Because existing Regulation S-T Rule 405 would require that foreign private issuers are immediately subject to the XBRL filing requirements upon publication of the IFRS Taxonomy, the SEC provided in its notice that foreign private issuers may delay submitting financial data in XBRL form until their first Form 20-F or 40-F, as applicable, for a fiscal period ending on or after December 15, 2017.

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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