In a bid to promote efficiency, transparency, and operational resiliency, the US SEC has adopted new rules mandating the electronic submission of a host of different paper forms by amending them for use with XBRL. In this short piece, we focus on the US SEC’s rule regarding Form 11-K.

What is an 11-K and how is it changing?

To be tagged using iXBRL as per the US SEC’s final rule Updating EDGAR Filing Requirements and Form 144 Filings, the 11-K is used by companies for reporting on employee stock purchases, savings, and related plans. The rationale behind the adoption of iXBRL for Form 11-K is the increased transparency it will bring to insiders’ trades in addition to simplifying access to data that can help consumers understand the internal sentiment. The easy analysis and comparability afforded by the XBRL standard due to its machine-readable nature contribute to this in a big way.

What will need to be tagged in Form-11K?

Mirroring the iXBRL reporting requirements of financial information contained in annual reports on Forms 10-K, 20-F, and 40-F, every data point in the financial statements required by Form 11-K will need to be tagged in iXBRL. It also means that registrants will need to apply block tags to narrative disclosures such as notes to the financial statements, along with detailed tags to numeric facts that are present in them.

What has brought about the adoption of this rule?

In November 2021, the US SEC unanimously voted to propose improvements to its filing rules for issuers, investment advisers, funds, and others. Among these proposals, most documents that permit electronic submission but do not require it would now have to be mandatorily submitted in iXBRL. This was done with a view to making the filing process less burdensome and more resilient in the face of disruptive events such as COVID-19.

How much time do filers have to comply with this new rule?

There is a three-year transition period after the effective date of the amendments for Form 11-K filers to comply with the iXBRL requirements. This rule is effective 30 days after publication in the Federal Register. Registrants are advised to start preparing for this transition as soon as they can to get ahead of the curve and ensure a smooth shift.

What other amendments does the new SEC rule bring?

Apart from amendments to the existing Forms 20-F, 40-F, 6K, 10K, and the previously mentioned 11-K, the SEC is bringing changes to mandate the electronic submission of Form 144 (Notice of Proposed Sale of Securities) as well as that of the “Glossy” Annual Report to Security Holders. In addition to this, it will require the electronic filing of Certifications of Approval of Exchange Listing as well as that of certain Foreign Language Documents. It is also bringing changes to the Transition Periods.

US SEC Chair weighs in on the new rule

Speaking about the new rule at length, SEC Chair Gary Gensler said he was extremely pleased with the announcement as it will modernize and improve the efficiency of the filing process.

“This is particularly important during COVID-19, which has made in-person visits to access these filings even more challenging. Even when access to physical copies isn’t restricted, there are other costs associated with paper filings. It costs investors money and time to travel to the SEC’s reading room. It costs the SEC money and time to process paper filings. These amendments will reduce costs and drive more efficiencies for investors, filers, and the SEC”, he said.

IRIS CARBON® has been involved with US SEC iXBRL filings for over a decade. Get in touch with us today if you’re looking to produce high-quality iXBRL reports.

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