In recent years, the SEC has increased its focus on Inline XBRL (eXtensible Business Reporting Language) as a means to improve the accuracy and usability of corporate financial disclosures. Since adopting the Inline XBRL requirements, the SEC has emphasized compliance through regulatory updates and guidance. Following the passage of new legislation in December 2022 aimed at enhancing corporate financial data quality, the SEC issued a sample letter in September 2023 to address common issues and provide clarity around Inline XBRL disclosures.

Below, we break down the six comments included in the SEC's sample letter and their implications for companies:

1. Inline XBRL Presentation Requirements

The SEC reminded companies of the need to comply with Item 405 of Regulation S-T, which mandates the inclusion of Inline XBRL in filings. Companies must ensure their filings are properly formatted and compliant with the EDGAR Filer Manual. Non-compliance could lead to amendments and delays.

2. Consistent Reporting of Common Shares Outstanding

Companies were flagged for discrepancies in the tagging of common shares outstanding, where different scales (e.g., full value vs. thousands) were used for the same data point. The SEC requires consistency in reporting, especially for critical elements like "EntityCommonStockSharesOutstanding."

3. Pay vs. Performance Inline XBRL Tagging

Under the Pay vs. Performance rules (Regulation S-K Item 402(v)), companies must tag all data points in Inline XBRL. The SEC reiterated that disclosures must adhere to the requirements outlined in Item 405 of Regulation S-T and the EDGAR Filer Manual. Companies should ensure accurate tagging to avoid compliance issues.

4. Relationship Disclosures and Inline XBRL

While combining data points in graphs or tables is permissible under Item 402(v)(5), the SEC emphasized that each required item must still have a separate XBRL tag. Proper tagging ensures the comparability and usability of reported data.

5. Consistency in XBRL Element Selection

The SEC identified cases where companies used different XBRL elements for the same income statement line items across reporting periods. Companies are expected to maintain consistency unless changes are justified by material differences in the nature of the items.

6. Custom Tags and U.S. GAAP Compliance

The use of custom XBRL tags, rather than standardized U.S. GAAP tags, was flagged. Companies should use custom tags only when no appropriate standard tag exists and provide an explanation if opting for custom tags. Ensuring alignment with current U.S. GAAP taxonomy minimizes errors and increases data reliability.

What This Means for Companies

The SEC's increased focus on Inline XBRL is a clear signal for companies to prioritize compliance. To avoid potential amendments, penalties, or reputational risks, companies should:

• Work closely with qualified EDGAR agents to ensure technical compliance.
• Conduct regular internal reviews of XBRL tagging processes.
• Stay updated on SEC guidance, including compliance and disclosure interpretations.
• Utilize consistent XBRL elements for comparable line items across reporting periods.
• Align disclosures with U.S. GAAP taxonomy and minimize custom tagging.

The emphasis on Inline XBRL highlights the SEC's commitment to improving data quality and transparency. Companies should proactively address these requirements to stay compliant and foster trust with regulators and investors alike.