On December 2, 2021, the SEC adopted a Final Rule implementing the requirements of the Holding Foreign Companies Accountable Act (HFCAA). You can read more and find a link to the related Fact Sheet here. (Remember to include new Item 9C in your next 10-K!)
To implement the reporting required by the HFCAA the SEC must determine each reporting company’s auditor and the auditor’s location. The Final Rule includes an addition to the “Document Entity and Information” section of the XBRL taxonomy for this information:
Consistent with these commenters’ suggestions, the final amendments include a new tagging requirement to facilitate the Commission’s accurate and efficient identification of Commission-Identified Issuers. To implement this requirement, in December 2021, the Document Entity and Information (“DEI”) taxonomy will be updated to include three additional data elements, applicable to annual report filings on Forms 10-K, 20-F, and 40-F that are submitted with XBRL presentations. Those three data elements will identify the auditor (or auditors) who have provided opinions related to the financial statements presented in the registrant’s annual report, the location where the auditor’s report has been issued, and the PCAOB ID Number(s) of the audit firm(s) or branch(es) providing the opinion(s).
The update to the EDGAR filing manual was released on December 20, 2021. All annual reports for periods ending on or after December 15, 2021, will require these new tags.
Details of the new tags are included in Volume II of the EDGAR Filer Manual. Section 6.5.54 begins with this language:
Auditor Name, Location, and Firm ID
The name represents the plain text (not logo nor signature) name of the auditor; the location text represents the city along with either or both country, US state or Canadian province; the firm ID is the auditors’ Firm ID as assigned by the US PCAOB.
If the DEI namespace version used in the filing has those three standard elements, then the absence of any of the three facts will cause the filing to be suspended (see table in 6.5.21).
If the DEI namespace version used in a filing does not have the three standard elements, the use of that DEI namespace version will cause the filing to be suspended. The filer will need to resubmit the filing with a DEI namespace version that has the three standard elements.
All three facts must also be visible in the sense defined by 5.2.5.14, and should be tagged where they normally appear, adjacent to the auditors’ opinion.
An interesting aspect of this change is that generally only information prepared by the company is tagged. How information about the company’s auditor will be tagged by management is likely something companies should discuss with their auditors.
As always, your thoughts and comments are welcome.