Companies that file financial statements in the United States following international accounting rules may be getting a pass on their first submission of those financial statements in the new data-interactive XBRL format.

Securities and Exchange Commission staff sent a letter to the Center for Audit Quality acknowledging that it would be impossible for foreign private issuers, or those who file their financial statements with the SEC following International Financial Reporting Standards, to file in XBRL following SEC rules. That's because the SEC has yet to specify the XBRL taxonomy that IFRS filers should follow.

Foreign private issuers are among the third and final wave of companies coming under the SEC mandate to file financial statements for the first time in the XBRL format this summer. The largest companies, those with a float of $5 billion or more, filed for the first time in 2009 while the rest of the large accelerated filers submitted in XBRL for the first time in 2010. In June 2011, smaller public companies and foreign private issuers filing under IFRS are required to furnish their financial statements in XBRL for the first time.

To provide financial statements in XBRL according to SEC's rules, companies must follow a taxonomy approved by the SEC. A taxonomy is a list of computer-readable tags in XBRL that allows companies to tag the thousands of bits of financial data that are included in financial statements and footnote disclosures. The tags allow computers to automatically search, assemble, and process data to makes it easy for users to access and analyze it.

On March 25, the IFRS Foundation finalized a 2011 IFRS taxonomy that would be followed by IFRS issuers to file in XBRL. The SEC has not yet approved that taxonomy, and hasn't said when it expects to do so. An SEC spokesman said the IFRS Foundation is still working on the taxonomy. When the Financial Accounting Foundation finalized the 2011 taxonomy for Generally Accepted Accounting Principles in January, it took about five weeks for the SEC to approve it.

The CAQ wrote to the SEC's top accounting officers with concern that companies do not have adequate time to study the taxonomy and make detailed tag selections to meet the XBRL filing deadline, which applies to any fiscal periods ending on or after June 15, 2011. Even further, said CAQ Executive Director Cindy Fornelli, the CAQ hears there are lingering concerns about whether the 2011 IFRS taxonomy as adopted by the IFRS Foundation might require some further work before it would be useful to investors.

The CAQ is worried that companies following the taxonomy might still need to create numerous “extensions,” or custom tags, to adequately describe each item in their financial statements. The SEC has expressed concern about excessive extensions in the early GAAP XBRL submissions. Until taxonomy issues are resolved, the CAQ is worried that any benefits from XBRL submissions for IFRS filers “may not outweigh the cost and effort to be expended and that additional time is necessary to further develop the IFRS taxonomy,” wrote Fornelli.

Meredith Cross, director of the Division of Corporation Finance, and James Kroeker, Chief Accountant at the SEC, answered the CAQ inquiry with a “no action” letter, which is a staff-level determination that enforcement action won't be recommended against issuers who don't follow SEC rules. “We are of the view that foreign private issuers that prepare their financial statements in accordance with IFRS as issued by the IASB are not required to submit to the Commission and post on their corporate websites, if any, Interactive Data Files until the Commission specifies on its website a taxonomy for use by such foreign private issuers in preparing their Interactive Data Files,” Cross and Kroeker wrote.

The letter gives no indication, however, of when the SEC expects to approve the IFRS taxonomy and therefore how that might impact the June 15 effective date for XBRL filing requirements. Cross and Kroeker also make no acknowledgment of CAQ's concerns about the readiness of the IFRS taxonomy to adequately serve this year's filing needs.