this is an updated version.

1. Regulatory Implications of
XBRL and other Legal Updates
© 2011 Morrison & Foerster LLP | All Rights Reserved | mofo.com
March 1, 2011
Tel Aviv Stock Exchange Visitor Center
Joseph R. Magnas
Co-Head of Israel Desk
Morrison & Foerster LLP

2. Overview
Scope:
 This presentation applies to operating companies; there are separate rules for mutual funds and nationally
recognized statistical rating organizations (NRSROs).
Topics:
 Introduction to EDGAR; Why interactive information?
 What Exchange Act filings need to be accompanied by Interactive Data?
 What Interactive Data must be tagged?
 Web site posting of Interactive Data
 Quality of Data; Validation & Acceptance
 Who is required to provide interactive information? When?
 Liability
 Officers Certifications
 XBRL in registration statements
 IPO exception
 Price range requirement and pre-effective amendments
 Grace period for registration statements
 Incorporation by reference considerations
 Form eligibility consequences
 Impact on due diligence in public offerings
 Dodd-Frank Issues
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3. EDGAR
 EDGAR is the SEC’s Electronic Data Gathering, Analysis and
Retrieval system.
 EDGAR performs automated collection, validation, indexing,
acceptance and forwarding of submissions by companies and
others.
 The purpose is to increase the efficiency and fairness of the
securities market.
 Not simply a data base; allows for specialized research of particular
companies and the public market as a whole.
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4. Why Interactive Information?
 The SEC’s goal is to “promote efficient and transparent capital markets.”
 Using interactive data, an investor can immediately pull out specific information and
compare it to information from other companies, performance in past years, and
industry averages.
 Requiring the filing of interactive data makes available ways to assess data that has
always been generally available only to large institutional investors.
 The availability of interactive data to the SEC’s staff may also enhance its review of
company filings. According to the SEC, after the FDIC required submission of
interactive data by banks, it reported that its analysts were able to increase the
number of banks they reviewed by 10% to 33%, and that the number of bank reports
that failed to fully meet filing requirements fell from 30% to 0%.
 The SEC noted in citing the statistics, the data required to be provided by the FDIC is
more structured and less varied than the interactive data required to be provided by
the SEC and, accordingly, the FDIC should have be able to realize greater efficiency
than the SEC.
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5. What Exchange Act
Filings Must be Tagged?
 Exchange Act form types potentially requiring interactive data:
 Quarterly Report on Form 10-Q
 Annual Report on Form 10-K
 Annual Report on Form 20-F
 Annual Report on Form 40-F
 Forms 8-K and 6-K if financial information is included.
 Not required on Exchange Act Registration Statements filed on the
following forms:
 Form 10
 Form 20-F
 Form 40-F
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6. What Interactive Data
Must be Filed?
 The financial statements and other financial data; not the MD&A, executive
compensation sections and other financial, statistical or narrative disclosure.
 Balance Sheet
 Income Statement
 Statement of Comprehensive Income
 Statement of Cash Flows
 Statement of Stockholders’ Equity
 Financial Statement footnotes and schedules
 Block text (year one only)
 Detailed tagging (after year one)
 Optional tagging of narrative information
 The voluntary program did not require filers using U.S. GAAP or FPIs using
IFRS to provide tagged data for the footnotes and schedules at all; final rule
does require such disclosure to be tagged, subject to the phase-in described
below regarding the extent of footnote tagging.
 Interactive data should be that of the filer, or at least one of the filers for
filings with multiple filers. If a filer includes separate financial statements of
its parent in a filing for which the parent is not a filer, the filer may not tag the
parent’s financial data.
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7. Footnote and Schedule Tagging
Block Tagging in Year One
 Entire footnotes tagged as a single block of text.
 Entire financial statement schedules tagged as a block of text.
Detailed Tagging in Year Two and Beyond
 Entire footnotes tagged as a single block of text.
 Significant accounting policies in the applicable footnote tagged as a single
block of text.
 Tables within each footnote tagged as a separate block of text.
 In each footnote, each amount (i.e. monetary value, percentage, and
number) separately tagged.
 Optional tagging of narrative disclosure using U.S. GAAP or IFRS
taxonomies.
 In each financial statement schedule, each amount (i.e. monetary value,
percentage, and number) separately tagged.
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8. Who and When?
domestic and foreign Large Accelerated Filers using quarterly report on Form 10-Q or annual report on Form
U.S. GAAP with worldwide public common equity float 20-F or Form 40-F containing financial statements for a
above $5 billion as of the end of the second fiscal fiscal period ending on or after June 15, 2009
quarter of their most recently completed fiscal year
all other Large Accelerated Filers using U.S. GAAP quarterly report on Form 10-Q or annual report on Form
20-F or Form 40-F containing financial statements for a
fiscal period ending on or after June 15, 2010
all remaining filers using U.S. GAAP quarterly report on Form 10-Q or annual report on Form
20-F or Form 40-F containing financial statements for a
fiscal period ending on or after June 15, 2011
foreign private issuers with financial statements annual reports on Form 20-F or Form 40-F for fiscal
prepared in accordance with IFRS as issued by the IASB period ending on or after June 15, 2011
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9. Who and When (cont.)?
Domestic and Foreign Large Accelerated Filers. Domestic Large Accelerated Filers, and foreign
Large Accelerated Filers that use U.S. GAAP, with a worldwide public common equity float above $5
billion as of the end of the second fiscal quarter of the most recently completed fiscal year are
required provide to the SEC an exhibit with interactive financial data with the filer’s Securities Act
registration statement, quarterly, if applicable, and annual reports, transition reports and any reports
on Form 8-K or 6-K that contain revised or updated financial statements. The requirement
commenced with the first 10-Q, 20-F or 40-F containing financial statements for a fiscal period
ended on or after June 15, 2009 (generally, the Form 10-Q for the second fiscal quarter of 2009 for
most filers in this category).
All other Large Accelerated Filers using U.S. GAAP. Remaining domestic and foreign Large
Accelerated Filers have the same requirements but with respect to fiscal periods ended on or after
June 15, 2010 (generally, the Form 10-Q for the second fiscal quarter of 2010 for most filers in this
category).
All remaining filers using U.S. GAAP. All other filers using U.S. GAAP must file the same exhibits
with the Form 10-Q for fiscal periods ending on or after June 15, 2011 (generally, the Form 10-Q for
the second fiscal quarter of 2011 for most filers in this category).
Foreign private issuers with financial statements prepared in accordance with IFRS as issued by the
IASB. All foreign private issuers that prepare their financial statements in accordance with IFRS
must file the same exhibits for fiscal periods ending on or after June 15, 2011 (generally, the Form
20-F for the year ending 2012 for most filers in this category).
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10. Who and When? (cont.)
 A filer first assesses its filing status at the end of each fiscal year (by looking to its
public float as of the end of the most recently completed second quarter) and then
follows the phase-in provisions for that status in the filings it makes during the
immediately following fiscal year. So, a filer may have to start submitting interactive
data with an annual report in some situations. This acceleration applies to the detailed
tagging as well—the filer will have to include detailed tagging with the Annual Report. If
a filer experiences a drop in status, it may be able to skip providing interactive data for
certain periods.
 Assume ABC Co., company with a fiscal year ending December 31, completes an IPO
in July 2009. Under the definition of “Large Accelerated Filer,” the determination of
whether a filer is a Large Accelerated Filer is made at the end of a fiscal year based on
the size of the public float of the filer at the end of the most recently completed second
fiscal quarter. In ABC’s case, at 12/31/2009, the calculation would find it not to be a
Large Accelerated Filer as at the end of 2Q09, it was still a private company. Assuming
at 12/31/2010 it was a Large Accelerated Filer, then it would be required to provide
interactive financial data for the first time with its 10-Q for 1Q11.
 These new requirements do not affect a filer’s requirement to file and provide financial
statements and any required financial statement schedules in the traditional formats.
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11. Who and When? (cont.)
The interactive data exhibits are due at the same time the related
reports or registration statements are filed, with the following
exceptions:
• The initial interactive data exhibit of a filer is required within 30 days of the
due date or filing date, as applicable.
• A 30-day grace period is also available for the detailed tagging required in
year 2.
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12. Web Site Posting Requirement
 Each filer covered by the rules must provide the same interactive data that it
is required to provide to the SEC on its corporate Web site, if it has one, on
the earlier of the calendar day it filed (or was required to file) the related
registration statement or report, as applicable.
 The interactive data should be accessible through the issuer’s Web site
address the issuer normally uses to disseminate information to investors.
 Finally, the interactive data will be required to be posted for at least 12
months, which is consistent with issuers’ full one year reporting cycle.
 Filers can not comply with the Web posting requirement by including a
hyperlink to the SEC’s Web site, which is not the case with other web
posting requirements.
 In the adopting release, the SEC claimed that this is another incentive for
issuers to add content to or otherwise enhance their Web sites, thereby
improving investor experience.
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13. Quality of the Data
 To help ensure that interactive data meets investor expectations of reliability
and accuracy, filers are expected to have policies and procedures in place,
and the SEC will apply its own technology. Market forces and the liability
provisions of the federal securities laws are expected to help further those
goals.
 In the adopting release, the SEC stated that it plans to use validation
software to check interactive data for compliance with many of the applicable
technical requirements and to help the SEC identify data that may be
problematic. The SEC further stated that it expects its technology to:
 check if required conventions (such as the use of angle brackets to separate data) are applied
properly for standard and, in particular, non-standard special labels and tags;
 identify, count, and provide the staff with easy access to non-standard special labels and tags;
 identify the use of practices, including some practices contained in the XBRL U.S. Preparers
Guide, that enhance usability;
 facilitate comparison of interactive data with disclosure in the corresponding traditional format
filing;
 check for mathematical errors; and
 analyze the way that companies explain how particular financial facts relate to one another.
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14. Validation/acceptance issues
 The SEC applies a validation procedure to incoming interactive data
submissions.
 A major error will cause the exhibit to be suspended
The remainder of the filing will be accepted if there are no non-XBRL errors
The filer must revise the exhibit to fix the errors and resubmit the interactive
data using an amendment to the prior filing.
• A minor error will not prevent the interactive data from being accepted by EDGAR;
the interactive data is disseminated along with the filing.
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15. Liability
In accordance with Rule 406T of Regulation S-T (the regulation that governs electronic filings with the SEC), an
interactive data file generally will be subject to the federal securities laws in a modified manner if the filer submits the
file within 24 months of the time the filer is first required to submit interactive data files but no later than October 31,
2014. Basically, there is a temporary two-year phase-in; but, no matter what, filings made after October 31, 2014,
are subject to full liability.
Rule 406T provides that during the time a filer’s interactive data files are treated in this modified manner, they will
be:
 subject to specified anti-fraud provisions except in connection with a failure to comply with the tagging
requirements that occurs despite a good faith attempt to comply and is corrected promptly after the filer
becomes aware of the failure;
 deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the
Securities Act and not otherwise subject to liability under those sections;
 deemed not filed for purposes of Section 18 of the Exchange Act or Section 34(b) of the Investment Company
Act and not otherwise subject to liability under these sections;
 and deemed filed for purposes of (and, as a result, benefit from) Rule 103 under Regulation S-T.
Rule 103 of Regulation S-T protects a filer from liability and anti-fraud provisions of the federal securities laws with
respect to an error or omission in an electronic filing resulting solely from electronic transmission errors beyond the
control of the filer, where the filer corrects the error or omission by the filing of an amendment in electronic format as
soon as reasonably practicable after the electronic filer becomes aware of the error or omission.
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16. Liability (cont.)
 Even if a filer elects to start providing interactive data early, the 24-
month clock does not start until the filer is required to provide the
interactive data.
 Rule 11 under Regulation S-T defines “promptly” as “as soon as
reasonably practicable under the facts and circumstances at the
time.”
 Rule 11 Nonexclusive Safe harbor: A correction made by the later of
24 hours or 9:30 a.m. on the next business day after the filer
becomes aware of the need for the correction is deemed promptly
made. If a filer fails to correct within the safe harbor, it may still be
judged under the “facts and circumstances at the time” test.
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17. Officers Certifications
 The Officer certification requirements of Rules 13a-14 and 15d-14 of
the Exchange Act do not cover the interactive data files.
However,
 The preparation and dissemination of interactive data files will be
part of a filer’s disclosure controls and procedures.
 To the extent that the preparation of interactive data files becomes
integrated into the filer’s business information processing, there may
be implications on internal controls no different than any other
controls.
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18. XBRL in Registration Statements
 Registration statement form types potentially requiring interactive data:
 Form S-1 (except for IPOs)
 Form S-3
 Form S-4 (for the issuer/acquiring company)
 Form S-11
 Forms F-1, F-3, F-4, F-9, F-10
 Interactive data is not required as an exhibit to a Securities Act registration
statement that does not contain financial statements, such as a Form S-3 or
other form filed by an issuer that is eligible to and does incorporate by
reference all required financial statements from its periodic reports.
 Canadian filers that use Canadian GAAP in their Form F-9s and F-10s are
not required to provide interactive financial data.
 Although the registration statements described herein are required to be
accompanied by interactive data, as applicable, the prospectus supplements
and final prospectuses subsequently filed need not be accompanied by
interactive data.
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19. XBRL in Registration Statements
 Financial statements must be tagged:
 Balance Sheet
 Income Statement
 Statement of Comprehensive Income
 Statement of Cash Flows
 Statement of Owner’s Equity
 Notes to the financial statements
 Schedules
 Financial information not required to be tagged:
 Capitalization Table
 Selected Financial Data
 Pro Forma Information
 Acquired company financial statements
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20. IPO Exception
 Interactive data is required as an exhibit to a Securities Act
registration statement that contains financial statements – such as a
Form S-1 that is not incorporating filings by reference – but is not
required in connection with an initial public offering.
 Voluntary submission of interactive data with an initial public offering
is permissible, as long as:
 Interactive data files are included as exhibits as soon as the registration statement
contains a price or price range; and
 Subsequent amendments also must include interactive data if the financial
statements are changed.
 Transitioning to XBRL following an IPO.
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21. Price Range Requirement
 The rules require that interactive data be submitted with a Securities
Act registration statement filing only after a price or price range has
been determined.
 Recognizes that most issues associated with Staff review have been resolved by
the time a price or price range is included.
 Interactive data must be submitted at any later time when the
financial statements are changed in a pre-effective amendment.
 No interactive data file is required with a pre-effective amendment when there has
been no change in the financial statements.
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22. Grace Period
 Under a “grace period” provision, required interactive data files may
be submitted within 30 days after the filing date of the amendment to
the registration statement including the price or price range.
 This is a one-time grace period for the first interactive data
submission (and another grace period applies for the first time
footnotes are tagged).
 Each filer has only one initial submission 30-day grace period,
regardless of whether that initial submission is made voluntarily (i.e.,
in advance of its scheduled phase-in) or as required (i.e., at its
scheduled phase-in).
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23. Incorporation by Reference
 Interactive data files that are submitted with periodic reports are
incorporated by reference (as with the other exhibits) into any
Securities Act registration statements that provide for incorporation
by reference (e.g., Form S-1, Form S-3, Form S-8).
 Incorporation by reference subjects interactive data files to civil
liability provisions under the Securities Act, such as Section 11.
 Web site-posted interactive data is not incorporated by reference
into registration statements.
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24. Incorporation by Reference
 Interactive data files are required when providing revised financial
statements that must be incorporated by reference into short-form
registration statements.
 For the purpose of satisfying registration statement requirements,
issuers need to file a Form 8-K to reflect:
 Retroactively revised financial statements to report discontinued operations
occurring after the year-end balance sheet;
 Retroactively revised annual financial statements to reflect segment reporting
changes; and
 Retroactively revised annual financial statements to reflect the application of
different accounting principles in accordance with FAS 154.
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25. Form eligibility consequences
 If a filer does not make the required interactive data submission by
the required due date (or post the interactive data on the company
Web site on the same calendar day), the filer will be unable to use
short form registration statements on Forms S-3, F-3, or S-8.
 Issuers that are unable to use short form registration also are unable to incorporate
by reference certain information into Forms S-4 and F-4 (see Item 12 of Forms S-4
and F-4).
 Similarly, such filers will not be deemed to have available adequate
current public information for purposes of Rule 144.
 Rule 12b-25 filings are not available if the interactive data is not
ready on time.
 Once a filer complies with the interactive data submission and
posting requirements (and assuming that the issuer is otherwise
timely and current), then it will be deemed to be timely and current in
its periodic reports.
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26. Form eligibility considerations
 Rule 201 of Regulation S-T generally provides a temporary hardship
exemption from electronic submission of information, without SEC or
SEC staff action, when a filer experiences unanticipated technical
difficulties that prevent the timely preparation and submission of an
electronic filing.
 If the filer does not electronically submit the interactive data by the end of the six-
business day temporary hardship period, from the seventh business day forward
the filer will not be deemed current until it does electronically submit the interactive
data.
 Also applies with respect to web posting of interactive data.
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27. Form eligibility considerations
 Rule 202 of Regulation S-T provides a procedure whereby a filer can
request that the SEC Staff grant a continuing hardship exemption.
 The grant of a continuing hardship exemption for interactive data does not require a paper
submission, and the filer will be deemed current until the end of the period for which the
exemption is granted.
 Rule 202 also provides that, if the exemption was granted for only a specified period rather than
indefinitely, the filer will be deemed current up to the end of that period.
 If the filer does not electronically submit the interactive data by the
end of the granted period, from the next business day forward the
filer will not be deemed current until it submits the interactive data via
EDGAR.
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28. Impact on due diligence in public offerings
 Limitation of liability during the first two years.
 Rule 406T provides exemptions from specified liability provisions of the federal
securities laws during the first two years after a filer is subject to mandatory
interactive data requirements.
 During the two year period, the interactive data is not subject to
Section 11 or 12 of the Securities Act.
 The interactive data file is not deemed “filed” or “part of the registration statement
or prospectus” for purposes of Sections 11 and 12.
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29. Impact on due diligence in public offerings
 Liability (including Securities Act liability with respect to registration
statements) will apply for errors after the initial two-year period.
 Must evaluate whether errors in the interactive data file that do not
appear in the official filing would be rendered immaterial by the
correct information in the official filing.
 Evaluating the total mix of information, including both the accurate
and the inaccurate information. See, e.g., Virginia Bankshares v.
Sandberg, 501 U.S. 1083 (1991).
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30. Impact on due diligence in public offerings
 Carrying out a reasonable investigation with respect to interactive data.
 Interactive data from audited financial statements – is it expertized disclosure?
 Potential review of unaudited portions of the disclosure:
Information in tags (e.g., labels); and
Interim period financial information.
• Issuer’s auditors may be called upon to tick and tie interactive data.
• Use of software for detecting errors.
• Although the SEC has been very clear that auditor participation in the
preparation of interactive data is not required, we can expect the use of
attestation engagements with accountants pursuant to which they will verify
interactive data.
• If the filer’s regular accountants get involved in the preparation of the
interactive data, there may be independence issues (see Section 10A of the
Exchange Act).
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31. Dodd-Frank Act Issues
Issues in the Dodd-Frank Act that apply to FPIs
 Many of the Dodd-Frank changes that affect disclosure do not apply to FPIs, but there are a
number of topics that may have significant effects on FPIs.
 Many of the provisions of the Act were directives from the U.S. Congress to the SEC or the
national stock exchanges regarding desired rule making. Accordingly, the effect of many of the
provisions remain unknown.
 The Dodd­Frank Act requires the SEC to compensate certain whistleblowers who provide original
information about violations of the U.S. federal securities laws and provides for a payment equal
to 10% to 30% of the amount of any sanctions, including disgorgement, collected in any
proceeding in which the SEC levies sanctions in excess of $1 million. The Act also give the
whistleblowers a private cause of action against employers that retaliate against them.
 Dodd­Frank requires that stock exchanges adopt listing standards requiring that a listed company
develop and implement a clawback policy that provides that in the case of an accounting
restatement due to the material noncompliance of the issuer with any financial reporting
requirement, the company will recover:
 from all present and former “executive officers” (not just named executive officers);
 any incentive­based compensation received in excess of what would have been paid under the accounting restatement;
 during the three­year period preceding the date on which the company is required to prepare the restatement;
 regardless of whether there was any fraud or misconduct involved (that is, the policy must apply to any accounting errors, intentional
or not, resulting in a material restatement).
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32. Dodd-Frank Issues (cont.)
 Dodd-Frank directs the SEC to issue rules requiring three new types of disclosure
about compensation matters: the comparison of executive compensation and
company performance; disclosure about a company’s hedging policies for employees
and directors; and internal pay ratios. The first two are proxy items, which means they
will not apply to most FPIs. The third, internal pay ratios, may ultimately apply to FPIs.
 Dodd-Frank amended the Exchange Act to include a law requiring the stock
exchanges to adopt listing standards requiring each member of the compensation
committee of a listed company to be an independent director. This provision will not
affect those FPIs that elect not to have a fully independent compensation committee
(in compliance with the rules of the exchanges). The Exchange Act also dictates the
definition of independence for purposes of compensation committee membership.
 Dodd-Frank authorized the SEC to shorten the 10-day period in which greater than
5% beneficial owners must initially report their ownership of a company’s equity
securities to the SEC on Form 13D and to no longer require these reports to be sent to
the company or the national securities exchange on which the securities are traded.
 Non-accelerated filers and smaller company issuers were exempted from the
requirement to provide an auditor attestation report on internal controls pursuant to
Section 404 of the Sarbanes-Oxley Act.
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33. Dodd-Frank Issues (cont.)
 The jurisdictional reach of the antifraud provisions of the U.S. federal
securities laws were expanded, but only with respect to actions by the United
States or the SEC, not private causes of action. Jurisdiction in the United
States was extended for two situations:
 “conduct within the United States that constitutes significant steps in
furtherance of the violation, even if the securities transaction occurs
outside the United States and involves only foreign investors;” and
 “conduct occurring outside the United States that has a foreseeable
substantial effect within the United States.”
 Dodd-Frank amended the U.S. federal securities laws to explicitly provide
the SEC authority to bring enforcement actions against secondary actors
that “knowingly or recklessly” provide substantial assistance to another
person in violating the U.S. federal securities laws.
 Say-on-Pay. Those companies that file a proxy must submit their executive
compensation to an advisory vote of the shareholders. Not a binding vote.
 Frequency. The same companies must solicit a vote from their shareholders
regarding how often the company must solicit the shareholder advisory vote
on compensation. The choices are one, two or three years. This is binding.
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34. Joseph R. Magnas
Co-Head of Israel Desk
E-mail: jmagnas@mofo.com
Israel Phone: +972 (50) 971-4670
U.S. Phone: +1 (212) 336-4170
www.mofo.com/Israel
www.mofo.co.il (Hebrew)
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