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Unique Financial Disclosures – Is XBRL Beneficial or Problematic?

Lou Rohman, Vice President, XBRL Services, Merrill Corporation | February 07, 2017

If you’ve prepared or reviewed SEC financial statements that are tagged with XBRL, you know it happens. The financials include a disclosure for which there is no appropriate tag in the dictionary of tags (the US GAAP Taxonomy).

Unique Financial Disclosures Lou Rohman Blog

So what do you do? You create your own unique tag (an extension tag) and add it to your company’s XBRL filing, as required by the SEC rules.

Beneficial or Problematic

And this starts the XBRL debate. Are unique tags beneficial or problematic?

Some say they’re beneficial. With unique tags it’s easier to identify the unique disclosures of the company, something that surely anyone would want to know. With unique tags, analysts comparing companies can quickly tell which disclosures aren’t comparable to other companies, something that surely helps prevent comparing apples to oranges. And tagging this data with unique tags, as opposed to skipping over it and leaving it untagged, results in the digital financial report including all of the rich data that is in the traditional paper-based financial report. Again, that’s something that surely consumers of the financials want to have.

However, some say they're problematic. These unique tags create inefficiencies in analyzing the XBRL data. Most XBRL consumption software currently can’t make sense of these unique tags, so the extensions often get omitted from the analysis and are set aside unused. Also, when comparing across companies it is tough for software to even categorize a unique tag for comparison purposes,since the tag has little or no meaning to the software. Adding to the problem is that, within the filings of a given company, unique tags can change from quarter to quarter making consistent automated analysis very difficult.

And one more thing - having permission to create unique tags enables some preparers to go too far – they erroneously create a unique tag for a disclosure when there is an appropriate US GAAP tag that should have been used. That’s problematic too, but I’ll leave that topic for a different day.

Possible Solution

A possible solution is to require that each unique tag somehow be anchored or connected to a tag from the US GAAP Taxonomy. For software consumption purposes, this would give extra meaning to the unique tag since it would be associated with a US GAAP Taxonomy tag. Since the software knows the US GAAP tags, it would know more about the unique tag. Software would then, at a minimum, understand the basic concept of the unique disclosure and how it fits into the financial statements. If it’s done properly, the unique tag wouldn’t be kicked to the curb, rather it would provide the rich disclosure information it was intended to provide.

But what do I mean by “if it’s done properly”? Well, there will be an answer forthcoming for that. XBRL International has convened a task force, of which I’m a member, which will arrive at recommended ways to give more meaning to unique tags. The Entity Specific Disclosure Task Force will provide recommendations that aren’t just for the US SEC; they will be for any regulator that has an XBRL program.

Adoption of Changes for SEC XBRL

In the US, for these recommendations to be effective, the SEC would need to agree to and implement them, resulting in a change to the EDGAR Filer Manual. So although this would take some time, it seems like one of those things that needs to happen. The change seems very valuable and necessary to achieve more effective XBRL financial reporting and efficient consumption of it. There’s even a good chance it will finally bring an end to the debate – whether unique tags are beneficial or problematic

I agree

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