By Jen Stretch. The SEC is paying close attention to the quality of your company’s XBRL tagging, and it is critical to avoid common mistakes. According to a study conducted by XBRL US, many common (and preventable) XBRL errors are committed each year come filing time. In this blog series, we will explore the four most common XBRL mistakes. Part one will focus on invalid member axis combinations.
Accounting for over one third of errors identified by XBRL US, the invalid axis member combination is, by far, the most common XBRL error. This is a qualitative error that occurs when a member and axis are used together inappropriately and do not make “financial sense.” With the number of axes and members in the US GAAP Taxonomy, there are numerous possibilities for incorrect combinations.
The offense that XBRL US has noted occurs most frequently is the incorrect use of ParentMember under LegalEntityAxis. The intention of ParentMember and its home axis, EquityComponentsMember, is to identify the portion of equity that is attributable to the parent (i.e., excluding non-controlling interests). When filers place ParentMember under LegalEntityAxis, they combine equity reporting and legal entity concepts and this does not make sense in financial terms.
LegalEntityAxis should only be used with its intended member, ParentCompanyMember, which, by definition, is intended for the legal entity acting as a parent of a company in a parent/subsidiary relationship.
Some errors may be obvious when reviewing a company taxonomy, such as an asset type member housed under a liability type axis, but others may require a more detailed analysis as seen in the following example.
You may be reviewing your taxonomy and see SeniorNotesMember (a standard us-gaap element) under DebtInstrumentAxis and think that this is an appropriate combination; XBRL US, however, would disagree.
They advise against using any non-extended member in combination with DebtInstrumentAxis as this specific axis is intended for the name of company specific debt instruments (as indicated by the associated domain DebtInstumentNameDomain.) In this situation the appropriate action would be to investigate the tag to determine whether a replacement is needed for the member (which would be an extension) or the axis (which would be a more appropriate axis of either LongTermDebtTypeAxis or ShortTermDebtTypeAxis, etc.)
As we saw in the previous example, not all invalid combinations will jump out to the average user. It is important to carefully consider the member axis combinations by asking yourself the following questions (keeping in mind the overall goal of making financial sense out of the data):
- Is the member appropriate for the concept being tagged?
- Is the axis appropriate for the concept being tagged?
- Are the axis and member appropriate for each other?
- Is there a more accurate member/axis available in the taxonomy?
Filing with this type of error leaves inaccurate and potentially misleading data for public consumption and can be easily prevented, so consider incorporating some of the following preventative and correctives steps into your process.
Training: If your internal reporting staff is responsible for element selection, make sure they are properly trained to analyze member axis combinations for appropriateness.
Review New Taxonomy Items: Implement a review process for new member/axis/element selection. With the vast array of members and axes that are available in the taxonomy, two heads really are better than one at identifying those easy to miss member axis combination errors.
Review Existing Company Taxonomy: When you have some down time between filings (and hopefully you do), take some time to review your existing taxonomy structure for appropriateness. If you wait until crunch time in your filing schedule, it is more likely to get pushed aside for next quarter.
Validation: There are several validation tools out there that will identify this type of error, among others, and summarize them in a report which can then be addressed. Through our partnership with XBRL US this validation can be completed in the Disclosure Management platform.
The quality of your XBRL tagging speaks volumes about your company’s financial disclosures. A disclosure management platform can help you avoid these errors with a series of validation warnings. Be sure to read Part 2: Negative Value Errors, Part 3: Required Value Not Reported, and Part 4: Date Error.