By Jen Stretch, Manager, Compliance Services
It has been over eight years since the United States Securities and Exchange Commission mandated the use of XBRL with public company financial statements. In that time, the US-GAAP taxonomy has changed drastically. The annual release of updated taxonomies has focused on removing low-use elements and redundancies, promoting consistency, and updating for required changes related to Accounting Standard Updates (ASUs) – but there is always room for improvement.
On May 10, 2017, the Financial Accounting Standards Board (FASB) issued an Invitation to Comment in which it discusses the areas for improvement in the US GAAP taxonomy, as well as the taxonomy update process itself. This blog addresses the first half of the letter, taxonomy quality and usability.
There are five main quality issues that FASB addresses in this Invitation to Comment:
1. Elements that have had minimal usage by filers. With complaints of the excessive taxonomy size and previous efforts to reduce unused elements, the FASB has asked for public input on this issue.
2. Use of dimensions for more than one purpose. Currently, dimensions in the taxonomy are used for several reasons, such as disaggregating data (breaking down company-wide values into components) or identifying what line item on the financial statements includes a tagged value from the footnotes (Income Statement Location [Axis].) Data users, however, have indicated that using dimensions on company-wide values is troublesome and prevents automatic consumption of the data.
3. Multiple ways to tag the same value. The most common example of this is the one that FASB discussed in the letter: property, plant, and equipment (PP&E). The US GAAP taxonomy has individual monetary elements for different categories of PP&E like, land, buildings, and leasehold improvements, but the taxonomy also has members for these categories of PP&E. The same PP&E value can be tagged with a single, specific monetary element, or it can be tagged with a generic PP&E element and more specific dimension.
4. Inconsistencies in the taxonomy. Some disclosures are modeled using dimensions, while some use line items, such as in the PP&E example above.
5. Element extensions or Entity-Specific Disclosures (ESDs). Elements extensions interfere with comparability and the automatability of data consumption.
The FASB has offered several solutions to these US GAAP taxonomy issues, and they want your input. The first solution is to allow the use of dimensions on the financial statements. This would allow FASB to remove line items that are conceptually the same as existing dimensions, and, secondarily addresses low element usage, modeling inconsistencies, and element extensions. The alternative solution presented in the Invitation to Comment is to only allow dimensions to be used to disaggregate data. This directly resolves the use of dimensions for more than one purpose, inconsistencies in the taxonomy, and multiple ways to tag the same value.
The Invitation to Comment provides the pros and cons of each suggested solution for readers and requests feedback from them. XBRL service providers and data aggregators alike are solicited to provide input on this letter and submit it to FASB for consideration. In our next post on the subject, we will discuss the second part of the Invitation to Comment, which involves the taxonomy update process itself.