Staff Observations of Custom Axis Tags
Filers should carefully evaluate their need for custom axis tags and, where possible, eliminate their use
|Wednesday, March 30, 2016|
By SEC Staff, Reports and Publications
As part of our ongoing process to monitor registrant compliance with the requirements to report their financial information in their eXtensible Business Reporting Language (XBRL) exhibits,1 staff in the SEC Division of Economic and Risk Analysis recently assessed certain aspects of the XBRL exhibits that affect the data quality of the disclosures provided. Specifically, the staff examined the use of custom axis tags in XBRL exhibits that reporting companies submitted with their annual reports on Form 10-K. An axis tag in XBRL allows a filer to divide reported elements into different dimensions (e.g., revenue by geographical area, fair value measurement levels, components of total equity (e.g., common, preferred)) while also showing the relationships between separately reported elements. Over 300 standard axis tags exist in the U.S. GAAP taxonomy, and the average annual XBRL exhibit uses about 20 axis tags. In general, the need to create a custom axis tag – one that is not in the standard taxonomy – should be infrequent. When companies create a custom axis tag when an appropriate standard axis tag already exists within the U.S. GAAP Taxonomy, data quality is diminished and comparability among and between reporting company filings is unnecessarily impaired.
The staff’s analysis resulted in a few key observations. First, unlike our previous staff observations that revealed a lower average rate of custom line item tags among large filers,2 staff observed a higher average use of custom axis tags as filer size increased, with the rate of custom axis tags highest for large accelerated filers. Second, for a random sample of filings that staff reviewed, staff observed instances of filers creating custom axis tags unnecessarily when an appropriate standard axis tag existed in the U.S. GAAP taxonomy.
Staff believes that the complexities of larger company financial disclosures may contribute to the higher rate of custom axis tags among the larger filers. Filers should carefully evaluate their need for custom axis tags and, where possible, eliminate their use. Because FASB updates the U.S. GAAP Taxonomy on an annual basis, filers should take the opportunity to re-evaluate their axis tags with each new release. FASB offers updated models and guidance for structuring dimensioned information using axes within the U.S. GAAP Taxonomy.3 Filers can reference those models and guidance in order to accurately represent their structured disclosures, and to help comply with the Commission’s rules.
As with all custom tags, Commission rules only allow filers to create custom axis tags when the U.S. GAAP Taxonomy does not provide a choice that appropriately describes the filer’s particular reporting need.6 The use of custom axis tags can adversely impact the ability of investors and other market participants to compare and analyze financial statement data, particularly footnote disclosures which generally rely on axis tags to identify the reported information. In particular, when filers characterize like-dimensions differently by creating custom axis tags, automated information processing and large-scale statistical analysis across filings is unnecessarily inhibited. In contrast, when filers use standard axis tags, investors can more easily compare financial information over time at the same reporting company, and at the same point in time across different reporting companies.
II. STAFF OBSERVATIONS
Average % of filings with custom axis tags (XBRL exhibits submitted with annual reports on Form 10-K)
Note: Based on 2013 – 2015 XBRL exhibits to annual reports on Form 10-K (as of September 1, 2015).
Notable Examples of Custom Axis Tags Use
Creation of custom axis tag when appropriate standard axis tag already existed in the U.S. GAAP Taxonomy. Staff observed instances where filers created a custom axis tag when an appropriate standard axis tag existed. For example, there is already a standard axis for subcategories of “cash and cash equivalents.” It is inappropriate to create a custom axis tag for “only cash.”12