Friday, 5 May 2017

Will there ever be less XBRL data items?

If you read my previous post, you will know that the arrival of the SEC US-GAAP Taxonomy unleashed a veritable tsunami of data items on a concerned body of filers and a bewildered bevy of investors.

So with so many data items milling around, you would have thought that someone or something might be sent out to clean it up. Well the good news is that in late 2014, the FASB launched the Xbrl Taxonomy Simplification Initiative.

And now the not so good news...


Looks good until you realise that this represents the rate of change. In other words you don't really want the blue line exceeding the red line. But you can actually see the impact of the 2014 initiative as the red line finally jumps above the blue one through 2015/2016 reaching a peak of 681 deprecated items in 2016. I have to say I still find it staggering that there are so many items to choose from given how few items companies actually disclose in their 10-K's and Q's.

So is there any way out of this forest? Well all is not entirely lost because in March 2017 the SEC finally agreed to allow foreign filers to use the IFRS taxonomomy. This is good on two counts. One it means that all foreign filers will for the first time be required to file XBRL which starts to answer the is it only for US Companies question (more on this later!) and two it establishes a precedent that a taxonomy does not have to have 16,000 data items.

The IFRS Taxonomy which is designed to satisfy the filing requirements of every country around the world, not just one large country, has only 4,610 items. It did have a lot less (47% less to be precise back in 2011 when it was originally scheduled to be mandated) but I think they were told to bulk it up a bit if they wanted to get SEC approval (sound of head banging on table). A group was tasked with adding items by custom or practice (and approx. 1,000 Common Practice items have been added since then). During this process no specific consideration is given to how useful an item's structural relationship might be - this is sadly not the philosophy behind either the IFRS or US taxonomy. Well at least 4,500 is a lot better than 16,000.

IFRS based XBRL is likely to be adopted for mandatory filing in Europe in 2020 and one would imagine the rest of the world will fall into line after that (completely answering the US Companies only question). Most of the world now uses International Financial Reporting Standards or has standards based on them.

I should point out that I am a member of the IFRS Taxonomy Consulative Group (ITCG). But this is not why I'm a relative fan of the IFRS taxonomy. It's just got less items in.

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