XBRL. An extensible
business reporting language. Public companies report in a digital format using
a common taxonomy. Speed. Accessibility. Economy. Comparability. Sounds really good,
right? Well, it could be. Unfortunately, the SEC’s implementation of XBRL is
yet another story of a well-intentioned government program that
refuses to succeed.
Let’s set aside the fact that ‘extensible’ has come to mean that
a company can add new ‘words’ to this business language at any time and for
any reason, or for no reason. Standardization isn’t enforced and comparability
isn’t achieved. XBRL will never be the default ‘reporting language’ of business
until the ‘dictionary’ is controlled.
But there’s an equally troubling aspect of XBRL that
undermines its utility. The SEC’s requirements for tagging company data to the
US-GAAP taxonomy lack specificity and enforcement. Elements from the banking
taxonomy are used by commercial companies. Company ‘duration’ elements are
tagged to XBRL ‘instant’ elements. Company-defined
relationships among elements are inconsistent with the XBRL taxonomy.
Companies routinely redefine standard elements via labeling. And the list goes
on.
Here’s an example. Campbell Soup Company has been using an
incorrect tag in its XBRL filing for years. It’s decided that ‘Other cash flow from
operations’ in its Cash Flow
Statement is a good fit for the US-GAAP subtotal ‘Adjustment to Reconcile
Net Income to Cash … “. And that it’s a good
idea to re-label the US-GAAP element that aggregates all adjusments to net income as ‘Other’. A non-subtotal is
tagged to a subtotal, a standard element is completely redefined and the user
is left to figure it out. This error hasn’t been noticed by the company, nor by
Workiva’s filing software (which should flag obvious tagging errors), nor by
the SEC’s enforcement division (which should run every filing through robust
validity tests).
At AsReported.com, we see exceptions
like these every day in our standardization process. They’re a symptom of the
loose tolerances accepted by the SEC and the filing software that it spawns. With few rules and limited demand for the XBRL product, companies view XBRL as a compliance
headache rather that an investment in more effective communication of financial results.