The staff in the SEC Division of Economic and Risk Analysis is required to assess any aspects of XBRL that could potentially affect data quality. Recently, the SEC staff specifically examined XBRL custom axis tags, also known as segment tags, submitted in annual reports associated with the Form 10-K. Axis tags are utilized in XBRL by allowing filers to differentiate between reported elements through the use of dimensions. These dimensions can include a variety of things, such as differentiating revenue based on geographical location. These tags are useful because they demonstrate the relationships between elements that have been reported separately.
Key observations of XBRL tagging
The staff noted that currently over 300 standard axis tags exist in the taxonomy, but the average XBRL exhibit only utilizes about 20 of these tags. The standard axis tags that currently exist encompass a large amount of possible scenarios, so custom tags were meant to be used infrequently. Custom tags are only permitted to be utilized when the Taxonomy does not provide an appropriate choice for the filer’s respective reporting needs. However, custom tags are being frequently used when an appropriate standard axis tag already exists, which reduces data quality. Comparability among filings is also increasingly impaired as more custom axis tags are used.
In previous staff observations, it was revealed that large filers typically have a lower rate of custom axis tags. However, these most recent observations revealed that as filer size increased, so did the amount of custom axis tags used. Smaller reporting companies tend to use axis tags much less frequently. This could be explained by the less complex financial disclosures required of smaller reporting companies. However, approximately 50% of all filers create one or more custom axis tag with each filing.
The staff also took as sample of custom axis tags and found several common errors:
• Filers created custom axis tags, when there was already an appropriate standard axis tag.
• Some filers are under the impression that standard axis tags are not able to be used multiple times per filing, and therefore create custom axis tags that they can reuse. However, several axis tags are designed for reuse, and so creating a custom axis tag is unnecessary.
• Creating non-practical custom axis tags, such as creating custom axis tags when no axis tag is necessary.
The SEC’s observations have been released in hopes that filers will become more informed as to why reducing the usage of custom axis tags is beneficial to all parties. Reducing the use of custom axis tags not only improves data quality, but also allows for more comparability between filers. The use of custom axis tags will continue to be monitored in an effort to improve data quality.
Learn more about our EDGAR filing services for submitting proper XBRL tagging to the SEC.