Last week’s blog post discussed XBRL tagging and the role SEC filers play in ensuring that companies are using accurate tags for their filings. This week I’d like to dig a little deeper into the issue of custom XBRL tags. Custom XBRL tags are unique metadata tags companies create to describe financial data points that do not fit into the standard XBRL GAAP taxonomy. These tags are extremely helpful when used appropriately. If a company’s data truly does not fit into one of the 17,000 approved tags then it is better to create a custom tag (or extension) than inappropriately use one of the standard tags. The downside to custom tags is they can be created quickly during the filing process and are easily overused.
Last summer the SEC issued its ‘Staff Observations of Custom Tag Rates’. According to the SEC, smaller filers accounted for 96% of filers with high custom tag rates. While the use of custom tags is decreasing from larger companies, its continued use among small cap companies diminishes the benefits of XBRL in the long-run. XBRL can be resource intensive to get right. Larger companies have had more time and experience working with XBRL. For smaller companies, where resources are tight, custom tags can be an easy and quick solution. However, they are not needed in most cases.
To avoid over use of custom tags companies can follow these simple guidelines. • Know which form you are filing and select the taxonomy section related to that specific statement you are tagging. Yes, you can select a tag from anywhere in the GAAP taxonomy but you risk selecting an incorrect one.
• If the financial data doesn’t conform exactly to the GAAP Taxonomies or SEC definition, that doesn’t necessarily mean you need to create a custom tag. If you are unsure, talk to a trained XBRL tagging expert to determine what is required.
• Your XBRL statement should contain the same information (not more or less) as the HTML statement. If the financial information is different, it’s a red flag.
• When possible, use the predefined table structure in the GAAP Taxonomy.
• Your XBRL tags should be reviewed and updated according to the latest taxonomy guidelines.
• Remember, not all SEC filing agents are created equally. Your filing agent should be an expert in XBRL, using the latest 2015 GAAP taxonomy guidelines and providing diligent proofreading services to help identify tagging errors before forms are submitted to the SEC.
To help address issues associated with tagging, XBRL US recently created the XBRL US Data Quality Committee whose goal is to provide guidance on uniform, consistent tagging of financial data and on the use of extensions (custom tags), as well as develop automated validation rules to verify compliance with the Committee’s guidance and to prevent or detect tagging errors.
At Edgar Agents we support this effort and believe that establishing best practice guidelines across the industry will help reduce the use of custom tags and eliminate errors that undermine the value XBRL can bring to the industry.
I am proud to say that at Edgar Agents, we have been working with XBRL since its early days. We have seen the standard (and the debate around) XBRL evolve. Our XBRL experts are familiar with the latest GAAP taxonomy standards and offer clients best practice advice on how to streamline their SEC reporting processes to reduce errors and stress. We offer a variety of XBRL tools and services (such as an XBRL Widget) to ensure that companies are meeting SEC guidelines. Contact us today to learn more or read our XBRL FAQ.
