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A Paper: Quality of XBRL US GAAP Taxonomy: Empirical Evaluation using SEC Filings

A paper written by Hongwe Zhu and Harris Wu of Old Dominion University, Quality of XBRL US GAAP Taxonomy: Empirical Evaluation using SEC Filings, looks at the quality of the US GAAP Taxonomy.  The following is an abstract of that paper:

The primary purpose of a data standard is to improve the comparability of data created by multiple standard users. Given the high cost of developing and implementing data standards, it is desirable to be able to assess the quality of data standards. We develop metrics for measuring completeness and relevancy of a data standard. These metrics are evaluated empirically using the US GAAP taxonomy in XBRL and SEC filings produced using the taxonomy by approximately 500 companies. The results show that the metrics are useful and effective. Our analysis also reveals quality issues of the GAAP taxonomy and provides useful feedback to the taxonomy users. The SEC has mandated that all publicly listed companies must submit their filings using XBRL beginning mid 2009 to late 2014 according to a phased-in schedule. Thus our findings are timely and have practical implications that will ultimately help improve the quality of financial data.

While the paper just scratches the surface (note that the authors refer to this as their initial work), it does offer helpful insight into using the US GAAP Taxonomy to create SEC XBRL Filings and using those filings.

Here is a summary of some of the more helpful and interesting findings of this analysis.  I have added my commentary to this information using italics:

  1. The authors point out that from a syntactical perspecive, all the XBRL documents (XBRL instances and the filer XBRL taxonomy extensions) prepared by SEC XBRL filers are interoperable because they use the same syntax (i.e. XBRL). However from a semantic perspective (business meaning), the XBRL documents can be difficult to compare when different companies use different data elements in their document.  (I would point out that an XBRL taxonomy contains two things: elements (better referred to as concepts really) and relations.  Differences in not only concepts can cause comparability difficulties, but also differences in the relations.)
  2. The authors point out that from the perspective of the users of this information, the metadata (i.e. the taxonomy concepts and like I said above their relations to other concepts) are also data.
  3. The US GAAP Taxonomy has 10,537 "active concepts".  (There are also 2,653 abstract concepts which can never be used to report information and 346 deprecated concepts which should not be used by SEC filers.)
  4. Many companies are reporting using the deprecated concepts.  The authors point out that 195 out of 481 filers used deprecated concepts.  They point out a list of the deprecated concepts.  (It seems to me that the SEC should provide a submission test to not allow these deprecated concepts to be used.  The US GAAP Taxonomy clearly identifies these concepts.  Or, perhaps the US GAAP Taxonomy should simply remove these concepts rather than providing them and marking them deprecated.  Either of these would solve this problem.)
  5. All SEC XBRL filings combined, a total of 2,558 US GAAP Taxonomy concepts were used and a total of 10,168 custom concepts were introduced by filers.
  6. The average filing contained approximately 125 concepts of which 109 were from the US GAAP Taxonomy and 16 were added by filers.
  7. A list of the top 50 most used US GAAP Taxonomy concepts is listed.  (I have two points relating to that list.  First, I am very currious why "Assets" is used 1229 times and "LiabilitiesAndStockholdersEquity" was used 1217 times.  Seems to me they should be the same.  Maybe this is because some of the filers are partnerships or something.  Second, it seems to me that the frequency of the items on that list is a good indicator of comparability between filings.)
  8. A list of the top 50 custom concepts added by SEC XBRL filers is provided.  Of that list of 50, the authors point out that 15 concepts have identical names as concepts which exist in the US GAAP Taxonomy. Of that list of 50, an additional 13 concepts added are very similar to US GAAP Taxonomy concepts.  (I would point out that these lists are a nice little validation check which could help SEC XBRL filers not use duplicate concepts.  These checks would be quite easy for a software application to implement and seems helpful to filers.)
  9. A comment was made by the authors, "The data shows that the lengthier-named elements are certainly less frequently used." (I would point out from my experience in creating the US GAAP Taxonomy that the lengthier concepts are in the disclosures and the SEC XBRL filers are not doing detailed tagging of the disclosures, therefore the lengthy concepts clearly would not be used at this point.  The author also notes that only 2,653 of the existing 10,537 concepts were used.  Wait until detailed tagging kicks in, the number of concepts used would grow.)

All in all this research provides useful information, but like the authors point out...there is a lot of opportunity for more research.  Just like the SEC XBRL filers, the researchers will figure out the really interesting things to research when they have more experience with the taxonomy.

Also, I would point out that the researchers who did this analysis have an IT background, not an accounting or financial reporting background.  So while this information is helpful, personally I think more accounting people need to be involved in this type of research.  I have several blog posts which raise interesting accounting and financial reporting which need to be answered such as this post about taxonomy architectures, this post relating to the top 10 errors in SEC XBRL filings that I have run across, or this post where I evaluate the criteria for investor friendliness of SEC XBRL filings.


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