Getting Dialed in on Extensions Related to SEC XBRL Financial Filings
Wednesday, May 14, 2014 at 09:31AM
Charlie in Becoming an XBRL Master Craftsman

Many people tend to make the broad, sweeping statement that "extensions are bad" when it comes to SEC XBRL financial filings. Making such a statement is simply an indication that they don't really understand the moving pieces of SEC XBRL financial filings very well.  The perception that all extensions are bad shows that one just does not understand why XBRL is so useful. (For more information about extension, read these blog posts.)

For XBRL extensibility to work correctly it must be controlled. What can and cannot be extended, where an XBRL taxonomy can be extended, and when a taxonomy is extended by a filer it must be clear what that filer is communicating.

In order to understand and explain this, I took the fundamental accounting concepts that I identified and looked at them closely from the aspect of whether and how to extend them, this blog post summarizes that information.  This graphic below provides a summary of my initial analysis (click the image for a larger view).

(Click image for larger view)

The first thing I noticed is that there are a handful of categories which concepts fit into or rather a set of properties which a concept might have.  Concepts might have more than one of these properties  (And I am focused on concepts right now, not Axis or Members, etc.)

So that seems to be the spectrum of options. 

Now let's look at a specific concept: us-gaap:Assets.  What category does us-gaap:Assets fit into? Well, given that I am considering only financial filings in this analysis (10-Q and 10-K financial reports), and given that 99.6% of SEC XBRL financial filings report us-gaap:Assets, and given that I looked at each of the .4% of filers who did NOT report that concept and determined that the extensions created were undoubtedly inappropriate; I would conclude that the concept is required and it makes zero sense to ever extend that concept.

What about adding a subclass or child to that concept?  The concept us-gaap:Assets has two subclasses or children: us-gaap:AssetsCurrent and us-gaap:AssetsNoncurrent.  What other classes would you ever need?  Also, given the high number of filers (97.7%) who used those concepts and more importantly who do not ever provide some other subclass of assets other than those two, it is fairly clear us-gaap:Assets should NOT allow child concepts or other subclasses to be added.

At the same time, it seems doubtful that extension of the concept us-gaap:AssetsCurrent or us-gaap:AssetsNoncurrent should be allowed. Again, use by SEC filers proves this.

What about extensions to the subclasses or children of us-gaap:AssetsCurrent or us-gaap:AssetsNoncurrent? Well, that seems perhaps reasonable.  Do you know that, say, the current assets of a reporting entity can fit into one of the existing subclasses such as cash and cash equivalents, trade receivables, inventories, or the catch all "other current assets"?  Well, most likely.  Particularly given that catch all category "other current assets".  But, do you REALLY want filers to put everything else into that category?  Perhaps not.

But this decision is a conscious choice.  It is that conscious choice about allowing a new subclass of current assets to be created or to allow additional subclasses (children) to be added to an existing class of current asset. What choice one makes is less relevant.  What is more relevant that you understand that you have a choice.

And so this same decision process exists for EVERY piece of the US GAAP XBRL Taxonomy.  Not all concepts are the same.  The choices which will be made for each concept and for each subclass of a concept depends upon the specific case. 

But the list of options you have is both clear and finite.  You cannot "sort of" extend something. Not understanding the different options or expressing the options within the US GAAP XBRL Taxonomy makes it seems that every concept acts randomly or uniquely.  But this is simply not the case.

You can take a look at my first cut at trying to group the fundamental accounting concepts into one of the above categories.  I have a lot of tuning to do, but this seems rather straightforward.

Article originally appeared on Intelligent XBRL-based structured digital financial reporting using US GAAP and IFRS (http://xbrl.squarespace.com/).
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