Will XBRL open up a Pandora's box?

by admin on March 30, 2009

in General

Neil Hannon may have unwittingly opened a Pandora’s Box over the upcoming use of XBRL. Discussing a common situation where “…and other” gets added into an accounts classification, he says – and quotes from a conversation with Louis Matherne, former XBRL International President and XBRL consultant:

The company balance sheet says “prepaid expenses and other”. “Other” is there because it represents several accounts that aggregated to the balance sheet become immaterial as separate items. The registrant, however, knows what it is and thinks they should create a new taxonomy concept that better captures the details of “other”. No where in the financial statements or footnotes to the financial statements do they describe what that ‘other’ is.”

The object of using XBRL for compliance with the SEC mandate is to present the company‚Äôs required financial statements and footnote disclosures, not to expose the preliminary accounts and internal decisions the led to the final, top level reports. XBRL is not meant to extend, expand or further explain legal filings. It simple puts your disclosures into a machine readable form. The last word comes from Matherne: “XBRL for the SEC is primarily about the disclosure of the accounting”.

What is immaterial one minute may not be immaterial the next. Given the extent to which things get hidden inside reported accounts, the fact this debate has arisen should not be a surprise.

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Daniel Roberts March 30, 2009 at 3:06 pm

Neal is quite right. XBRL is not, or was not, intended to create more information that is already reported, but simply to tag that information to ensure rapid and easy consumption of the information. It remains the responsibility of the reporting company to determine what and how, within relevant accounting standards, they will report. Therefore "and other" becomes, in effect, an override to the standard label that is provided within the taxonomy. XBRL is not an accounting standard, and does not pretend to either be one or to expand on any accounting standard. Therefore, it remains perfectly acceptable for a company to report "and other" using XBRL.

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