The X-Factor: Custom XBRL Tags

One of the major value props of XBRL is comparability. The ability, for the first time, to do automated comparisons on unambiguously accurate data. A few things have to be in place for that to become a reality including well trained mappers who understand tagging best practices as well as a relatively complete set of tags that everyone agrees with. Otherwise the "X" in XBRL, extensibility or the ability to create custom tags at will, gets out of control and limits comparability.

My recollection is that people were expecting about 10%-15% extension (or custom) tags in the voluntary filings. The fact is that the initial experience was over 30%*, more than double that expectation. Like the man said, "That's just too high!"

So the SEC spent a few million of our money to beef up the tag dictionaries. Did it work?

While only a handful of filings are available in EDGAR so far, the initial results are yes, we've seen a dramatic reduction in the number of extension elements by some companies providing data based on various beta versions of the new GAAP taxonomies. For instance, one company used the a beta version of the new GAAP taxonomy for their 2007 10-K. Compared with their 2006 10-K filing they reduced the number of custom elements by 40% (30.77%/18.57%).

Another company that just submitted their first XBRL used the new set and got under 8% extensions, one of the lowest percentages to date.

Now, extremely low percentages of custom tags is not a goal in itself. There has to be a balance between standardization and customization to accommodate financial reporting practices and that balance will be different for different companies. But there clearly was a problem that the new taxonomies appear to have addressed.

* Based on filings in the voluntary program from its inception in April of '05 through late October of '06. Just to head off the inevitable, you can remove the Microsoft filings and still end up over 25%, well over anyone's comfort level. (Microsoft went pretty deep into the Notes and had to create a large number of custom elements because the original taxonomies weren't really designed to go there.)

-- Ed Hodder