Chapter 10-understanding usfrtf


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Chapter 10-understanding usfrtf

  1. 1. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) 10. Understanding the US Financial Reporting Taxonomy Framework In this section8 we will explore the US Financial Reporting Taxonomy Framework (USFRTF) with a focus on explaining the fundamentals of the taxonomies. This will provide users with the knowledge they need in order to begin reading, comprehending, and using these taxonomies for financial reporting or analyzing financial information which make use of financial information expressed in XBRL. While obtaining this understanding of the taxonomy is a process that will take some time and effort, this investment in truly understanding the taxonomy will be worth while. Not possessing a good understanding will make everything about using the taxonomy more challenging. From a big picture perspective, the following captures information about what the USFRTF is and what it is not: • The USFRTF is not intended to represent authoritative GAAP or SEC guidance, but rather a suggested model that can be used as a starting point for companies to use to create XBRL instance documents. • The framework can be, and is intended to be, modified to express financial reporting information as desired by individual companies. • Although the USFRTF is intended to be as comprehensive as possible, it should not be seen as a guide for what should or should not be included in the financial statements of a company. • The USFRTF is not intended to redefine US GAAP, but rather to capture information about the application of these existing pronouncements as they in practice today. • The framework models alternative presentations and calculations which can be used; however, it does not provide every disclosure option. • The USFRTF does not infer that one presentation or calculation method is preferred over another, but it does model more commonly followed approaches. • It is assumed that companies will create company extension taxonomies to express information which they wish to disclose, which is not contained in the USFRTF. In addition to defining new reporting concepts within company extension taxonomies, companies may also change relationships expressed within the framework. • The USFRTF does not distinguish between concepts which need to be disclosed and those which do not need to be disclosed by a specific company. It simply provides concepts. Not all concepts are intended to be used by an company. Professional accounting and financial reporting knowledge and judgment are needed to properly apply the USFRTF to financial reporting information. • The USFRTF does not distinguish between presentation (presented on the face of the face of the balance sheet, income statement or statement of cash flows) and disclosure (presented in the notes to the financial statements). The inclusion of concepts within the USFRTF is based on their historical occurrence in financial statement disclosures. © 2006 UBmatrix, Inc 203
  2. 2. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) 10.1. Background to Set Perspective First we want to establish some grounding to get common misperceptions surrounding XBRL out of the way so they don’t interfere with truly understanding what the USFRTF really is. The USFRTF has been in development for a number of years and is truly on the cutting edge of XBRL taxonomy development. The first US XBRL financial reporting taxonomy was created and released in July 2000 (based on XBRL 1.0). It was a significant effort to create the world’s first XBRL taxonomy and creating it contributed significantly to understanding what XBRL was, what XBRL needed to be and what tools were necessary. Unfortunately, this first XBRL taxonomy was not really usable for "production" financial reporting but instead served as an important learning experience for what was to come. The current USFRTF is several orders of magnitude beyond the first XBRL US financial reporting taxonomy in terms of its functionality and purpose but the taxonomy is still really in its infancy. When XBRL was first introduced, there was no "guidebook" for creating taxonomies, no examples to follow, etc. All this had to be developed by those blazing the trail. There is a bit of a trail now, as XBRL International has created and released the FRTA (Financial Reporting Taxonomy Architecture) and FRIS (Financial Reporting Instance Standards) guidance which provides best practice/guidelines on building taxonomies and instance documents, respectively. But, at this phase, there is still more that is unknown and to be discovered or figured out than there is know. The USFRTF was created, or rather "evolved", over a number of years. It was physically created by a small group of people. This small core group collected, synthesized, and then incorporated feedback from many, many others who entered, but then exited this process of creating the taxonomy framework. Feedback has also been received from US GAAP technical specialists in "the Big 4" and regional accounting firms as well as other groups which are interested in seeing the USFRTF created. The USFRTF expresses concepts presented or disclosed in financial statements, prepared using US GAAP for public profit-oriented companies. The precise accounting pronouncements covered and other information about the taxonomy will be discussed below. But first, we want to set the proper perspective so you can truly understand the USFRTF. 10.2. An Accountant's Perspective: What is the USFRTF? If you were forced to describe the USFRTF in terms of something accountants are familiar with, that something would be a sample or "model” financial statement which contains all presentation and disclosure information of a company reporting to the US Security and Exchange Commission under US GAAP (SEC). It contains information which must be reported based on US GAAP, SEC regulations and common practice. Another metaphor is using the popular AICPA guide, Accounting Trends and Techniques, which is an annual survey of accounting practices which are followed in 600 financial statements. The USFRTF condenses reporting down into one common option, but then is flexible and lets reporting entities modify the taxonomy to meet their individual needs. © 2006 UBmatrix, Inc 204
  3. 3. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) The USFRTF (model) is "consensus based", meaning it is not issued by one of the Big 4 or regional accounting firms; instead, it is as if these firms banded together and merged their thinking into a single model. Where their internal models were different, they reached consensus on how the model should be combined to create the USFRTF (merged model). This is an oversimplification to achieve a desired result, as the USFRTF is really not a model; instead, what we are trying to do is achieve a "grounding" and then move from that grounding to discussing the details of what the taxonomies actually are that make up the USFRTF. We want to dismiss misconceptions that people have. The USFRTF has some characteristics of concepts organized to be used to create a model financial statement but it is not a model financial statement. But let's start there and build on this understanding. In this section, we will explain the USFRTF from an accountant's perspective. We will try to avoid using XBRL terms as much as possible and stick with accounting terms. While we will need to use some XBRL terms to explain some essential aspects, we will try to keep them to a minimum. If an accountant looks at the USFRTF, in particular the presentation linkbases, they should be rather familiar. It contains a large amount of accounting terms, things that accountants understand, and things which, believe it or not, technical IT people try and stay away from. (Go to most information technology type people and say "debit" or "credit" and watch their hair stand on end!) Familiar terms include things like "Balance Sheet", "Income Statement", "Cash Flow Statement", etc. In addition, the presentation linkbase is structured in a manner very familiar to accountants. “Income Statement” can be thought of (and in fact seen) as a hierarchy that contains “Revenue”, “Expense” and “Net Income” concepts in that specific order (i.e. the same way a company tends to present its Income Statement). To help answer the question "What is the USFRTF?", first some details about how the USFRTF was created will be helpful. We then explain more clearly what the taxonomy framework is, once we have set the appropriate perspective. 10.2.1. Taxonomy Defined The USFRTF is a collection of taxonomies. But what is a taxonomy? So, we start with the definition of the term "taxonomy". Taxonomy is not an accounting term, as you may have determined by now. But it is also not a "technical term". The term taxonomy is a term used in science and other domains and comes from ancient Greek word that means "structured dictionary”. A taxonomy can be thought of as a "system of classification relating to a topic" or as a "division into ordered groups or categories". For example, a taxonomy of soccer terms might include ball, goal, World Cup, etc. The USFRTF expresses its system of classification relating to the topic of financial reporting under US GAAP and SEC regulations using XBRL, an XML-based language for representing business reporting information. The USFRTF is a representation of financial information prepared in accordance with US GAAP. The taxonomy framework is a collection of concepts and relationships between those concepts. The taxonomy framework does not define the concepts; the FASB (Financial Accounting Standards Board) and other standards bodies define the concepts. The concepts in the taxonomy framework reference these standards within the taxonomy. © 2006 UBmatrix, Inc 205
  4. 4. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) The connection between the USFRTF and US GAAP is limited to the taxonomy framework being based on the presentation and disclosure requirements of US GAAP and it does not add to, modify or even contribute to the standards in any way. It allows you to identify concepts in the financial statements prepared under US GAAP using consistent descriptions found in the taxonomy framework and the accounting standards. 10.2.2. Other Information Neither the Big 4/regional accounting firms, the FASB (Financial Accounting Standards Board), the PCAOB (Public Companies Accounting Oversight Board), nor the US Securities and Exchange Commission endorse the USFRTF taxonomy in any way. But, the Big 4/regional firms did help create it, as did the AICPA (American Institute of Certified Public Accountants). The taxonomy is not static, it is dynamic. It can be changed, and is in fact designed to be changed. There are no limits XBRL provides on what can be moved around and what should not be moved around within the taxonomy by a company extension taxonomy. Using the taxonomy will help the taxonomy evolve to its appropriate state. 10.2.3. Not a Model Financial Statement or Disclosure Checklist The "backbone" of how the USFRTF was created, and also one benchmark for judging the USFRTF in terms of accuracy and coverage by accountants, has been the actual financial statements and disclosure checklists that are used by the Big 4 accounting firms in the preparation of financial statements. Initially, when work first began on the very first US GAAP taxonomy, accountants came with their US GAAP accounting technical experts, their sample financial statements, and their disclosure checklists. Very few (if any) of the accountants had even heard of XBRL. When reviewing the USFRTF, accountants commonly compare the USFRTF to their sample financial statements and disclosure checklists. The sample financial statements and disclosure checklists are easier to read than reading through the standards and trying to create a financial statement. That is why sample financial statements and disclosure checklists exist. But sample financial statements and disclosure checklists do not define US accounting standards. An important point here is that in most cases, the different sample financial statements and disclosure checklists from the Big 4 accounting firms used the same "line item labels", and more importantly these line items attract the same numerical value when applied in the preparation of a set of financial statements. The USFRTF reflects this and where there are differences in the line item labels, the taxonomy framework reflects a consensus of opinion. Also, if desired, the Big 4 accounting firms or other stakeholders could create extension taxonomies to reflect labels and relationships they deem to be more appropriate than the USFRTF. And frankly, they likely will. One vantage point to help you get your mind around what the USFRTF is that the taxonomy framework could be considered somewhat of a collection of concepts and relations which could be used to create a "big sample financial statement". But most of the sample financial statements certainly are not organized in the manner of the USFRTF. Nor are sample financial statements nearly as comprehensive as the USFRTF – the taxonomy framework is very comprehensive. © 2006 UBmatrix, Inc 206
  5. 5. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) 10.2.4. A Consensus The way a sample financial statement and disclosure checklist is typically created is decided internally within each of the individual Big 4 accounting firms. These sample statements and disclosure checklists are prepared by reference to the different accounting pronouncements applicable from US GAAP to each part of the sample and/or disclosure checklist. But the USFRTF has a broader consensus; the Big 4 and regional accounting firms and many, many other financial reporting and accounting experts came to a consensus as to what should be in the USFRTF. Derived from this consensus is the single taxonomy framework instead of competing/conflicting taxonomy frameworks. While the USFRTF might not look like any of the Big 4 accounting firms sample financial statements or disclosure checklist, it reflects all of them because it is based on this broader consensus. The USFRTF represents one way to create a taxonomy to represent US GAAP. And while the USFRTF is not the only way a company can report using US GAAP, it is one way a company can report. This is all that the USFRTF can be. All possible ways to report could not possibly be reflected in a single taxonomy framework. Reflecting all possibilities would render the taxonomy too confusing. However, the USFRTF can still be as flexible and dynamic as financial reporting by extending the taxonomy. Again, this is a bit of an over simplification in order to make a point. The point is that there is only one, say, classified balance sheet format rather than every possible format for the classified balance sheet. 10.2.5. EDGAR® Another resource which was used to create the USFRTF was the SEC’s EDGAR system. EDGAR® Online®, Inc. has tools which can take the millions of financial statements filed with the EDGAR system, examine them, and then parse the information so it can be used to understand how companies actually report. How companies actually report is extremely good information in determining what is needed in the USFRTF. EDGAR Online and others (University of Kansas, EDGARSCAN) have been writing software for many years trying to extract useful information from Edgar filings of public companies, this is a wealth of information. However, if it were possible to perfectly parse this information, XBRL and the USFRTF would not need to exist. Very useful information has been gleaned from this process and these systems generate information which can be recycled into making the USFRTF better. For example, EDGAR Online has been able to generate XBRL instance documents (an XML document that contains the actual company report information in XBRL format) for almost 100,000 public companies (counting current and prior period filings). This information was used to generate an EDGAR Online "extension" to the USFRTF for areas where it fell short in meeting the needs of actual financial reporting practices. They basically have 100,000 XBRL instance documents which can be used to test the USFRTF. This actual information is incredibly useful input in judging how well the USFRTF works, where it needs to be adjusted, etc. 10.2.6. Principles Based Accountants always need to exercise professional judgment in creating financial statements, whether they are prepared using standard financial statements, disclosure checklists, XBRL taxonomies, or other tools used for financial reporting. © 2006 UBmatrix, Inc 207
  6. 6. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) 10.2.7. Not a Standard Chart of Accounts The USFRTF certainly is not a "standard chart of accounts". Again, accountants need to always exercise professional judgment. XBRL is simply a method of expressing something, anything really, using a language which computers can understand. How the language is used is up to the users. XBRL is extensible. That is one of the primary requirements the users, which included accountants, placed on the technical people when creating XBRL. Any company, any industry, or any accountant is free to use, or not use any taxonomy component or add any taxonomy component by extending the USFRTF. XBRL and the taxonomy framework are that flexible. Users of the USFRTF are free to ask the accountants to justify why they added an extension or did not use the USFRTF as it exists. Frightening? Maybe. With the right of exercising professional judgment comes the responsibility to have and use good judgment. That is the role of a professional accountant. Does XBRL provide clarity? Yes it does. Clarity as to what concept you intended to communicate, how the concept is mathematically calculated, etc. One thing that XBRL does do is reduce, but not necessarily eliminate, vagueness. The creator of the financial information communicates clearly, using concepts from the USFRTF or by adding a concept which they believe is appropriate to add, or adding relationships which they feel are appropriate to add. Analysts using this information can see very clearly which concepts have been used, how concepts add up. The USFRTF does NOT require any company to report additional information. What it does is help see, very clearly, what was reported and allows a computer to use the information reported. 10.2.8. The "House of GAAP" XBRL does not cover everything in US GAAP. And there are common practices that are not included in accounting pronouncements issued by any standards body which are included in the USFRTF. The taxonomy is about what is presented and disclosed in financial statements. US GAAP also covers recognition and measurement. The taxonomy generally does not cover recognition or measurement unless it relates to a method or basis of measurement that should be disclosed or assumptions made in making those measurements that should be disclosed. Other concepts have an "XBRL" reference. These concepts (referred to as abstract concepts) are only for the convenience of presenting (referred to as the presentation link) the taxonomy in a visual, hierarchical format that accountants can easily understand. These concepts can never appear in an XBRL financial statement, called an instance document. 10.2.9. Industry Coverage Currently, the USFRTF does not cover all industries. Nor does it cover certain types of financial reporting such as reporting by not for profit entities, state and local governmental entities, or personal financial statements. The following is a list of AICPA audit guides which will provide an idea of the different industries which exist: AICPA Audit Guides USFRTF Taxonomy Agricultural Producers and Agricultural Not provided Cooperatives © 2006 UBmatrix, Inc 208
  7. 7. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) Airlines Not provided Banks and Savings Institutions us-gaap-basi Brokers and Dealers in Securities us-gaap-bd Casinos Not provided Common Interest Realty Associations Not provided Construction Contractors Not provided Credit Unions Not provided Employee Benefit Plans Not provided Entities with Oil and Gas Producing Activities us-gaap-og Federal Government Contractors Not provided Finance Companies Not provided Health Care Organizations Not provided Investment Companies us-gaap-im Property and Liabilities Insurance us-gaap-ins Companies Service Organizations Not provided Not-for-Profit Organizations Not provided State and Local Governmental Units Not provided Personal Financial Statements Not provided The XBRL-US Domain Working Group is currently responsible for creating new taxonomy framework pieces for the industries identified above. Although a few additional taxonomies are in development, there is no known master plan for the building out of the USFRTF to cover all these industries. 10.2.10. What is the USFRTF? With the background provided above, we now venture to define what the USFRTF is from an accountant's perspective. The USFRTF is one consensus-based method of "electronically" classifying concepts and formats that may be used in presenting and disclosing financial information under US GAAP. It covers both US GAAP and common practices used for US financial reporting. The language, XBRL, is a language which is understandable to both humans and computers. The USFRTF does not define new accounting concepts. The USFRTF does not extend or reduce the professional judgment needed by accounting professionals who are responsible for creating financial statements under US GAAP. 10.2.11. Some Things Accountants Should Understand Taxonomies are important to accountants; accountants make up a large majority of who will be using these taxonomies. Therefore, accountants need to thoroughly understand these taxonomies. This is particularly true because the USFRTF is really still being created and is open for input. The following are a few things that accountants really need to understand in order to contribute to making sure we have the correct XBRL taxonomies for the needs of the US financial reporting supply chain. These points are summarized below and are not about making any sort of judgment about the USFRTF or what is appropriate. This is the responsibility of the accounting profession and other participants in the financial reporting supply chain. What is outlined here are a number of aspects that accountants need to understand so that they can determine if these aspects are applied correctly in the USFRTF to increase the probability that the USFRTF is appropriate to use for financial reporting. © 2006 UBmatrix, Inc 209
  8. 8. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) The goal here is to empower the accountants to better read, understand, and contribute to the improvement of the USFRTF. If users do not understand these concepts, they will not understand the USFRTF appropriately. One or Many We have to use two technical terms here in order to make a very important point: XBRL items and XBRL tuples. Items and tuples will be discussed in further detail later but there is one very important difference between these two "building blocks" of taxonomies. When you put an XBRL item (such as “Land”) in a taxonomy, you can use the given reporting concept once and only once for a context when you create an XBRL instance document. An XBRL context represents a reporting time period for a specific entity and for a specific reporting scenario. When you put an XBRL tuple in the taxonomy, you can report an unlimited number of the given reporting concept for a specific context. For example, "Class of Common Stock" is a tuple which has a number of items included within the tuple. Since "Class of Common Stock" is a tuple, you can report an unlimited number of different classes of common stock. A critical point to understand with items and tuples is this: Are the concepts in the taxonomy which are items properly designated items; and the concepts which are tuples properly designated tuples? If not, then the taxonomy will not be usable as required by its users. The choice of whether to express a concept as an item or as a tuple when creating a taxonomy can be a “science”, with reporting concepts falling into one category or the other. However, sometimes there are shades of gray involved and ultimately the desired result will determine the choice between these two options. Same Concept Concepts should be defined in the USFRTF taxonomy only once. For example, "Net Income" should be defined once. This concept is in the USFRTF. Now, this concept is used in multiple places in the framework: on the income statements, in the statement of equity, in the cash flow statement, and many, many other places. If, however, the concept is NOT actually the exact same reporting concept in all the places it occurs within a taxonomy, it should NOT be defined only once. Instead, they should be defined as separate concepts and appear where necessary in the taxonomy. This distinction is critical. If a concept is defined once, and the concept is used in two different places but the values for a single specific context (i.e. period of time) could actually be different, then the taxonomy will not work unless the concepts are broken out separately in the taxonomy. If a taxonomy author is unsure whether to assign the same element or not for a reporting concept that appears in multiple places within a taxonomy, the least risky choice is to create two different concepts. Comparability XBRL is comparable to the extent that users of XBRL in a certain situation desire to have comparability. Comparability is not an XBRL issue, it is a domain issue; how much comparability does a specific domain, or use, of XBRL desire? © 2006 UBmatrix, Inc 210
  9. 9. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) In the financial reporting supply chain, many dynamics are at work. Analysts need to analyze corporate report data. Comparability helps them, as it helps them make timely and accurate comparisons. Some companies like comparability while others don’t…for various reasons. The financial reporting supply chain which uses the USFRTF will determine the comparability possible with the USFRTF by how they build the taxonomy framework. This will be driven by the market, as it is driven by the market now. In general, XBRL is capable of any level of comparability. Comparability is a very emotional issue which people tend to turn into an XBRL technical issue. The reality is that comparability is a domain issue which will be determined by the domain. Coming to a consensus will likely involve much emotion and take many years to reach. XBRL can handle any level of comparability a given domain throws at it, from “closed loop” systems such as the Federal Deposit Insurance Corporation (FDIC) implementation of XBRL to more market driven systems such as the Security and Exchange Commission’s (SEC) Voluntary Filing Program. Creating taxonomies that leverage standard dimensions and/or standard industry schemes enhance comparability. Not having standard approaches does not mean that comparability cannot be achieved; it just means it will be harder. The technical aspects of comparability and the emotional aspects of comparability need to be separated. Dialog and Balance XBRL can facilitate a clearer dialog between standard setters, accountants, analysts/regulators and reporting entities. Financial reporting pronouncements are fairly detailed and complex. XBRL helps in this communication by forcing the communication to be more explicit, as well as allowing the communications to be expressed in a global standard way. XBRL allows these parties to communicate at a very detailed, clear level. This communication is not new; communication has always existed in the financial reporting supply chain. However, XBRL is raising the possibility of communicating at an even higher (and more efficient) level of detail. That possibility never really existed before in a global, standard way. XBRL taxonomies play a very important part in helping achieve this level of communication. Also, some information technology tools or processes could be adopted by the accounting profession to help make pronouncements clearer throughout the financial reporting supply chain. For example, when software is created, there also tends to be created something called a "conformance suite". A conformance suite exercises the software to ensure that it is operating as intended. Creating an XBRL taxonomy and instance documents based on existing pronouncements, such as the current USFRTF has done, actually helps users to understand and use those pronouncements, and, more importantly, will be available for potential new pronouncements. The process of using a taxonomy to create real financial statements helps detect inconsistencies so they can be resolved. Let's look at an example of this in the creation of another financial reporting taxonomy. In creating the International Financial Reporting Standards – General Purpose (IFRS-GP) taxonomy, a number of inconsistencies were detected in the existing International Accounting Standards (IAS)/IFRS standards. In many cases, the inconsistencies will be (are) interpreted consistently by humans who can figure things out even if they are somewhat inconsistent. However, there are still inconsistencies which are open © 2006 UBmatrix, Inc 211
  10. 10. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) for interpretation. This does not include those where room was intentionally left for interpretation; this is inconsistency which forces interpretation where interpretation was not intended. Computers are very, very bad at dealing with inconsistencies; in fact, they cannot operate with inconsistencies as humans can and achieve a reasonable, consistent result. There are two quick examples which arose when creating the IFRS-GP taxonomy to make the point more clearly. The IFRS/IAS standards define the concept "Finance Costs" but it does not provide an example or clearly state what makes up the details/what to include in finance costs. As a result, this was one of the harder areas of the IFRS-GP taxonomy to create, as it was far harder to agree on what goes into the detail of the line item "Finance Costs". Guidance could have been much more clear. The second issue involved "Minority Interest" and "Subscribed Capital", two components of equity. These line items moved around the taxonomy for several years and it was hard to agree where they should appear in the financials. Another interesting thing which occurred while creating the IFRS-GP taxonomy was the dialog between financial institutions and the taxonomy creators, indirectly through one of the central banks. The taxonomy was initially created based upon interpreting the standards as written. However, discussions with financial institutions made it clear that the financial institutions could not report information in a certain manner; a different approach with the same end result would have been more practical. As such, the taxonomy was modified. The dialog between standard setters, accountants, analysts/regulators and reporting entities is not new. However, it can be more detailed as a result of XBRL. Creating taxonomies to express new proposed standards help test the standard and make it crystal clear what the standard is asking for. The ultimate step will be realized when standard setters and regulators use XBRL when communicating new pronouncements to the financial reporting supply chain. Computers Don’t Fully Understand the Taxonomy Computers don’t fully understand a taxonomy. Now, this is a quite an odd statement, given that the XBRL version of the taxonomy is something a computer is supposed to understand. But let me explain. To a computer, there is no real differentiation between many pieces of the taxonomy at this point. A computer has no idea that "Cash and Cash Equivalents" is a balance sheet line item and that "Net Income" goes on the income statement. It also does not know that "Intangible Assets Policy" is really a policy. Humans think computers can understand these concepts because the word "Policy" is included in the term "Intangible Assets Policy". Unfortunately, computers cannot, or should not. The reality is that computers are pretty dumb, they need to be told everything about every aspect which they are supposed to understand. They are smart in areas where they are made smart. Computers do understand XBRL, if they have XBRL processing software. XBRL processors understand XBRL concepts and will know that "Cash and Cash Equivalents" and "Net Income" and "Intangible Assets Policy" are all reporting concepts. And, computers will even know some things about the concept, such as, whether it is a number, a piece of text, a debit or credit, or what type of period it relates to. In order to have additional meaning in the taxonomy, which XBRL technically provides and which people will soon do, you have to add that meaning. The definition linkbase functionality of XBRL is a very powerful tool, but as of now, © 2006 UBmatrix, Inc 212
  11. 11. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) unused in the USFRTF. By adding things like a definition linkbase, computers can understand more about the components of the taxonomy. For example, there is no concept of a "Balance Sheet" in XBRL, but there could be if it is added. There is no concept of an "Accounting Policy", but there could be, and "Intangible Assets Policy" could be included in the collection of policies. The point is that much of this meaning does not exist yet, more will be added. Base information does exist. And as the meaning is added, XBRL will be even more powerful. What is added will determine how powerful it will be. This is why things such as the "Link Role Registry" (LRR) are important, even though you might not understand completely what the Link Role Registry is. 10.2.12. In Summary XBRL is a relatively new tool which accountants and other participants in the financial reporting supply chain have at their disposal. Even though relatively new, XBRL will exist far into the future. Accountants need to understand XBRL in order to harness its power. Learning about the basics of XBRL is the first step to understanding where it is working and where it is not, and then correcting the USFRTF to work as required. XBRL needs to work as financial reporting currently works today; changing financial reporting en masse to meet the needs of XBRL is not acceptable, nor would it be tolerated in the marketplace. There may be certain aspects of financial reporting that will likely change over time as a result of the use of XBRL. However, the USFRTF in no way changes financial reporting, other than provide a method of expressing financial information, defined by existing financial reporting pronouncements in an electronic format which is readable by computer software. 10.3. Physical Location of Framework 10.3.1. URL All the taxonomies that make up the USFRTF can be found at the XBRL-US Web site ( by selecting "US GAAP Taxonomies". This brings up the following web page: © 2006 UBmatrix, Inc 213
  12. 12. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) On this page is a listing of all the approved, or released and usable, USFRTF taxonomies. 10.3.2. File Structure If you look at the directory structure of the taxonomies, they look like the following: © 2006 UBmatrix, Inc 214
  13. 13. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) 10.3.3. USFRTF Files The following is a summary of the URLs of each taxonomy file: Namespace Prefix FileType FullURL usfr-fstr XSD usfr-fste XSD us-gaap-im XSD usfr-fstr Labels usfr-fste Labels usfr-fstr Presentation presentation.xml usfr-fste Presentation presentation.xml usfr-fste References reference.xml usfr-fstr References reference.xml us-gaap-basi XSD usfr-fstr XSD us-gaap-im XSD © 2006 UBmatrix, Inc 215
  14. 14. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) us-gaap-im XSD usfr-pte XSD usfr-pte Labels usfr-pte Presentation presentation.xml usfr-pte Reference usfr-fstr XSD usfr-ptr XSD usfr-ptr Calculation usfr-ptr Presentation presentation.xml us-gaap-basi XSD us-gaap-basi Calculation calculation.xml us-gaap-basi Labels us-gaap-basi Presentation presentation.xml us-gaap-ci XSD us-gaap-ci Calculation us-gaap-ci Presentation presentation.xml us-gaap-im XSD us-gaap-im Calculation us-gaap-im Presentation presentation.xml us-gaap-ins XSD us-gaap-ins Calculation calculation.xml us-gaap-ins Labels us-gaap-ins Presentation presentation.xml usfr-ar XSD usfr-ar Labels usfr-ar Presentation usfr-ar References usfr-mda XSD usfr-mda Labels usfr-mda Presentation usfr-mda References usfr-mr XSD usfr-mr Labels usfr-mr Presentation usfr-sec-cert XSD usfr-sec-cert Labels usfr-sec-cert Presentation presentation.xml usfr-sec-cert References references.xml There are a total of 53 files included in the USFRTF (this includes the broker- dealer taxonomy) 10.3.4. Relations Between USFRTF Taxonomies The following diagram explains the relationships between the different taxonomies. © 2006 UBmatrix, Inc 216
  15. 15. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) A document, "US Financial Reporting Taxonomy Framework" summarizes information about the USFRTF. It is located at the following URL: This document: • Explains the US Financial Reporting Taxonomy Framework, provides an overview of its components and structure, as well as plans for future components. • Describes significant design decisions, updates from previous versions, etc. The above summary document states, "The US Financial Reporting Taxonomy Framework is a collection of XBRL taxonomies that will be used to express the financial statement-based reports of both public and private companies across all industry sectors." 10.4. Components of Framework First we will take a look at the components of the USFRTF. Then we will look at the relationships between the components. The framework is broken down into components or "layers". These layers include: • Add-on taxonomies • Common terms • Common relationships • Industry relationships Note that all components of the USFRTF are compliant with the XBRL 2.1 specification and FRTA (Financial Reporting Taxonomies Architecture) version 1.0 (more information on FRTA can be found on the XBRL International Web site). 10.4.1. Add-on Taxonomies Layer Add-on taxonomies are stand alone taxonomies typically used by those creating instance documents. For example, all audited financial statements have an accountants report and the USFRTF contains an Accountants Report taxonomy. © 2006 UBmatrix, Inc 217
  16. 16. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) Those who wish to use these add-on taxonomies can attach them to their extension taxonomy or to their instance document. 10.4.2. Common Terms Layer (Common Concepts Layer) The common terms layer are basically building blocks for other taxonomies, usually industry taxonomies. For example, the term "Net Income" is a commonly used term, whereas "Aircraft" is a term which is specific (for the most part) to the airline industry. This set of taxonomies contain schema (.XSD) files with concepts, labels (in the label linkbases) for those concepts, and reference linkbases with references to accounting pronouncements for those concepts. Also, in many cases, documentation (such as human readable definitions) is also provided for these concepts. 10.4.3. Common Relationships Layer The common relationships layer is again building blocks, but for presentation and calculation relationships, rather than the concepts themselves. If the relationships are common across many industries, they are typically expressed here. 10.4.4. Industry Concepts Layer The industry concepts layer contains concepts which are unique for a specific industry. For example, "Aircraft" is a concept unique to the airline industry. Rather than burdening other industries with this term, it is defined within the industry concepts schema, rather than the common terms schema shared by all industries. 10.4.5. Industry Relationships Layer The industry relationship layer expresses industry-specific presentation and calculation relationships. The industry relationships layer typically uses the common concepts layer and common relationships layer taxonomies and builds upon them for a specific industry, such as "Airlines". 10.4.6. Summary of Existing Components The following is a summary of the existing components of the USFRTF. The components are broken down by layer. For each component, the namespace prefix, name of the taxonomy, the status of the taxonomy, and a brief description of the taxonomy are provided. This summary contains only taxonomies which are approved (or final and released), are drafts, or are currently planned. Namespace Prefix Name Status Description Common Layer Taxonomies usfr-pte Primary Terms Elements Approved Contains common terms used by many industries. psfr-ptr Primary Terms Approved Contains common Relationships relationships used by many industries. © 2006 UBmatrix, Inc 218
  17. 17. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) usfr-fst Financial services Approved Common terms used within financial services sector. Add-on Taxonomies usfr-sec-cert SEC Certification Approved Contains concepts commonly used with the officer's certification report as mandated by Sarbanes- Oxley Act of 2002. usfr-mr Management Report Approved Contains terms which are used within the management report which typically accompanies audited financial statements. usfr-ar Accountants Report Approved Contains terms which are used within the independent accountants' report. usfr-mda Management Discussion Approved Contains terms commonly and Analysis used within the annual report where a company's management provides analysis on results of operations, financial positions, and issues. Industry Layer Taxonomies us-gaap-ci Commercial and Approved Concepts and relationships Industrial Companies to allow commercial and industrial entities to express their financial statements. us-gaap-basi Banking and savings Approved Concepts and relationships institutions to allow banking related entities to express their financial statements. us-gaap-ins Insurance Entities Approved Concepts and relationships to allow insurance related entities to express their financial statements. us-gaap-im Investment Approved Concepts and relationships Management to allow investment management related entities such as mutual funds to express their financial statements. us-gaap-bd Broker-Dealers DRAFT Concepts and relationships to allow insurance related entities to express their financial statements. © 2006 UBmatrix, Inc 219
  18. 18. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) us-gaap-og Oil & Gas Under Concepts and relationships development to allow oil and gas related entities to express their financial statements. Each of the taxonomies summarized above are a part of the USFRTF. From the summary of all taxonomies in the USFRTF on the XBRL-US web site, users can navigate to a summary page for a specific taxonomy. This web page which serves as a summary of information related to that specific taxonomy. For example, look at the line below for "Commercial and Industrial": If you click on the link for this taxonomy, you will be taken to the following summary page at the following URL: This summary page is somewhat of a "starting point" for the taxonomy. The summary page contains the following information: • General information about the taxonomy. • Location of the physical files included in the taxonomy. • Downloadable copies of the taxonomy files for local use. • Explanatory Notes which is a narrative which describes the taxonomy. It also contains disclaimers, terms and conditions of use, and other important legal stuff which should be considered. • Printouts of the taxonomy. © 2006 UBmatrix, Inc 220
  19. 19. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) • Sample instance documents provided with the taxonomy including various XSLT style sheets to render the instance documents into a human readable format. • "Proof" instance documents (included in the samples) which contains basically every concept in the taxonomy and is used to test every calculation of the taxonomy. • ZIP file which contains taxonomy files, printouts, samples, etc. which can be downloaded and used locally. • Summary of errors discovered and reported. It is highly likely that these summary pages become somewhat insignificant to actual users of the taxonomy. You may never need to know or use information about the taxonomy at this level. It is highly likely that software vendors and others will better organize this information so it is far more usable by the average CPA but for the time being, this is where all the information about each of the taxonomies exist. The USFRTF can be used from the Internet, but it is more than likely that you will download a copy of the taxonomies and use the version on your local hard drive. A local version of the taxonomy ensures you don’t have to download it every time you desire to use it and thus should increase performance when using XBRL- enabled software applications. 10.4.7. Probable Future Components To get a better idea of the taxonomy framework, we will speculate here about the future components of the USFRTF. The following speculates on additional taxonomies which will be included in the USFRTF. Namespace Prefix Name Status Description Industry Layer Taxonomies us-gaap-agri Agricultural Producers Will likely be and cooperatives added us-gaap-air Airlines Will likely be added us-gaap-cas Casinos Will likely be added us-gaap-cira Common Interest Realty Will likely be Associations added us-gaap-cc Construction Will likely be Contractors added us-gaap-cu Credit Unions Will likely be added us-gaap-eb Employee Benefit Plans Will likely be added Federal Government Probably will not be a Contractors separate taxonomy us-gaap-fc Finance Companies Will likely be added us-gaap-hc Health Care Will likely be Organizations added © 2006 UBmatrix, Inc 221
  20. 20. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) us-gaap-so Service Organizations Will likely be added us-gaap-np Not for profit Will likely be Organizations added, but not in this framework us-gaap-slgu State and Local Will likely be Governmental Units added, but not in this framework us-gaap-pf Personal Financial Will likely be Statements added, but not in this framework The last three on the list, Not for Profit Organizations, State and Local Governmental Units, and Personal Financial Statements deserve a bit of discussion. It is hard to determine exactly how these three taxonomies will fit within the USFRTF model since USFRTF is currently focused on public/for profit companies. There are three possibilities: • The first possibility is that they will be tightly woven into the existing foundation, such as using the primary terms taxonomy. This approach leads to two things. First, that the term "Cash and Cash Equivalents", for example, would have one definition in all of US financial reporting. There are those who value this. But that comes at a price. If you want "Cash and Cash Equivalents", you get EVERYTHING ELSE also. All of it. For example, take the case of the potential negative impact this could have as it relates to a user of the personal financial statements. Personal financial statements tend to be rather simple but this approach means that the user has to wade through all the common terms used in the reporting of public companies just so there can be one concept for "Cash and Cash Equivalents". • The second possibility is that each of the last three taxonomies would NOT share the primary concepts, but would create separate physical schema files for each of the taxonomies, each most likely defining "Cash and Cash Equivalents". This makes using each taxonomy simpler, as you are not burdened with wading through thousands of concepts which you would never use. However, would this mean that you cannot compare say the City of New York's "Cash and Cash Equivalents" (a local government), Microsoft's cash (a public company), and John Doe's cash? It does not mean that at all. Mappings can easily be created between different physical schema files allowing comparisons across taxonomies. • The third option is to split the primary terms taxonomy into those which would be shared by all taxonomies, and those which would not. One additional final point is worth reinforcing. Currently, the USFRTF primarily covers financial reporting by public companies. It does not cover financial reporting by private companies. For example, a small restaurant which is a sole proprietorship or a CPA partnership are not covered by USFRTF. Will the existing taxonomies be expanded to cover private companies, or will separate taxonomies be built for the private sector? This has not been determined. What ultimately drives how these taxonomies, or drives how these taxonomies should be created, is how they will be used and the user experiences of those using these taxonomies, all things considered. Theoretically, it would be great to © 2006 UBmatrix, Inc 222
  21. 21. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) have one concept "Cash and Cash Equivalents". However, from a practical perspective, it is a simple process to create a mapping to express that they are the same and create separate physical files. All this will be worked out over time. At this time, the taxonomies have not been used enough to know the right answers to every question. Using them, and then refactoring the taxonomies based on user feedback will likely be in the cards for the USFRTF as it evolves. 10.5. Relationship of Physical Files The USFRTF contains a number of taxonomies that are used to create an industry taxonomy such as US GAAP CI. Each taxonomy contains a number of different physical files. This section will describe these files and how they relate to one another. Some of the files are related and have physical mechanisms to express that relationship. For example, the XML Schema <import> element physically relates the files in a precise fashion so that an XML parser or XBRL processor can navigate through them consistently and completely. In general, there are four ways taxonomy files can be related: • <import> element from one schema file to another schema file • <schemaRef> element from an instance document to a schema file. • <linkbaseRef> element from an instance document or schema file to a linkbase. • <locator> HREF attribute from a linkbase locator to a schema file. We will look at a few known issues in order to understand how these physical relationships work. 10.5.1. Issues with Relations Each of these different linking mechanisms has different "features". These features can be positive (desirable), or negative (undesirable). The important thing when creating taxonomies is to have the right combination of physical relatedness. Additionally, files can be intended to be physically related, but not actually physically related in a taxonomy. The relationships can be put together in a company's extension taxonomy or in an instance document. For example, currently in the US GAAP CI "Commercial and Industrial Companies" taxonomy, the presentation and calculation relationships exist for both the direct and indirect versions of the cash flows statement. A company would never have both such cash flows statements; they would have either direct or indirect. Another approach to building taxonomies is to not have components such as presentation links and calculation links which COULD be used related to a schema file and instead provide them as modularly as possible and let the users of the taxonomy "wire them together" (physically link them) as desired. This is the approach used by the IFRS-GP taxonomy, and it is the approach which the USFRTF will likely move toward. This approach has been called "the window" taxonomy approach (as you provide a window into the concepts, based on the linkbases) or an "ala carte" or "palette" approach. This approach is characterized by creating lots of smaller components (such as having the direct and indirect cash slows statements presentation and calculation linkbases in separate files) and then “linking them” together. A user of the taxonomy can then ultimately © 2006 UBmatrix, Inc 223
  22. 22. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) hook the smaller components they desire to use either to their company extension taxonomy or to their instance document. Please keep in mind that this is not how the current version of the USFRTF is created, but to some degree this can be achieved and in fact will be explained later. In summary, this approach simply ignores the schema files such as the Commercial and Industrial Companies schema (us-gaap-ci-2005-02-28.xsd) which only contains links to the linkbases and instead references the linkbase files themselves such as (us-gaap-ci-2005-02-28-calculation.xml) as required by the user. The problem still exists that both the direct and indirect cash flows statement calculations links are in the same file. But these can be separated out in the future. Users can separate them out now by simply creating their own calculation linkbases, for example. 10.5.2. Issues with Extended Link Role Definitions Another issue exists with the USFRTF related to extended link roles which will likely be addressed in future versions. Currently, the extended link roles used by each taxonomy are defined by each taxonomy. For example, the extended link role " lr/role/StatementFinancialPosition" is defined by the us-gaap-ci, us-gaap-basi, us-gaap-in, us-gaap-im (it is actually different, but this is a balance sheet, it is just called something slightly different), etc. An alternative would be to create one file which defines all these extended link roles which are needed by the entire USFRTF, or perhaps modularize it into two or a few files. This creates more consistency between the extended links. 10.5.3. USFRTF Current Status Having explained a few issues and how they might be worked around or resolved in the future, we will like at how files are physically related now. We will do this by looking at one taxonomy, the "Commercial and Industrial Companies" taxonomy, or as we will refer to it, the “CI” taxonomy. The "core" of a taxonomy is its schema file(s). For example, the schema file for the taxonomy CI taxonomy is "us-gaap-ci-2005-02-28.xsd". This file is located at the following URL: 2005-02-28.xsd. The schema file defines concepts used within the taxonomy, hooks to other schema files which define concepts used, or hooks to linkbases used by the taxonomy. In the case of the Commercial and Industrial Companies taxonomy, the schema file: • Uses the <import> element to connect to the primary terms taxonomy, usfr-ptr-2005-02-28.xsd, • Uses the <linkbaseRef> to physically link to the set of presentation links, us-gaap-ci-2005-02-28-presentation.xml, • Uses the <linkbaseRef> to physically link to the set of calculation links, us-gaap-ci-2005-02-28-calculation.xml,It defines a number of extended link roles used in the presentation and calculation linkbases. It also, like all taxonomy files, imports two schemas used by XBRL, xbrl-instance- 2003-12-31.xsd and xbrl-linkbase-2003-12-31.xsd. This is required as per the XBRL Specification. A couple of things are worth noting. The CI taxonomy defines no concepts; all concepts come from the primary terms taxonomy. © 2006 UBmatrix, Inc 224
  23. 23. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) The calculation and presentation links are physically hooked to the CI schema. In the future, it is highly likely that the CI schema may not even exist, and the CI single presentation and calculation linkbases, each one separate file, will likely be 50 or so separate components, each component used if desired, but the user is not burdened by unneeded presentation and calculation relationships. Any more discussion on relationships would tend to get very technical, so we will stop here. Additional issues related to the relationships between files which are important for accountants to understand will be addressed later in this document. The important takeaways from this discussion of the physical relationships between files are the following: • Taxonomies typically contain one or more schema files and linkbase files…all of which are physical files. • The smaller the number of files, the less control users have over the components of the files. If you have one file with everything in it, and you need one small set of stuff from the file, if you use that file, you get everything in that file. If you have a larger number of smaller files, you have more files to look through to find what you need, but when you find what you need, you are not burdened by other information which tends to clutter or obscure the smaller set of information you were looking for. • Taxonomies are made up of schema files (XSD) and linkbases. We will discuss the different types of linkbases and what they do later. 10.6. USFRTF (CI Taxonomy) Summary Information The following summary information relating to the taxonomy provides an overview of the USFRTF CI taxonomy: • Has about 53 physical files which make up the official USFRTF (this does not include printouts, etc. • Defines 3,066 concepts, • Defines 37 extended link roles defined, but some of these are defined multiple times in different taxonomies, • Contains 44 tuples, • Defines 1 custom type (data types), • There are 10,394 labels (about 3.3 labels per concept which includes a standard label, documentation, terse label, etc.) Since all this will be explained in later sections, the above is simply a summary of statistics relating to the CI taxonomy. The CI taxonomy is XBRL 2.1 compliant, FRTA compliant, and the sample instance documents provided with it are FRIS compliant. The sample instance documents provided with the CI taxonomy serve as an example of how instance documents look when prepared by US public commercial and industrial like companies. The components of the taxonomy will be described in significantly more detail later in the document. © 2006 UBmatrix, Inc 225
  24. 24. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) 10.7. Synchronization to US GAAP This version of the CI taxonomy is tied to US GAAP, sometimes called "the house of GAAP". The table below shows the accounting literature covered in the USFRTF: Publisher Publication Abbreviation FASB Accounting Principles Board Opinion APB FASB Statement of Financial Accounting Standard FAS FASB FASB Interpretation FIN FASB FASB Technical Bulletin FTB FASB Emerging Issues Taskforce EITF FASB Implementation Guide Q&A FASB FASB Staff Position FSP FASB Current Text CT FASB Accounting Principles Board Statements APS FASB FASB Financial Accounting Concepts CON AICPA Accounting Research Bulletin ARB AICPA AICPA Opinion and Interpretation AICPA Industry Audit and Accounting Guide AAG AICPA Statement of Position SOP AICPA Practice Bulletin PB AICPA AICPA Accounting Interpretation AIN AICPA AICPA Accounting Principles Board Statement AICPA AICPA Issues Papers AICPA AICPA Technical Practice Aids TPA SEC Regulation S-X SX SEC Article 9 ART 9 SEC Article 4 ART 4 SEC Regulation S-K SK SEC Regulation S-B SB SEC Regulation S-T ST SEC Staff Accounting Bulletins SAB SEC Regulation T Reg T SEC Staff Position SP SEC Financial Reporting Release FRR SEC Staff Legal Bulletin SLB SEC SEC Industry Guide OTS Federal Regulation FR 10.8. State and Maturity of the USFRTF Although the USFRTF has existed in many forms over the past several years, this version of the framework is really the first usable version. In the past, XBRL tools were not mature enough to properly test the taxonomies. All previous versions of the taxonomy should be considered “early prototypes” and thus abandoned in favor of the current version. With this version of the USFRTF, a significant amount of testing has gone into creating the taxonomy. In many (but not all) of the USFRTF taxonomies, the calculation and tuples were tested to ensure they "behave" as desired by creating "sample" instance documents to test the taxonomy prior to releasing it. © 2006 UBmatrix, Inc 226
  25. 25. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) However, the real test of the taxonomy will be when hundreds of companies are reporting their financial information using the USFRTF. This "stress testing" of the framework in the real world will help ensure it was built and operates as desired. During the creation of the USFRT a number of instance documents were created to test the taxonomy. Although helpful, the reality is the taxonomy is still fairly new and untested in the marketplace. As with any work in progress, there are still some issues related to the taxonomy. It will likely never be perfect but it will be as good as humans can get it given the current maturity level of XBRL and XBRL software and related tools. The importance of the USFRTF taxonomies should not be overlooked. In the early stages of XBRL, the USFRTF was the first set of taxonomies addressed by the consortium. These taxonomies blazed a trail when there was not even a trail to follow. More recently, the USFRT was the first taxonomies taken through the XBRL International Domain Working Group approval process, helping other taxonomy builders learn from the process as well as helping improve the process itself. Does being first mean that it reflects the way it should be built? Although still in its infancy, the use of the taxonomy in the marketplace will ultimately answer that question. So, do the regulators, accountants, reporting entities, and consumers of information have what they need from the USFRTF? That question can only be answered through using the taxonomy to see where it works and where it does not. Only then will all of the participants in the financial reporting supply chain be able to prove that the taxonomy as it exists is the taxonomy required by the market. The following are some specific examples of issues which remain unanswered in order to provide a sense of the financial reporting issues which are still to be answered through making use of the taxonomy in a real world environment: • "Property, Plant and Equipment" is a commonly used line item on a balance sheet; however, the taxonomy defines several classes of Property, Plant and Equipment: "Land", "Building", etc. The issue is would it be better to simply define the concept "Property, Plant and Equipment" and offer no additional detail classes, or should the taxonomy offer a reasonable list of detail classes for "Property, Plant and Equipment" as it currently exists. If the latter is true, is the list provided the right detailed list, or are their additional classes that are required? Will accountants agree that the list provided is a good list? • The same issue as above exists for "Identifiable Intangible Assets", "Accrued Expenses", and other similar sub classes of financial reporting information. • If a company using the CI taxonomy is, say, an airline and wants to add the concept "Airplanes" as a class of "Property, Plant and Equipment" as part of their extension taxonomy, the process is more complex than just adding a single element and involves the following: o The concept "Airplanes" must be added to the taxonomy, o The measurement basis concept for airplanes must be added o The depreciation method concept for airplanes must be added o The estimated useful life concept for airplanes must be added There are better ways of expressing these "properties" (or meta-data) of a class of Property, Plant and Equipment. This same issue exists for other parts of the USFRTF. © 2006 UBmatrix, Inc 227
  26. 26. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) • The financial statements of conglomerates (hybrids) which have the characteristics of multiple industries cannot be easily expressed with the current USFRTF and thus an extension taxonomy must be created. • Movement analysis calculation relations cannot be fully expressed in the taxonomy as XBRL cannot express cross-context (time period) relationships. This deficiency is currently being addressed by the creation of the formula linkbase specification (add-on functionality to the XBRL 2.1 Specification) which is discussed later in this document. • At times, concepts are included in the taxonomy as items or classes of items such as the classes of "Property, Plant and Equipment" which include "Land", "Building", etc. At other times classes of information are captured within a tuple. Concepts are expressed using both methods. Time will tell if the appropriate method was used for specific concepts within the taxonomy. Using item concepts maximizes comparability; using tuples hinders comparability to a degree (precisely what degree is yet to be determined). Adding "Codes" to tuples is an effort to decrease the amount of lost comparability when using a tuple. Continued use of the USFRTF will prove that the taxonomy is what is desired, ensuring that what exists is correct, ensuring that pieces are not missing, and that relationships are correctly expressed. This step in the evolution of the UFRFTF has not yet occurred but is getting some traction as result of the XBRL programs in place at the Federal Deposit Insurance Corporation (FDIC) and Security & Exchange Commission (SEC). The trick will be not only to heavily make use of the USFRTF but also to evolve it and correct any errors reported by the market. Key is that in the process it is important not to disrupt the financial markets which rely on the financial information being reported. 10.9. Understanding the Taxonomy Components In this section we will explain the USFRTF taxonomy components at a moderate level of detail so that users can better understand how to "move around" the taxonomy, how to read it, where to go for additional information, and generally how to make use of the taxonomy. We will also summarize useful information in this section important in better understanding taxonomy components. A common mistake made by users time and time again is to believe that a reporting item that should exist in the taxonomy does not exist when in fact it does exist…it’s just the user can’t find it. It is very important to spend time to understand the different "areas" within the taxonomy so that looking for and finding specific items is simple and straightforward. While you can open up the taxonomy files (the physical XML files) and see what is going on, you would have to have a good understanding of XML, XML Schema, and XBRL in order to really make sense of all the information. We are trying to avoid getting into the technical level, so we will focus on looking at reports and other user-friendly ways of exploring the taxonomy. Using financial reports as the basis for exploring, it is possible to get a thorough understanding of the taxonomy. One does need to understand how to read GAAP- based financial reports. Keep in mind that the official version of the taxonomy is the information contained in the XML files themselves. The USFRTF is quite large, and will grow even larger. It would not be practical to cover each part of every taxonomy included in the USFRTF in this document, as we are attempting to provide only an overview. So, we will continue to focus on © 2006 UBmatrix, Inc 228
  27. 27. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) one industry taxonomy, the "Commercial and Industrial Companies" or CI taxonmy. The process we use for looking at this taxonomy can be used to look at the other component taxonomies of the USFRTF. 10.9.1. Understanding the Physical Files and their Relation This section describes the physical files of the CI taxonomy (us-gaap-ci namespace prefix). The starting point for the CI taxonomy is the following file: If you obtain the file above and load it into an XBRL tool, the XBRL tool will locate all the other files which it needs to piece together the entire CI taxonomy. The following are all the files which would be obtained by the XBRL processor of the given tool: us-gaap-ci Calculation linkbase us-gaap-ci Presentation linkbase presentation.xml usfr-ptr XSD usfr-ptr Calculation usfr-ptr Presentation presentation.xml usfr-pte XSD usfr-pte Labels usfr-pte Presentation presentation.xml usfr-pte Reference Reference parts (Not sure whether I should add this) When considered as a whole, all of these files make up the CI taxonomy and allow XBRL tools to present the taxonomy in a way users can understand. 10.9.2. Reports of Taxonomy Information Available There are several different reports which come with the CI taxonomy that will help with better understanding its detail. All of these reports, which can be found at the CI link provided above, come in a variety of formats: PDF, Excel, and HTML. Although each format is beneficial, we will focus on the PDF versions of these reports. A URL for each of these reports will be provided to make it easy for you to locate the actual report. Note that the official reports from the web site of the CI taxonomy are being used below. These may not be the best reports to use, as they are cluttered with too much information in many cases. If you have an XBRL tool, you can regenerate these reports to be more readable, or you can try and obtain alternative reports from other sources. Element/Concept List Report The following is a screenshot of a portion of the report of elements/concepts in the CI taxonomy. This report can be found at the following URL: © 2006 UBmatrix, Inc 229
  28. 28. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) This report contains a flat listing of every element/concept defined in the taxonomy and any taxonomies referenced by this taxonomy. Specific to the CI taxonomy, it does not define any concepts itself. Instead, references the usfr-pte which does define concepts. Information provided for each concept on the report includes: • "ID" or identifier. The ID is not actually part of XBRL but instead an automatically incremented number that helps make the concepts more readable/trackable. This is very useful when you want to refer to a particular concept and can easily reference "ID 5", for example. • "Bal" or balance type, which will either be "D" for debit, "C" for credit or blank meaning there is no balance type assigned. This is an indication of what the “natural” balance for the item is; for example, assets are “naturally” debits so if the value is positive it should be read as a debit and if negative, a credit. • "Per" or period type which will always be I for instant (as of date – e.g. for balance sheet items) or D for Duration (from/to dates – e.g. for P&L items). • "Nil" or nillable attribute value; T means true (item can be left empty when creating instance documents), blank means false (item must have a value when creating instance documents). • "Type" or data type – see “Concepts/Elements” section later for more detail on what these types are and their effect. • "NS" or namespace prefix. Note that all the concepts have a namespace prefix of usfr-pte. If there were other taxonomies included then they could be identified by their different namespaces. • "Labels/Name/Documentation", a list of the all labels, the XML unique name and human readable definition for the concept. For ID 5 above, you can see the element name and four labels of that element listed after the name. Further note that the label role (Terse label, for example) is included. Concepts can have a number of labels which can be used in different circumstances, these are distinguished by the “roles”. They can also be in different languages, but right now the CI taxonomy only has English available. • "References" to authoritative guidance – see “References” section later for more detail. © 2006 UBmatrix, Inc 230
  29. 29. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) If you go to the end of this report you’ll find ID number 1503, exactly the number of concepts defined in the taxonomy (one concept per ID). This point is important to remember as in the presentation and calculation reports, concepts may appear multiple times. But in the element/concept list, each concept appears only once. One feature of the element/concept report is that although each concept is listed, the concepts are in alphabetical order instead of any kind of presentation or report order. This causes the concepts to be seen out of their typical context and thus may make understanding the meaning of individual concepts more difficult. The presentation-oriented taxonomy reports give a better understanding of the taxonomy as it relates concepts in the way they tend to appear on financial reports. However, you need to be careful as the presentation report shows relations, not concepts. Relations can appear several times in presentation reports and yet point to or use the same concept. This is an important concept to keep in mind. In summary, the element/concept listing is a good listing of concepts, but it does have limited use and utility. Presentation Reports The presentation reports are the best reports for understanding taxonomies. Keep in mind that the presentation report shows relations, not concepts. As such, concepts can appear in multiple places on the presentation report and yet refer to the same concept. The presentation report of the CI taxonomy can be found at this URL: Again, this report is a bit cluttered as it is showing all the labels and documentation for each presentation “concept”, making it difficult to read the © 2006 UBmatrix, Inc 231
  30. 30. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) report and use it for certain purposes. If the report were regenerated, say, to display only a single label, it would make the report easier to understand. The CI presentation reports provide a summary of the presentation links in the CI taxonomy. It is similar to the element/concept report, but shows the appropriate labels (standard, beginning balance, ending balance, etc.) for each concept instead of the element name and all types of labels. Since the CI taxonomy has a unique label for each concept, you can look at the taxonomy quite effectively using just the label. Another significant difference with this report is that it shows extended links. Each presentation link is contained within an extended link which "partitions" the presentation links into "sets" or "networks" as they are referred to within XBRL. Note that the concepts themselves in the concepts report discussed above are not partitioned by extended links, as only relations can be partitioned. For example, ID 1 above shows the extended link with the label "Statement of Financial Position" or balance sheet. It is undesirable for, say, the direct cash flows statement and the indirect cash flows statement to be combined together; therefore, they are in different extended links which keep them partitioned. We will see more on this later. While the element/concept report shows concepts only once, concepts may appear on the presentation reports a number of times. For example, the concept "Net Income" appears in the income statement, statement of equity, cash flows statement, and various places in the notes to the financials. The information about the concept (Reference, NS, Type, etc.) will be the same for each presenation concept occurrence. What could be (and most times will be) different is the "parent" the given concept is related to. The relationship between a concept and another concept is shown by the indentation under the label. When there is an indentation that means there is a “parent-child” relationship between the outer concept and the indented concept – i.e. all the indented concepts “belong to” the outer concept. When there is no indentation, concepts are called “siblings” – i.e. they “belong together” or can be thought of as existing at the same level. An important topic to discuss related to how concepts are presented is abstract elements. In the CI presentation report above, ID 3, "Assets", is an abstract element. Abstract elements are included purely for organizing the taxonomy itself and have no effect on, nor appear in, any resulting financial report. They are like “placeholders” or “headings”. The presentation report identifies an abstract element by the Type having parenthesis (for example "(String)") and the label is in italics. Every concept used by the CI taxonomy is shown on the presentation reports. Concepts not shown are not intended to be used by the CI taxonomy. Calculation Reports A third way to look at a taxonomy is using the calculation report which, for the CI taxonomy, can be found at the following URL: © 2006 UBmatrix, Inc 232
  31. 31. FINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01) Note that each "bar" (white or gray) is one taxonomy concept, similar to the display on the element/concept and presentation reports. Both the label and the concept name are shown on the report; removing the concept name from this report would make it clearer. The calculation report shows calculation relationships between concepts. The report is very similar to the presentation report, but there are some differences. The "Wgt" or weight column shows the XBRL "weight" attribute value for the calculation relationship. For example, ID 6, "Cash – Unrestricted" has a "Wgt" value of 1. "Cash – Unrestricted" is indented under "Cash and Cash Equivalents" (ID 5), its parent. A weight of “1” means that the given concept adds into its parent while a weight of “-1” indicates it subtracts from its parent. For example, we might have a parent “Fixed Assets, Net” that has 2 children – “Fixed Assets, Gross” and “Accumulated Depreciation, Fixed Assets”. “Fixed Assets, Gross” would have a weight of 1 and “Accumulated Depreciation, Fixed Assets” would have a weight of -1 so that “Fixed Assets, Net” can be calculated as “Fixed Assets, Total” minus “Accumulated Depreciation, Fixed Assets”. Addition and subtraction (1 or -1) are the only mathematical operations you can do within the Calculations links. A more sophisticated mechanism, the formula linkbase, is being developed by XBRL International to overcome this limitation. Only elements which are involved in calculations are shown on the calculations report. There are extended links shown on the reports for calculations and those extended links can be different to the presentation links, although their purpose is exactly the same. And again, this report shows links, not concepts. A concept can have more than one calculation link, therefore it can appear on this report in multiple places. Usually if a concept appears on this report more than once, it will be within different extended links. Definitions Report The USFRTF presently has no definition links, and as such, there are no definition reports included with the taxonomy. Explanatory Notes or Taxonomy Documentation The explanatory notes or taxonomy documentation can be found at the following URL: This documentation contains additional information about the CI taxonomy which is not contained in the XML Schema or linkbase files. This includes legal information, terms and conditions of use, disclaimers and other information of a legal nature which might be deemed important. © 2006 UBmatrix, Inc 233