DERA (Division of Economic and Risk Analysis) conducted a study of XBRL files to assess the quality. As part of the examination, DERA analyzed the use of "custom tags." The news was at best mixed or, as DERA put it, "[o]ur assessment suggests that not all of the Commission’s expectations have been met, particularly as they relate to smaller filers and their custom tag rates."
The analysis showed "a steady decline in custom tag use by large accelerated filers during the phase-in period and thereafter." Indeed, with respect to custom tagging by larger filers, DERA concluded that even those "with high custom tag rates . . . generally revealed an appropriate use of custom tags—there was no systematic evidence of obvious selection error or unjustified use of custom tags."
The conclusions with respect to smaller filers, however, was quite different. As the Study noted: "we observed systematic evidence of smaller filers in our sample creating a custom tag instead of selecting an available standard tag." Moreover, the need for customized tags for smaller issuers should be less than for larger companies. See Id. ("Smaller filers currently have an average custom tag rate almost twice that of larger filers, inconsistent with our expectation that smaller filers should, as a general matter, have simpler financial statements that are easier to standardize.").
Likewise, there was a difference in the rate of custom tagging between large and small companies. "We also observed that the average use of custom tags in primary financial statements among larger filers has declined in each year since XBRL exhibits were required, while the custom tag rate in primary financial statements among smaller filers has remained relatively flat during the commensurate phase-in period."
Moreover, the Study suggested that the use of custom tagging was often preceded by consideration of the standard tag.
- While not required, filers are encouraged to include detailed definitions for their custom tags. In general, the larger filers used the same wording in their custom definitions as could be found in similar standard tags already in the taxonomy, but modified the text to indicate a material difference from the standard definition. This demonstrates consideration of standard tags and a desire to justify customization.
So what is the explanation?
- As part of our assessment, we also observed a strong correlation between third-party provider selection and exhibits with high custom tag rates. In our sample of smaller filers with high custom tag rates, 64% were served by the same third-party providers, of which one third-party provider accounted for 33% of all filers with a high custom tag rate. This suggests that in many instances the high custom tag rate may not be determined by the unique reporting requirements of a filer or available taxonomy, but an artifact of the reporting tool or service used.
The study suggests the need for more aggressive staff monitoring. Certainly greater attention to smaller issuers is warranted.
At the same time, however, the Study does not pinpoint an appropriate or optimal amount of custom tagging. As the table from the study below illustrates, even for larger companies, the rate of custom tagging averages over 5%. Moreover, while most companies with a custom tag rate of over 50% were smaller, some did come from the larger company category. See Id. ("Analyzing the most recent XBRL exhibits as of October 30, 2013, Commission staff identified a sample of filers with custom tag rates greater than 50%. Among these, approximately 96% were smaller filers.").
Presumably more consistent monitoring of compliance would bring down the custom rate for both large and small companies.