IFRS discusses tagging of implicitly reported concepts and data consumption problems
What happens when some values go untagged? If we know A and B, can we simply assume C? In case you missed it, a really interesting presentation by Karlien Conings asks whether lack of tagging of implicitly reported concepts hinders digital consumption of financial information, and what might be done about it. This was discussed at the June 2021 meeting of the IFRS Taxonomy Consultative Group.
These kinds of concerns essentially occur when there is an accounting relationship between concepts, along the lines of Concept A + Concept B = Concept C, and they fall into two main categories.
In the case of ‘equal amounts’ issues, concept B is zero or not material, so often B is missing and only A or C is reported (or better, since these are equal, a single fact is ‘double tagged’). For example, in the relationship Profit (C) = Profit attributable to owners of the parent (A) + Profit attributable to non-controlling interests (B), where there are no non-controlling interests. In this situation, most filers only report total profit.
‘Unreported totals’ issues, on the other hand, occur when concepts A and B are reported, but not the total C. This has been observed for concepts such as revenue, total employee benefits expense, depreciation, and more. But can a consuming application safely calculate the missing values?
“In some cases, users would be able to automatically derive untagged concepts using IFRS Taxonomy calculation relationships and anchoring. However, arguably, any additional step required by users to analyse data is undesirable—users would need to spend time and resources or rely on intermediaries to make the data usable. In other cases, it is not possible to automatically derive untagged concepts due to use of extensions and calculations in the IFRS Taxonomy being incomplete.”
The IFRS staff conclusion is that there is a problem here. They propose considering two possible types of solution: either changing paper-based reports to achieve better digital reporting, by requiring explicit reporting of the missing values, or improving digital reporting independently from paper-based reporting, by allowing omissions in paper-based reports for simplicity but requiring digital tagging.
This is a great example of the kind of issues that are emerging with expanding real-world implementations of taxonomies. The reporting community now has an opportunity to clarify as we continually refine our standards and processes.
See the presentation here.
