The IFRS Foundation is accepting comments on an exposure draft of the IFRS Taxonomy 2011 interim release reflecting disclosures that are commonly reported by entities in their IFRS financial statements. The tags are intended to supplement the 2011 IFRS Taxonomy to enhance the comparability of financial information, consistent with IFRSs and with the XBRL architecture of the IFRS Taxonomy.
The Foundation has heard from constituents who are concerned that the current IFRS taxonomy may be challenging to use because it contains so few tags when compared with the U.S. GAAP Taxonomy. The IFRS taxonomy contains some 2,550 elements while the GAAP taxonomy contains about 13,000.
The key difference is that GAAP is more prescriptive, so there are more specific requirements that can be described by more detailed, more precisely defined tags. IFRS is based more on principles than prescriptive requirements, so it’s simply not as straightforward to establish precise tags for every conceivable way companies might elect to report something.
The interim release attempts to address this problem by establishing additional tags for common practice concepts. The Foundation’s XBRL team studied the financial statements of about 200 companies that report under IFRS in countries and industries throughout the world, identifying disclosures that are most common among those companies. The tags in the interim release reflect those most commonly reported practices.
These 300 additional tags do not represent IFRS requirements, but they do represent the disclosures that are most common among companies that report under IFRS. When these tags are finalized, entities will be able to apply the tags to line items in their primary financial statements and to notes and accounting policies using text blocks. They will require fewer entity-specific tags, which will reduce divergence in reporting practice, which in turn will improve the comparability of all IFRS financial information.
While some perceived there are architectural differences between GAAP and IFRS taxonomies, in truth the only differences lie in the underlying accounting rules. And even those differences are narrowing as the International Accounting Standards Board and the Financial Accounting Standards Board seek to converge the two different sets of accounting standards. If an XBRL preparer is moving from one accounting standard to another, the same XBRL software can be utilized.
The IFRS taxonomy is continuously updated to reflect changes in accounting standards as they are released by the IASB. This assures companies referring to the taxonomy can be confident they reflect the latest IFRSs as they are issued and become requirements for IFRS filers. This is important given how dispersed IFRS filers and XBRL filers are around the globe. To date, some 120 countries have adopted IFRS, and about 25 of those countries are now using or implementing the IFRS taxonomy for XBRL filings.
It will be important for the IFRS Foundation to receive broad feedback to the taxonomy’s interim release to assure it accurately reflects the reporting practices most common among IFRS filers. This is the only way to assure the greatest comparability possible, which is essentially if XBRL is to truly become a useful reporting platform.
by Olivier Servais
Leave a comment