One of the promises of XBRL is that standardization of reporting elements aids transparency and comparability of financial numbers. However one important area of transparency and comparability, certainly for peer group assessment, is in the area of corporate performance. But we are a long way from standardizing the definition and metrics of corporate performance, as the March 2009 European Discussion Paper on Corporate Performance (produced by the aptly named PAAinE) highlights.
Section 4 of the report discusses ‘Key Lines, Bottom Lines and Recycling’ and this is where it becomes clear that XBRL could help (p27):
What criteria should be used to specify key line(s)?
4.11 As already noted, users and preparers want key lines to convey and receive ‘headline’ messages and to provide a starting point for analysis. Users will obviously want for this purpose a number (or numbers) that are useful. That means they need to be relevant (we will discuss this in the next chapter), but what other attributes should these key lines possess? The authors suggest:
(a) A key line should be understandable, which means it must be underpinned by a principle that explains the significance and the characteristic that this line has compared to other items. Various principles that might be used are discussed in Chapter 5.
(b) Key lines should to some extent be standardised, to increase transparency and comparability. Of course, standardisation can be taken too far; uniformity does not result in comparability, and there is very little comparability between entities in different industries any way. Nevertheless, a degree of standardisation helps users.
The report goes on to discuss various ways that income and expense items may be ‘disaggregated’ for use as performance-indicating key lines and concludes:
Therefore, rather than focusing on issues like the nature of performance, the
number of performance statements, and recycling, Europe needs to thoroughly
engage in the most important performance reporting debate of all—which is about disaggregation.
So is ‘disaggregation’ really “the most important performance reporting debate of all“?
Tags: performance, reporting
