Issued: December 6, 2013
Impact: All US GAAP

Issue

A filer’s financial report often includes data of a company other than the consolidated entity. This occurs when an entity reports information about another company because it is a subsidiary, a spinoff, an acquisition, the parent holding company, etc.  The axis used to report values for a company other than the consolidated entity is often inconsistent.  For example, filers often use other axes, such as the Customer Axis or Related Party Axis, to report values for these companies.

Recommendation

A filer typically reports the value for a separate legal entity when that entity is a subsidiary of the reporting entity.  The values for a legal entity other than the consolidated entity should be reported using the Legal Entity Axis and a member representing that legal entity.  Values reported for the legal entity represent the amounts applicable to that legal entity. They do not represent transactions between the legal entity and the reporting entity.  For example, sales of $20 million for Company XYZ that is reported as a legal entity in the filing of registrant ABC Company are sales of XYZ Company and NOT sales of ABC Company to XYZ Company or sales of XYZ Company to ABC Company.  The $20 million represents all sales of the legal entity.

This is an important distinction that is applicable to the Legal Entity Axis.  In addition, if the amount is a balance sheet item such as inventory, the value reported for XYZ Company on the Legal Entity Axis is the inventory of XYZ Company.  The Legal Entity Axis allows filers to report values for legal entities whether or not they are included in the consolidated totals.  In a generic XBRL filing, values for a specific entity would normally be represented using the entity CIK identifier of the context. The SEC allows a company to use only a single CIK in its filing. The values reported for other entities included in the filing cannot use the entity CIK identifier of the context.  The Legal Entity Axis is a mechanism to allow companies to report financial balances and transactions for legal entities other than the registrant.

In other cases, companies want to report the value of transactions with counterparties or the balance of an account owing to another party.  For example, ABC Company wants to report that it had sales to XYZ Company of $5 million.  In the filing of ABC Company, the Legal Entity Axis and XYZ Company Member should not be used to represent these sales. Using the Legal Entity Axis would mean that XYZ Company has $5million in sales as discussed earlier.  In order to reflect the nature of these relative transactions between parties, a different axis must be used depending on the nature of the transaction.  The axis used can depend on the nature of the relationship between the parties.

There are a number of axes that could be used depending on the relationship. For example, when reporting sales to customers, the Customer Axis (“MajorCustomersAxis”) is used to report sales broken down by customer.  If the company is part of a disposal group that is held for sale, the Disposal Group Name Axis could be used if sales are included in the value of sales reported for registrant ABC Company.  Either way, these axes are used when they show a disaggregation of the revenues value for registrant Company ABC by a different categorization, such as by customer, related party or disposal group.  Sales can be broken down by legal entity as well, but the Legal Entity Axis does not require that the entity is included in the consolidated value.

Table 1 shows what the different intersections of axes mean when combined with the revenue element of registrant ABC Company. For example, the intersection of the Legal Entity Axis and the member XYZ Company with the Customer Axis and member BUY Company is the aggregate sales of XYZ Company to BUY Company.

Table 1: Dimension Combinations

Revenues for ABC Company Concept Legal Entity [Axis] Customer [Axis] Disposal Group Name [Axis] Consolidation [Axis]
Aggregate revenues of ABC Company (Net of eliminations) Revenue (Default)  (Default)  (Default) (Default)
Aggregate revenues of XYZ Company (Net of eliminations of XYZ) Revenue XYZ Company [Member] (Default)  (Default)  (Default)
Aggregate revenues of ABC Company that were eliminated upon consolidation Revenue (Default)  (Default)  (Default) Consolidation Eliminations [Member]
Aggregate revenues of XYZ Company that were eliminated in the consolidation of XYZ Company Revenue XYZ Company [Member]  (Default)  (Default) Consolidation Eliminations [Member]
Aggregate revenues of ABC company comprised of sales to BUY Company Revenue (Default) BUY Company [Member]  (Default)  (Default)
Aggregate revenues of XYZ company comprised of sales to BUY Company Revenue XYZ Company [Member] BUY Company [Member]  (Default)  (Default)
Aggregate revenues of ABC company made to BUY Company that were eliminated upon consolidation Revenue (Default) BUY Company [Member]  (Default) Consolidation Eliminations [Member]
Revenues of ABC Company attributable to the disposal Group XYZ Company (Only if disposal group revenue is in revenue). Revenue (Default)  (Default) XYZ Company [Member]  (Default)
Revenues of ABC Company attributable to the disposal Group XYZ Company (value if the revenue of XYZ Company is a discontinued operation and is excluded from the revenues of ABC). Disposal Group Including Discontinued Operation Revenue (Default)  (Default) XYZ Company [Member]  (Default)
Revenues of ABC Company attributable to the disposal Group XYZ Company eliminated on consolidation (Intercompany sales of XYZ company) Revenue (Default)  (Default) XYZ Company [Member] Consolidation Eliminations [Member]

The nature of the relationship between the axes and the line item used should be consistent. If describing financial transactions with counterparties, use the Counterparty Name Axis. For example, a derivative contract or repurchase agreement.  A more specific axis can be used if there is a specific attribute of the counterparty that needs to be defined.  For example, if describing sales to a customer, then use the more specific Customer Axis (“MajorCustomersAxis”).