Labelling is seldom given the thought and emphasis it requires. We are often asked, “What is the main thing one can do to make models more readable and reviewable?” Simply stated, “More and better labels”. In fact, short, simple formulas improve readability mostly because they force the modeller to include more labels explaining and walking the reviewer through each step of what otherwise would be a complex calculation.
FAST 3.05-01 Provide a label for all line items
Labelling everything improves the clarity of the model and avoids modelers making faulty assumptions about what values represent. Labelling constants provides the safety net of a broken anchor described above.
FAST 3.05-02 Invest time in drafting a good label
Some line items are easy to describe, and a comprehensive and clear label comes immediately. In other cases, this is more challenging. In these cases, be clear over being brief and work to streamline the label over time. Spend at least 30 seconds developing such labels; it is worth the investment of time.
FAST 3.05-03 All line items must have a unique label
Inconsistent and confusing labelling should be eliminated. Each calculation, itself unique, should be given a unique label (of course as augmented with units and section headings as relevant). It is no better to have two calculations called the same thing, then to have the same label for two different calculations.
FAST 3.05-04 Include a units designator on all line items
FAST-3.05-04.1 except it can potentially be omitted when SMU applies
Unit labelling starts with the reasonable command:
“Label everything with a units designator; a missing unit is something that needs attention. Absence of information to convey meaning is a fundamentally weak design”.
To this, some will reasonably argue that clarity is hampered by over-cluttering the display with unimportant units designators. One of the common, valid omissions of units is for Standard Monetary Units (or SMUs for short). If a units designator is omitted in these circumstances some ‘global’ indication on a sheet print-out, up in the freeze pane header indicating a statement such as, “Unless otherwise indicated, all monetary units are in $ 000s” is warranted. (See also FAST 2.03-06: Include definition of SMU on Presentation sheets, [page 23].)
A case can also be made that Line Items that are inherently dimensionless, e.g. Flags, factors, percentages of amounts (as distinct from interest rates), need not have a unit. However, to avoid any prospect of confusion under circumstances where omission of units on SMU Line Items is adopted, including simple designators such as ‘flag’, ‘index’, ‘factor’, ‘of x’ (on percentages), etc. likely will improve clarity.
FAST 3.05-05 Choose a capitalization convention and stick with it
The Standard does not take a position on capitalization in labels. The rule is that whatever standard you use, apply it consistently throughout the model. Failure to do so not only looks scrappy and gives a poor impression of the modellers attention to detail. Like all labelling inconsistency it also impairs any ability to search on specific terms and therefore increases model risk.
FAST 3.05-06 Include the word “balance” in labels of balances
Together with FAST 3.01-05: Include display totals on all flows, page 28, this rule is one of the clearest means to ensure the distinction between flows and balances is clear to anyone reviewing the model.
FAST 3.05-07 Include the word “cash” when Label is otherwise insufficiently clear
FAST 3.05-08 Unit designators must be clear and unambiguous
FAST 3.05-09 Include units in the label
Including units in the label again adds clarity. When it comes to labels, verbosity is less of a problem than miscommunication.
FAST 3.05-10 Ensure alternative sign version of flows are clearly labelled
position being developed for subsequent draft.
FAST 3.05-11 Ensure distinction between opening and closing balances clearly indicated
It is important to clearly indicate whether a balance is an opening or closing balance. The opening balance will rarely, if ever, be reported on a Presentation sheet. For this reason it is given the functional suffix of BEG for ‘beginning balance’. While this is not in keeping with accounting conventions, accounting conventions of ‘brought forward’ and ‘carried forward’ balances are often shortened to ‘b/f’ and ‘c/f’ which are unclear and easy to confuse. The purpose of the BEG suffix is to ensure that modellers do not link to the wrong balance.
Closing balances are given no suffix and the absence of a suffix on a balance line item indicates that it is the closing balance. The reason that no suffix is given is that closing balances are very often reported on presentation sheets, especially on the balance sheet itself and the lack of suffix is preferable from a presentational perspective.
Rule FAST 3.05-03: All line items must have a unique label, [page 34], is related to this rule.
FAST 3.05-12 Maintain labelling consistency pedantically and precisely
Exercise discipline on standard elements to assist in global search and replace, for example, do not use “Tranche A” in one label and “Tr. A” or “TrA” in another). Do not vary the text used for standard suffixes, e.g. BEG for opening balances, POS for positive form of outflow line items.
FAST 3.05-13 Unit designators must be consistently applied throughout the model
Consistency amongst labelling components extends to units.
