There is a belief which has reached somewhat urban legend status about calculation inconsistencies in XBRL instances. The belief is that there are certain calculation inconsistencies which can never be made to go away no matter what you do, no matter how hard you try.
Is this belief that not all calculation inconsistencies can be made to go away truly a fact or is it a mistaken belief?
Let's look at some facts.
- A set of 403 SEC XBRL filings I looked at (the second quarter of XBRL filings with the SEC), 313 had no calculation inconsistencies. The 90 that have calculation inconsistencies are listed here. That is about 22% of all XBRL filings. That is an improvement from the first quarter of XBRL filings.
- The set of 408 SEC XBRL filings for the first filing period where XBRL was officially submitted there were 123 filings which had calculation inconsistencies. That was 30% of all filings.
- Of the calculation inconsistencies which existed in the set of 403 filings mentioned above, when I try and figure out why the calculation inconsistencies exist; in 100% of the cases the inconsistencies resulted from either (a) an error in creation of the XBRL instance or (b) an error in modeling the XBRL taxonomy or (c) a combination of both.
- This is a PDF which shows two filings which I looked at and tried to figure out why the calculation inconsistencies existed. It is not my intension to pick on these two filers. I did need to show specific details to make my point, so it was necessary to pick specific filings. It shows how I determined that the existing calculation inconsistencies, were in fact, unnecessary and could have been made to go away by correcting the XBRL instance or correcting the XBRL taxonomy.
- There seems to be a statistically significant relationship between the filing software used and the number of calculation inconsistencies. If there were no relationship, then it seems to me that the inconsistencies would be evenly distributed between those creating XBRL filings. But the data that I see does not show this. Perhaps someone with a better background in statics can check into this further. Here is the data from XBRL Cloud. Here is my summary of this information. You look at the data and reach your own conclusions.
- There does seem to be a realization in the filings that there is a difference between the presentation of numbers in a rendering and how that number is put into an XBRL instance (i.e. mixing up the data and the presentation of the data). This misunderstanding is NOT what is causing calcuation inconsistencies to the extent that it did before. This is very, very good news.
Now, I would really like to make it through all 90 of the XBRL instances which have calculation inconsistencies to figure out why the calculation inconsistencies exist. That would take a significant amount of time. What I may do is wait another couple of quarters until filers fix what amount to obvious errors and then undertake that task, it would yield some good information.
In my personal experience, I have never found the need to create an XBRL instance that needed to contain calculation inconsistencies and have always found that my calculation errors resulted from one of two things: bad fact values in the XBRL instance or a poorly modeled XBRL taxonomy.
Now, don't get me wrong here. Have I had inconsistencies in XBRL instances? Absolutely. Some inconsistencies were down right confounding. This was particularly true when the validation reports were harder to read. (They are not that great today, but they are WAY better than they used to be!) For example, when I was helping to create the IFRS taxonomy I always tended to have problems getting the indirect cash flow statement and the income statement to both have zero calculation inconsistencies. What I discovered is that I was making a modeling error in the taxonomy. To make a long story short, this helped me reach the conclusion that it is critical to create XBRL instances when creating an XBRL taxonomy to be certain that you don't model the taxonomy so that it is impossible to create an XBRL instance which does not have calculation inconsistencies. I learned a lot about creating XBRL instances from struggling to make calculation inconsistencies to go away.
However, I am not ready to say that it is possible to make all calculation inconsistencies to go away. And, as such, I can certainly understand the risk management decision to allow calculation inconsistencies in SEC XBRL filings which the US SEC has decided take. But at the same time I point out that allowing these inconsistencies with no ramifications for the inconsistencies promotes sloppiness. Evidence of this are the 90 filings with inconsistencies, the two which I pointed out above which are clearly filer errors, and the 10 or so other filings I have been through and see no situation where I would not be able to make the calculation inconsistencies to go away.
Is more evidence necessary to determine if all inconsistencies can be made to go away for every filer in all situations? I think so. But should there be something to motivate filers to fix obvious inconsistencies? Personally, I think that would be a good thing.
I know accountants. I am an accountant. We accountants like things to add up, tick, tie, etc. Personally I think that XBRL calculations are getting a bad rap for two reasons. First, I have personally called XBRL calculations impotent. Why? Well, they don't cover all the computational situations which exist in an XBRL instance for financial statements. Roll forwards are an example of something they don't cover. Cross dimensional aggregations is another. Second, in the early days of XBRL there was a lack of understanding between calculation and other relations expressed in networks and the XBRL instance which caused poorly created XBRL taxonomies. I know this because I made these mistakes myself. A good example is hooking up both indirect and direct cash flow statement calculation networks to one XBRL instance which only has fact values for the indirect network of calculations. I get that now, others do also.
So what is the conclusion here and what is the answer? This is what I believe:
- All this will work itself out over time. We clearly cannot have automated processes without things adding up correctly. It would be too difficult to create enough software which effectively overcomes the errors in numeric data where things need to add up to be useful.
- Filers should be more careful in creation of their filings. Part of this is to become more familiar with modeling XBRL taxonomies.
- If you find yourself blaming XBRL for the calculation inconsistencies, you are missing the point and in my view are hiding behind XBRL in an effort to basically cover up your unfamiliarity with XBRL or sloppiness. Don't fall into this trap.
- If you feel you cannot get the computations to be expressed correctly with XBRL calculations; fine, then use XBRL Formula. Use something to help prove out your data. You may not be able to submit the XBRL Formulas to the SEC, but what you will learn by going through this process are the taxonomy modeling errors you are making.
- Don't mix up poor XBRL taxonomy modeling practices and XBRL calculation inconsistencies. For example, if you think you cannot make things add up because of "dimensional issues", ask yourself, "Well, do I have my dimensions expressed correctly?" Generally you will discover that the problem is the taxonomy.
- Look at other SEC XBRL filings which have no calculation inconsistencies and see how they modeled their taxonomy. Ask yourself, "If they can make the inconsistencies go away, why can't I?"
- This may be asking too much, but what the heck. It is my belief that the SEC should not give filers carte blanc when it comes to calculation inconsistencies. There should be something to provide an incentive to not have calculation inconsistencies. Perhaps having to explain why they need to exist in an XBRL footnote in a filing or having to re-submit if the inconsistencies are subsequently found to be caused by an error would provide enough incentive.
If you do believe you have calculation inconsistencies which you simply cannot be made to go away, I would love to see the situation. Knowing these situations will help figure out how to tame XBRL in this area. Personally, I am taking the stance that until there is proof to the contrary, calculation inconsistencies can be made to go away if you try.