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Details Every CPA Needs to Understand About XBRL

If you believe XBRL is here to stay (there is plenty of evidence that will be the case), then it is time for certified public accountants and charted accountants to understand some things about XBRL. Even some attorneys will need to understand some of these details.

These are not details relating to the technology, rather they are details of financial reporting which the technology needs to be able to deal with.  This is not a list of all those details, here I am focusing on information being reported within a financial report which is expressed using XBRL. This may not seem important to you now, but keep in the back of your mind that one day the XBRL will be the source document which drives the financial information which is presented.  Today, most accountants look at XBRL as something additional you do after print your financial report.  That will not last for long, that approach is simply a step in the evolution of XBRL.

If you are expressing information in XBRL, you will want these details to be expressed correctly.  These details relate to expressing information correctly within an XBRL financial report.  The information you express are called facts.  These facts are described by other information which identify the fact and help represent the information you are disclosing.  There are various approaches to checking to see if what you expressed comes across as what you desired to express.

So, what exactly is a fact?  A fact is something you can observe.  For example, here is a fact with some of the information which identifies the fact and helps to express the fact:

Cash and cash equivalents amounting to $1,000,000 for the consolidated group for the end of the third quarter of 2009 which rounded to millions of US dollars reported in the financial statement released on February 18, 2009.

Again, that is only one fact, some of the information which helps identify that fact and other information which helps you to identify that fact.  You will have thousands of facts and there is various information which helps identify those facts and helps you represent those facts.  You have processes to help you be sure you expressed these details correctly.

Here is a fairly comprehensive list of identifying information and which helps you express that fact which you should be considering when you create your financial information in XBRL:

  • Concept: Every fact has a concept to which that fact relates.  The concept tells you what the fact is, for example "Cash and Cash Equivalents". Concepts have additional information relating to them such as the definition of the concept, labels, whether it is a debit or a credit, and so forth. There is much more to concepts, but let's stop there for now.
  • Report date: Every financial report has a report date, most of the time being the date of the audit opinion attached to the report.
  • Fiscal period: Information within a report relates to a fiscal period which you know might not be a calendar period.  Fiscal periods might not correspond to months, for example the retail industry uses a 52/53 week fiscal period in many cases.
  • Reporting entity: The reporting entity is the entity reporting the information which may not be the entity which the information is about.  See legal entity which is next.
  • Legal entity: The legal entity is the entity to which the information being reported relates.  It may, more may not be, the legal entity.
  • Operating segment: The information being reported may be for the consolidated group or parent, or it may be for one of the operating segments of the consolidated group.
  • Operations continuing or discontinued: The operating segment for which information is reported might be continuing or it may be a discontinued segment.
  • Measurement basis: The information being reported could be reported at historical cost, amortized cost, fair value, or some other measurement basis.
  • Restatement: The information could have been restated due to a change in an accounting policy or because of an error in a prior period report.
  • Reclassification:  The information of a prior period may have been reclassified to match the classifications in your current financial report.
  • Reporting scenario: The information being reported could be actual information, or it might be forecast information, or perhaps even budgeted information.
  • Third party verification: The information reported could be covered by a third party audit report or it may not have been audited at all.
  • Other descriptive information: All sorts of other details could be important to specific types of detailed information such as the class of long term debt or a specific category of subsequent event.  These details may, or may not, be important to communicate. 
  • Value of fact: Information reported could be a number such as "1,000,000" or it could be a piece of text such as "First in-first out", or it might even be an entire paragraph of text describing an accounting policy.
  • Rounding: If the information reported is a number, the number could be rounded to the nearest millions of dollars or detailed to the nearest cent.
  • Reporting units: Maybe the units are not dollars at all, but rather Euros or some other currency.  Or, the number might not even be monetary but rather the number of employees or the barrels of oil within a reserve.
  • Reason information is not reported: Sometimes for a number of reasons the information which is required to be reported is not available and you need to explain why that information could not be reported.
  • Relations to other facts or concepts: Facts reported relate to other facts being reported.  For example the line items of a balance sheet add up or "roll up".  A cash flow statement not only adds up (i.e. the net change in cash), but it also communicates a "roll forward" of the beginning balance of cash to the ending balance of cash.  Or, maybe the fact is not a number and therefore not involved in a computation but is rather an accounting policy and you want to organize it with your other accounting policies.

Another question to ask yourself is how the analyst using this information interpreting the information?  Is the analyst going to have to imply any meaning because when you reported the information you were not being explicit.  Is that analyst going to correctly imply the right meaning?

Sometimes XBRL taxonomies don't help you understand how to report certain identifying information or information which helps you properly represent the information you need to report in XBRL.  If the XBRL taxonomy does not, you will still need to do something to be sure the meaning you are trying to articulate will be interpreted properly by users of the information.

The bottom line is to ask users of the information if they are having any issues making sense of your XBRL based financial reports.  But the CPAs/CAs who create this information, those who review this information, internal auditors who work with this information, third party auditors dealing with this information, attorneys who help prepare and work with this information, and others need to be conscious of what they are saying in their XBRL based financial reports.  Software can help you, but you are the one who is ultimately responsible for the quality of your XBRL based financial reports.

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