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Four Common Areas of Confusion in SEC XBRL Filing Accounting Concept Selection 

As part of my detailed analysis of 1474 SEC XBRL filings I am seeing four common areas of confusion relating to the selection of the appropriate accounting concept. I provide details of these four areas in this PDF file. These four areas are important because pretty much every filer typically makes use of these concepts in their company filing. Here is the summary. 

  • Total Stockholders' Equity. The issue here is which concept should you use to represent total stockholders' equity if you DO NOT have "Stockholders' Equity Attributable to Noncontrolling Interest". If you do have that concept, the answer is clear, you will use both "Stockholders' Equity Attributable to Parent" and "Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest."  But this is less clear if you don't have a noncontrolling interest.  Per the US GAAP taxonomy documention and per what I heard from folks at the FASB, "Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest" is the proper concept to use for total equity whether you do, or do not have a noncontrolling interest.  The key is the "if any" phrase in the concept's documentation.
  • Income (Loss) from Continuing Operations Before Tax. Pretty much every filer is going to have a concept which expresses what amounts to "Income (Loss) from Continuing Operations Before Taxes". But, because of all the steps or levels in the income statement, it is less clear WHICH concept to use. Many filers become so confused that they try and get around the decision by creating their own extension concept, clearly the wrong approach to take. While the label will be different, my view of which concept to use is consistent with the 73% of filers who picked the concept with the US GAAP Taxonomy standard label "Income (Loss) from Continuing Operations Before Taxes, Extraordinary Items, Noncontrolling Interest".
  • Net Income (Loss) Including Portion Attributable to Noncontrolling Interest. Similar to the total equity issue, if a filer has "Net Income (Loss) Attributable to Noncontrolling Interest", they generally pick the right concepts to use.  But if they don't have a noncontrolling interest, then they get confused between picking "Net Income (Loss) Attributable to Parent" and "Net Income (Loss), Including Portion Available to Noncontrolling Interest." Consistent with total equity, I say the correct concept to use if you do not have a controlling interest is the latter, "Net Income (Loss), Including Portion Available to Noncontrolling Interest" whether you do, or do not, have a noncontrolling interest.
  • Net Cash Provided by (Used in) Operating Activities. Again, same deal.  If you have discontinued operations, which concepts to use in the cash flow statement for "Net Cash Provided by (Used in) Operating Activities" is clear, you use "Net Cash Provided by (Used in) Operating Activities, Continuing Operations" and "Cash Provided by (Used in) Operating Activities, Discontinued Operations" and you may even provide a subtotal for both using "Net Cash Provided by (Used in) Operating Activities".  But, which concept should you select if you ONLY have continuing operations: "Net Cash Provided by (Used in) Operating Activities" or "Net Cash Provided by (Used in) Operating Activities, Continuing Operations"? My analysis shows that 86% of filers used "Net Cash Provided by (Used in) Operating Activities" which I would personally tend to agree with. Others have a different view. (Note that the same issue exists for investing and financing activities also.)

If you ask each filer why they picked what they picked, they each have an answer which they feel is correct; thus their choice. Having that view misses the point. The point here is that if you asked to, the choices could be different.  Guidance in these four areas should be clear enough so that give the same set of facts every filer or filing agent, or analyst would make the same choice.

Further, there are likely other areas of the US GAAP Taxonomy where issues similar to this may exist.  Concept documentation needs to be clear enough to lead filers in the right direction.  If you run across areas such as this, I would encourage you to post a comment to the FASB so that the taxonomy can be adjusted.

Posted on Friday, April 1, 2011 at 06:57AM by Registered CommenterCharlie in | CommentsPost a Comment

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