Digital Financial Reporting

Anyone familiar with XBRL realizes how impotent the XBRL calculation linkbase is. Business rules articulated using XBRL calculation only allows for "roll up" type relations to be expressed.  But the US GAAP Taxonomy has many other types of business rules besides roll ups:

• Roll forwards: computations across the Period [Axis], beginning balance + changes = ending balance
• Dimensional aggregations: computations across some dimension such as the business segments or geographic areas.
• Adjustments: computations across the Report Date [Axis]; origionally stated balance + adjustments = restated balance
• Variance: computations across the Reporting Scenario [Axis]; actual - budgeted = variance
• Complex computations: computations such as earnings per share

And there are other business rules which a more powerful business rules engine could automatically validate.  In fact, much of a disclosure checklist can be validated using a powerful business rules engine.

What if there was a global standard approach to expressing business rules.  Should that standard be used by the US GAAP Taxonomy?

Well, the fact is that there is a global standard: XBRL Formula.

The 2008, 2009, and 2011 versions of the US GAAP Taxonomy did not include XBRL Formula.  Part of the rational for not using XBRL Formula was that XBRL Formula was still new.

A discussion on the XBRL-DEV mailing list yielded this list of business rules processors available in the market:

Commercial XBRL processors which include XBRL Formula capabilities:

• Edgar Online/UBmatrix: http://ubmatrix.edgar-online.com/products/processing_engine.htm#  (http://ubmatrix.edgar-online.com/products/formulas2008/index.htm)
• Fujitsu: http://www.fujitsu.com/global/services/software/interstage/solutions/xbrl/ 
• Invoke: http://www.invoke.fr/en/gabarit_03.asp?Page=produits/xbrlsuite.asp 
• Reporting Standards: http://www.reportingstandard.com/en/XBRL_API.html and http://www.hernandez-ros.com/webfp/  
• Semansys: http://www.semansys.com/sdnn/Aboutus/tabid/168/Default.aspx

Open source XBRL processors which include XBRL Formula capabilities:

• Arelle: http://arelle.org/ 

Proprietary business rule formats:

• CoreFiling: http://www.corefiling.com/products/sphinx/ 
• PFXBRL:  http://pfxbrl.blogspot.com/ 

Others (not clear on what exactly is provided):

• GPM Systemy: http://gpm-systemy.com/en/
• XBRL Test Platform: http://cosx.co.cc
• ShangHai Newlido, China: XBRL Validation Platform (No link available)

It is impossible to create a correct SEC XBRL financial filing without automated validation of business rules such as that provided by XBRL Formula.  You can try to validate all these details manually, but that does not work very well at all.

The FDIC implemented business rules in 2005using a proprietary approach because XBRL Formula did not exist.  They understood that validation of business rules.  The quality of data submitted to the SEC would no doubt improve if business rules were used by SEC filers.  Not having XBRL Formula in the US GAAP Taxonomy does not prevent filers from creating their own set of business rules.  But, by having these rules within the US GAAP Taxonomy and accepted by the SEC, not only would the accuracy/quality of the data improve but the consistency across SEC filers would improve as well.

I think it is time for XBRL Formulas to be used by the US GAAP Taxonomy.  What do you think?