Digital Financial Reporting

Looking at the balance sheet semantics of SEC XBRL financial filings can help understand what is meant by semantics and how useful understanding the semantics can be. Looking at the semantics also helps one understand the benefits of consistency.

Inconsistencies have implications.  For example, consider all the adjustments which would need to be made to software programs which read SEC filings if, say, a balance sheet did not physically report the fact with the concept "us-gaap:Assets".  The software would need to have code to handle all the possible exceptions that might come up.  Another way is to simply always require us-gaap:Assets to be on the balance sheet, even if you have no assets (report zero) or you only have one asset such as cash (still put in the total for current assets and total assets). 

Life would be so much easier and using the information would be easier and more dependable. Think about the implications when you look at the modeling choices filers have made in their balance sheets.

To look at balance sheet semantics in SEC XBRL financial filings, this is what I did.  First, I had to get filings to look at.  I used the SEC RSS feed archive.  I used October 2011 and November 2011. I looked at all 10-K, 10-K/A, 10-Q, and 10-Q/A filings.

From that list I looked for three things:

• Did the filer report "Assets"?
• Did the filer report "Liabilities and Equity"?
• Did Assets = Liabilities and Equity?

Pretty basic and reasonable financial reporting semantics.  Since all filers report balance sheets, balance sheets have assets and they have liabilities and equity; and balance sheets are supposed to balance, you would think that 100% of the filings would have those three characteristics.

This is what I found in the 8,098 SEC XBRL financial filings in my test set:

• 8,010 filings did have both of those facts (assets; liabilities and equity) and the balance sheets did balance (assets = liabilities and equity)
• 88 filings did not pass those three tests

So the obvious next step is to figure out WHY the 88 did not have those semantics. To do that I had to manually look at each of those 88 filings, which I did and the results are here in this PDF.

This list breaks those 88 tests down into categories:

• 4 filings CORRECT: Confirmed to be correct, uses Net Assets approach, need to adjust theory to consider net assets.
• 25 filings IN ERROR: Filer created concept which they used rather than using US GAAP Taxonomy concept because they felt "Liabilities and member equity" or "Liabilities and partner deficit" or "Liabilities Stockholders Equity and Redeemable Interest" made their number unique, not fitting into the definition of the concept with the standard label "Liabilities and Equity" (see http://goo.gl/g4UdH). However, this seems hard to justify. "Liabilities and Equity" seems rather clear, lots of other filers seem to agree with my view.
• 9 filings IN ERROR: Minor rounding error (most were $1, two were $2); I personally consider this sloppy.  Why can everyone else put in the correct numbers and have assets = liabilities and equity?
• 25 filings IN ERROR: Pretty clear filer made an error by choosing the wrong concept (say us-gaap:AssetsCurrent rather than us-gaap:Assets), transposed a number, entered an incorrect number, etc.
• 6 filings IN ERROR: Filer created extension concept called "TotalAssets", clearly us-gaap:Assets should have been used.
• 1 filing IN ERROR: Filer has balance sheet, but does not have an assets section, only liabilities and equity (i.e. could have provided Assets with a balance of $0). A balance sheet has both assets and liabilities and equity.  They perhaps could have called their statement "statement of liabilities and equity". Further, other filers added assets with a zero balance.
• 2 filings IN ERROR: Filer has balance sheet, has an Assets section, but that section contains only "Cash"; no total for "Current Assets" or "Total Assets".  Personally, I would add the concept "assets" and put the total on the statement.
• 6 filings IN ERROR: Clearly inappropriate use of the concept "us-gaap:AssetsNet" on a balance sheet (rather than a statement of net assets).  Easy to see that us-gaap:Assets should have been used.
• 2 filings IN ERROR: Filer used a nil attribute, should have used a zero. This is pretty clear in the EFM, besides there are lots and lots of filers who do use zeros in such cases.
• 1 filings IN ERROR: Created concept "NetAssetsInLiquidation", should have used "us-gaap:AssetsNet".
• 7 filings UNKNOWN: Unable to determine, but the balance sheet does not balance, seems incorrect, but could possibly be correct. Here is more information on those 7 balance sheets.

All of those add up to 88.  If all the errors were fixed and if I could figure out the 7 other strange filings which have balance sheets that don't balance, imagine how easy it would be to write a query to get total assets of all SEC filers at any point in time, for any set of filers.  We are so, so close to being able to do this for total assets of SEC public companies.  Once that is achieved, then other areas can be dealt with.  There is no magic involved here, pretty basic stuff.  Plus, you could double check your query by also requesting liabilities and equity and seeing that the two numbers you retrieved agree.

Now, you may not personally agree with my choices as to whether something is, or is not, an error.  Frankly, it does not matter which of us is correct.  What is important is consistency.  Unless there is a reason for not being consistent.  If that is the case then we both adjust our model to reflect all the allowable alternatives.  The bad things occur if there is no one model we can agree to.

Again, no magic here.