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Diving into Disclosures

For almost a year I was poking and prodding SEC XBRL financial filings at the primary financial statement level mostly in order to understand those SEC filings.

I am not using the techniques which I have perfected to dive into the disclosures.  Many people think that the disclosures are more complicated than the primary financial statements.  Personally, I don't think that is true.  There is more variety in the disclosures. There are a larger number of disclosures than primary financial statements.  But if you understand Digital Financial Reporting Principles; those same principles apply to the primary financial statements and to the disclosures.

Let me walk you through one disclosure. I will take something which is rather straight forward and a large number of SEC filers have. One of the first things to understand about the disclosures (if you are not an accountant, accountants know this) is that most disclosures are provided if you only have specific types of transactions, events, or other circumstances.

This disclosure relates to share based payment awards of equity instruments other than options, restricted stock, and stock units to share-based compensation arrangements. This is a very specific disclosure.  The terms (jargon) are very precise and important.  The simple explanation is that the disclosure is about stock options.  I will provide an overview of 5 different representation approaches used.  Don't focus on the accounting here though. 

Approach 1: This is not bad.  Notice how readable and understandable this is.  The units and values are shown separately.

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Approach 2: This approach is not bad either, but I think the first approach is better because of the headings provided.

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Approach 3: This approach is less desirable in my view because it mixes the units and values (i.e. weighted average price) together.  This is hard to read.

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Approach 4: This is somewhat of a disaster in my view.  Can you read this?  I cannot.

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Approach 5: I like this approach which is similar to approach 1 in that it has the headings which break up the information; this also adds the "[Roll Forward]" to the label which helps a reader of the information that it is a reconciliation between two periods.  But this has a problem.  The second roll forward is not really a roll forward.  It is information about the balances within the roll forward, but in actually the second "[Roll Forward]" does not really roll forward.  Get out your calculators and check it out.

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My vote for the best approach?  #1 is the best.  That could have been improved by adding the "[Roll Forward]" to indicate that it was in fact a roll forward. But, you can tell because of the beginning and ending balances. 

A question you may have is how do I discover all this stuff?  The answer: software.  All this information is structured.  I am not using XBRL to grab this information, at least not directly. Sure, if the information was not structured (in this case in XBRL) this sort of analysis would not be possible.  But, the information is structured.  So, I can write software to do magical sorts of things.

Here is the interface of the application I created:

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I can extract information for any of 1000 disclosures. How? Well, I mapped the each disclosure to the US GAAP XBRL Taxonomy (actually a remodel version of that).  I then use prototye theory to figure out where the disclosure I am looking for is.

Once I locate the pieces that have the disclosures, I use the XBRL Cloud Edgar Report Information web service to provide the renderings.  In my application it looks like this:

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So that is how I get at all this disclosure information.

This is starting to get really useful.  The information structured in XBRL is helpful in understanding the HTML financial reports.  The HTML and the XBRL must be consistent per SEC filing rules. Researching financial reports is a snap leveraging the information structured using XBRL.

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