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Correlation Between Quality and Software Shown by Missing Balance Sheet Rollups?

I believe that I am seeing my first definitive correlation between the quality of an SEC XBRL financial filing and the software used to create that filing.

What I did was look at all 7,199 SEC XBRL 10-K filings which I have been analyzing to try and find how many filers provide XBRL calculations for their balance sheets.  All SEC filers provide balance sheets. All balance sheets balance, that is "the accounting equation".  The XBRL Cloud Edgar Dashboard shows that this is true (see the column Domain Level Rules).

Well, balance sheets also foot.  Assets foot.  Liabilities and equity foot.  And so I ran a test against all 7,199 SEC XBRL financial filings, the 10-Ks in my set, and this is what I found:

  • Of the 7,199; a total of 6,679 (92.8%) do provide XBRL calculations for the assets and liabilities & equity roll ups.
  • Of the 7,199; a total of 520 (7.2%) do not.

But wait, this is the interesting part.  There seems to be a pattern in the software used to create SEC XBRL financial filings.  This is a breakdown of the same information by software used to create the SEC XBRL financial filing: (This Excel spreadsheet has the detailed results.)

There are two important things that I see in this data.  First, notice all the software vendors with zero missing XBRL calculations relations.  That means consistency.  Nothing falls through the cracks.

The second thing to notice is the high rates for a number of filers as compared to the rest of the pack.  Reach your own conclusions about what this means.  What it means to me is this: Why would there be any statistical correlation between whether an SEC filer needs business rules expressed and the software used to create the SEC XBRL financial filing?

This is, I believe, the first clear evidence that I have seen which shows a correlation between software and SEC XBRL financial filing quality.  I specuate that there will be more such correlations revealing themselves in the future as people dig into the filing information more.

What do you think?

What I think is that this is another clue that a financial report quality model will emerge.

Posted on Tuesday, March 26, 2013 at 11:25AM by Registered CommenterCharlie in | CommentsPost a Comment

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