Looking at individual SEC XBRL financial filings is helpful. Looking across many, many SEC XBRL financial filings with a focus on one specific aspect is likewise beneficial. Carefully and consciously comparing and contrasting many SEC XBRL financial filings helps one build a mosaic, increasing ones understanding even more. This helps one see and understand important and insightful patterns within those financial filings.
As part of something else that I am doing I have created a handful of analysis of SEC XBRL financial filings to see how different economic entities report specific disclosures.
As part of this analysis, I am seeing some interesting and pretty clear patterns. One of the patterns that I see is three specific reasons for let us just say "mind boggling diversity" within SEC XBRL financial filings. Here are the three reasons I see for this mind boggling diversity:
- Properly functioning US GAAP XBRL taxonomy: If you look at the property, plant and equipment by type roll up, you will notice a very high level of consistency between the Level 3 [Text Block] and the Level 4 detailed concept used to express that disclosure. SEC filers are able to find the correct concepts and they are applying the concepts consistently for the most part. One very interesting thing that you see is that of the 37 financial reports analyzed, 35 of the are reporting "PPE, NET" and 2 are reporting "PPE, GROSS" for the exact same disclosure. What is expected from the [Text Block], the same concept to be used for the detail disclosure? Or, might there be a missing [Text Block] if a filer discloses GROSS rather than NET?
- Filers having issues in some specific areas of US GAAP XBRL Taxonomy: If you have a look at the accounts receivable roll up, you start to see some issues reporting entities have with finding the correct concepts. Another interesting thing that you see is that some [Text Block]s don't differentiate between "current" and "noncurrent". Does that mean that there is a missing [Text Block]? Or, does that mean that [Text Block]s can sometimes be used to report "current" information and sometimes to report "noncurrent" information?
- Missing text blocks from the US GAAP XBRL Taxonomy: If you look at the capitalized computer software roll forward you can see the consistency in the Level 4 detailed representation of this disclosure, and a wild inconsistency in the Level 3 [Text Block] used by filers. This is a clear sign of a missing [Text Block] concept.
- Duplication of text blocks making it harder for filers to find the correct text block:If you look at the long-lived assets by geographic area disclosure, you will see 3 different and logical/rational choices for how to represent the Level 3 [Text Block] for that discloser. Is this diversity a feature or a bug? On the one hand, providing diversity (i.e. many choices) may be helpful. On the other hand, providing 3 choices where 1 would do causes complexity as contrast to simplicity. If a filer has 3 things to pick from, they have to go through the effort of choosing. Also, what is the value of providing a combined "revenues and long-lived assets by geographic area" as opposed to one for "revenues by geographic area" and another for "long-lived assets by geographic area"?
Here are my analysis documents:
- Accounts receivable roll up: Shows relation between Level 1 "footnote" text block, Level 3 "disclosure" level text block, and Level 4 "detailed" representation. (See more AR roll ups here)
- Property, plant and equipment by type: Shows a high level of consistency and specific reasons for the inconsistency. (See more PPE by type disclosures here)
- Long-lived assets by geographic area: Shows the possibility of a duplicate level 3 text block and combining of multiple disclosures into one text block. (See more long-lived assets by geographic area disclosures here)
- Capitalized computer software roll forward: Shows a clear sign of missing level 3 text block.
- Long-lived assets by geographic area: Shows consistencies and inconsistencies in the use of [Table]s, [Axis], the root [Member], and concepts used in the same disclosure.
- Property, plant and equipment estimated useful lives: Shows a relationship between disclosures and that common disclosure patterns exist (see next disclosure).
- Finite-lived intangible assets: Shows a similar "disclosure pattern" as property, plant, and equipment by type and property, plant, and equipment estimated useful lives (above) and that there is consistency, or should be consistency, between similar disclosures.
If you look at those documents, don't make the mistake to think that the analysis relates only to the specific disclosure being analyzed. These sorts of patterns exist for every discloser. Here are two prototypes you can use to look at different disclosures. This first prototype has more disclosures (420) but the volume of information is not as high. This second prototype is a bit easier to use, the quality of information is higher, but there are fewer disclosures.
How much diversity is warranted? Is this diversity planned? Or, is this diversity caused by sloppiness and lack of attention to detail?
How can this diversity be controlled? The answer to that question is easy: business rules. The reason for a lot of the unwarranted diversity is lack of business rules to control the diversity.
So consider the long-lived assets by geographic area disclosure. The following is pseudo code for business rules which would, if used by every reporting entity (i.e. if this information was provided by the US GAAP XBRL Taxonomy) would control where diversity is allowed and how diverse filers can be:
- Long-lived assets by geographic area disclosure - REQUIRES TABLE- us-gaap:ScheduleOfSegmentReportingInformationBySegmentTable
- Long-lived assets by geographic area disclosure - REQUIRES AXIS- us-gaap:StatementGeographicalAxis
- Long-lived assets by geographic area disclosure - REQUIRES CONCEPT - us-gaap:NoncurrentAssets
- us-gaap:NoncurrentAssets - ALLOWS ALTERNATIVE CONCEPT - us-gaap:PropertyPlantAndEquipmentNet
Look at those rules, then look at this matrix of what filers are doing. Don't quite like my rules? Fine, create whatever you want to allow filers to do. Rather simple. All this information can be expressed using XBRL definition relations. All these rule are, are allowed and disallowed relations between the report elements contained in the US GAAP XBRL Taxonomy. Having no rules means that anything is allowed.
Is there some sort of statement the SEC or FASB is making where their strategy for the diversity offered by the US GAAP XBRL Taxonomy is explained? If you see one, please point me to it. A clear sign that the US GAAP XBRL Taxonomy is out of control is a lack of that information....and no strategy.