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Understanding Why SEC XBRL Filings Cannot be Deciphered and How to Fix Situation

There appears to be exactly four specific situations which make it impossible to read basic information and decipher the correct meaning from the information reported within SEC XBRL financial filings using automated processes. By basic information I mean information about the entity of focus and the current reporting period. Additional things are perhaps needed to read information which has additional characteristics associated with reported facts.

The four specific situations are:

  • Missing totals/subtotals: Missing fundamental accounting concept totals/subtotals. For example, most filers do report key totals such as "Assets", "Equity", "Revenues", Net Income (Loss)" and so forth.  If filers don't report such totals/subtotals, it can cause problems with reading the information.
  • Crossing categories: Filers moving a fundamental accounting concept to be part of some other fundamental accounting concept.  A common situation is where a filer moves the concept "Interest and Debt Expense" to be included as part of "Nonoperating Income (Expenses)".
  • Extension category unknowable: No machine readable information which relates an extension concept to some existing US GAAP XBRL Taxonomy concept or concept category. For example, if a filer reports the concept "my:SomeTypeOfOperatingExpense" and they intended that to be an operating expense, while a human can figure out that the concept is an operating expense, a computer cannot.
  • Missing US GAAP XBRL Taxonomy concept: If a high-level concept is missing from the US GAAP XBRL Taxonomy, it can cause the filing to not be decipherable by automated processes.

Many people believe that it is extensions alone that cause all the problems of making use of XBRL-based financial information.  This is not the case.  A filer could create a filing with no extension concepts and the meaning reported by the filing can still be undecipherable. Alternatively, a filer can create numerous extensions and the meaning of the reported information within the filing can be completely and correctly deciphered.  And I am not including reporting errors which can cause problems because reporting errors can be fixed by the filer.

A filer inappropriately extending a fundamental accounting concept is explicitly not included in the list. If a filer extends a high-level concept, it will generally cause serious problems automating the use of the information.  For example, extending the concept "Net Income (Loss)" will cause problems.  But this is considered a filer error.  Errors are not included, filers can fix errors.

None of the situations above can generally be fixed by SEC filers, they need to be fixed by those that manage the US GAAP XBRL Taxonomy and those writing the rules for SEC XBRL financial filings.   Now, filers do have the power to work around each of these situations, at least in part.  Filers can creates safer filings by avoiding the four items in the list above as best as they can.

Understanding the impact of these situations is easy, you simply need to attempt to read SEC XBRL financial filing information using an automated process and look at the results which are achieved.

Finally, while if all four of those situations were corrected deciphering the meaning of reported information would work; it may not be the case that correcting all four are necessary.  For example, while reporting certain subtotals would solve problems related to using filing information, certain subtotals are not required to be reported.  But, if filers where not allowed to "cross categories" and change the meaning of information and if machine readable information about what category an extension concept fits into; the subtotals would not be necessary.

Posted on Saturday, September 13, 2014 at 12:02PM by Registered CommenterCharlie in | CommentsPost a Comment

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