Digital Financial Reporting

I put together a prototype that shows the possibilities that are enabled by XBRL-based reporting of financial and non-financial information.  The trail is being blazed by the U.S. SEC and public companies that are required to report to the SEC using the XBRL format.

What I did was run a query of the last 10-K submitted to the SEC by each of the 5,555 public companies in the set I am working with.  I exclude funds, trusts, foreign issuers, etc.  It took about 3 hours to run a query that went from XBRL document to XBRL document, extracted high-level fundamental accounting concepts from the reports, checked the information to make sure the information was right, and then put the resulting information into a database.  Then, I generated that HTML page from the database.

Of the total 5,555 10-K reports, there were 4,604 (85% of the total) reports where the information was checking out. There still seem to be some errors in the information in my HTML document.  Ultimately, the quality level needs to be 99.99966% which is Sigma Level 6.

So, how do we get to that level?  Well, part of what needs to happen is that a method for implementing a standard business report using XBRL needs to be created.  Then, professional accountants need to learn to consciously create such reports.

The case for XBRL-based general purpose financial reports is pretty straight forward.  The $64,000 question is how long will it take to get professional accountants with the program.  People tend to not like change. Accountants in particular are not known for their ability to embrace change.  But change will come.  The same technology that is causing problems like information overload are also the solution to the problem of information overload.

Here are a couple more prototypes that I put together for other purposes: (these are 10-Ks and 10-Qs that I use for evaluating the consistency of reports to high-level fundamental accounting concepts)

• Financial report core information sorted by reporting entity.
• Same information as above, but sorted by assets.
• Same information as above, but sorted by net income (loss).
• Same information as above, but sorted by net cash flow.

If you want to understand how to extract that sort of information from XBRL-based reports, see this set of Excel spreadsheets.  There are different ways to get lists of the XBRL-based reports, one is this set of RSS feeds provided by the SEC. Another is XBRL Cloud's Edgar Dashboard.

You don't have to be a programmer to create something useful.  Start fiddling around and you will become a good enough progammer to perform useful tasks.  I have been fiddling around with Excel VBA for probably 30 years.  One of the more useful things I learned was how to process XML files.  Then, I picked up what I could about XBRL.  This is not really rocket science.  The thing is, programmers don't really understand financial reproting.  Further, it would take way longer for a progammer to learn financial reporting than it would for a professional accountant that does undersand reporting to pick up programming.

If you come up with something useful or interesting please be sure to let me know about it.