Digital Financial Reporting

The Hitachi Interactive Data blog has an article by Tammy Whitehouse who interviewed Mike Willis of PWC, Persistent Errors Inhibit Consumers from Using XBRL Data. The article discusses errors in SEC XBRL financial filings.  Here is an example of one of those errors, balance sheets which do not balance.

So, of about 8,000 SEC XBRL filings I looked at, 7,973 (99.67%) had balance sheets where "assets" and "liabilities and equity" are equal. This is what one would expect.

But, 27 of those filers (.33%) had balance sheets which did NOT balance.  Granted, a handful of these (I think it was 7) were off by $1 or $2.  But, how hard would it have been to round those numbers so that the balance sheets did balance?  I speculate that this is what many of the 7,973 did.

The list below provides links to the filings so you can view them in the free XBRL Cloud Viewer.  The link takes you directly to the balance sheet and in most cases directly to either assets or liabilities and equity.  You can see for yourself that the balance sheet does not balance. Look at the graphic below, it helps you understand where to look in the viewer. 

Note the green circles which indicates balance sheet periods which balance and the red which indicates that they do not balance (the screen shot is of this specific filing):

SEC XBRL financial filings which had a balance sheet which does not balance:

• ACTIVECARE, INC.
• AF OCEAN INVESTMENT MANAGEMENT Co
• Alpha Network Alliance Ventures Inc.
• ALR Technologies Inc.
• Alternative Energy Partners, Inc.
• AquaLiv Technologies, Inc.
• Chang-On International, Inc.
• Cleartronic, Inc.
• Dolat Ventures, Inc.
• Dutch Gold Resources Inc
• Energizer Tennis Inc.
• Face Up Entertainment Group, Inc.
• FITS MY STYLE INC
• Independence Energy Corp.
• Marlborough Software Development Holdings Inc.
• Options Media Group Holdings, Inc.
• Rainbow International, Corp.
• RVPlus Inc.
• San Lotus Holding Inc
• SANGUI BIOTECH INTERNATIONAL INC
• SANTA FE FINANCIAL CORP
• Seven Arts Entertainment Inc.
• SEVILLE VENTURES CORP
• Superior Venture Corporation
• TouchIT Technologies, Inc.
• Vital Products, Inc.
• XIAN RESOURCES, LTD.

Don't think that this is perhaps the only error in these filings or other filings.  A balance sheet which does not balance is likely indicative of other errors.

Financial Reporting Trends is a tool which I created for myself. It is inspired by the AICPA's Accounting Trends and Techniques. Whereas Accounting Trends and Techniques is limited to about 500 SEC public company financial statements, Financial Reporting Trend suses all 8,000 SEC XBRL public company financial filings (10-K and 10-Q).  Reporting entities can be sorted and filtered in numerous ways.

My tool is far beyond what I would consider a prototype or a demo.  It is real, it works.  True, it is built using Microsoft Access which is a rapid application development environment which I understand and have been building applications in for over 25 years.  But my programming is simple because all of the heavy lifting has been done for me by a web service which serves as the data sources for all that SEC XBRL financial information.

I am using web service provided by XBRL Cloud.  The web service is not publically available yet, it is still a beta.  I am permitted to discuss this, I have XBRL Cloud's permission.  I am helping XBRL Cloud understand and implement this web service.  Foundational to the web service is the financial reporting semantics which I have been trying to get people to understand for a number of years.  The semantics are explained in the Financial Report Semantics and Dynamics Theory written by myself and Rene van Egmond who has helped me understand all this technical stuff since the very first XBRL International meeting in 1999. Additional details are provided in our book, Digital Financial Reporting. (Or, you can download the chapters of the book here.)

The fact that every 10-K and 10-Q SEC XBRL financial filing either (a) fits into the semantic model I use or (b) it "loads" into this commercial software and then modeling errors can be clearly seen is pretty significant proof that the Financial Report Semantics and Dynamics Theory is sound. (See the column 'Model Structure Rules').

There are a number of other software vendors who have embraced this model.  Most of them don't want me to talk about this fact at this stage of the game, so I cannot provide names.  But, you will see who is beginning to hide XBRL technical syntax in the background, providing an easier to use semantic layer to accountants creating financial reports.

The result of this can be seen in things like my Financial Reporting Trends tool which I can use for analysis of financial reports.  I contend that this is pretty useful stuff. While Accounting Trends and Techniques has provided a lot of the inspiration for what I have put together, there are other tools which provide the same functionality.  For example, PPC's Guide to Creating Financial Statements is a very similar tool.  I remember when PPC joined XBRL International.  PPC was eventually purchased by ThompsonReuters.

PWC's article about disclosure management refers to the notion of "reporting templates". That is what every SEC XBRL financial filing is, a reporting template.  Some are good, some not so good at the moment.  But they will get better.

Tools used to create financial reports, and folks I am not talking about Microsoft Word, are going to be able to read these reporting templates and import them into tools.  Included in the reporting templates are sophisticated business rules which help software help users get the financial reports from many different aspects: the XBRL technical stuff, but also the financial reporting aspects.

I see this as useful.  Repeat after me, "paradigm shift".  If you are trying to understand all this based on the current financial reporting paradigm, you will never "get it, get it".

Bottom line: XBRL provides benefits not just to analysts, but also to creators of financial reports.

I have been fiddling with the XBRL Cloud Viewer (which you can get to for any SEC XBRL financial filing here) and created this video which shows many of the featureswhich I figured out. Be aware that I have a paid subscription to XBRL Cloud so I can use the "Search" and "Explore" functionality.  All the other functionality is the same.

This is really worth checking out. The the last several posts for more information on what this viewer does.  Very useful stuff!

In my last post I mentioned the new XBRL Cloud Viewer. I have been fiddling around with the linking to specific parts of an XBRL instance and this is what I have discovered:

• Linking to a filing: If you click here, you will be taken to a specfic filing, in this case the latest Apple 10-Q.  Look at the link, notice how you pass the location of the XBRL instance to the viewer and the Viewer opens the filing.
• Linking to specific component: If you click here, you will be taken to that same filing and directly to the cash flow statement.
• Linking to specific fact: If you click here, you will be taken to the same filing, to the cash flow statement, and to the specific line item "Increase in cash and cash equivalents".
• Link to specific view: If you click here, you will be taken to the same filing, cash flow statement, the same line item "Increase in cash and cash equivalents", but to the model structure view.
• Link to business rule: If you click here, you will be taken to the same filing, same component, same concept; but this type to the business rule.

That is pretty handy functionality. Not sure if you realized that you can link directly to US GAAP Taxonomy report elements in this manner.  Click here to try that.

If you look at the URLs that you click on, you will see that you can predict what URL needs to be in order to get to a specific location in the XBRL Cloud Viewer.  That is very handy.

Core US GAAP domain level verification of core financial reporting semantics was added to the XBRL Cloud Edgar Dashboardwhich was recently released. Core US GAAP domain level semantics includes:

• Balance sheets report assets.
• Balance sheets report liabilities and equity.
• Balance sheets report equity.
• Balance sheets balance.
• Income statements report net income (loss)
• Cash flow statements report net cash flow

Of the approximately 8,000 SEC public company filers who submit 10-K and 10-Q financial reports, only about 180 violate these core US GAAP financial report semantics, which is consistent with my observations.  Another observation is that the number of violations of these core US GAAP financial report semantics continues to decrease.

XBRL Cloud Edgar Dashboard

I have been checking these core US GAAP financial reporting semantics two or three times a year for three years.  The progress is slow, but good.  The fact that XBRL Cloud has added these business rules, and has otherwise made that dashboard easier to understand, will help overall SEC public company report quality.

In addition to a new and improved dashboard, the XBRL Cloud Viewer has also been improved significantly. One of the most useful new features of the Viewer is that you can link directly to any component within an SEC XBRL financial filing.  For example, if you click here, you will be taken directly to the balance sheet of the Global Seed Corporation

The improved dashboard and viewer are definitely worth checking out.