Digital Financial Reporting

I am not sure why I did not think of creating these exemplars sooner, but I am getting increasingly happy with how helpful they are in resolving some of the issues I am seeing. You can check these exemplars out by going to the link above and clicking on"Show Specific Examples". What you will see is a number of links.  These links takes you two the three specific pages provided below.  Right now I am focusing on the balance sheet, income statement, and cash flow statement. Data referred to comes from an analysis I performedon 1474 SEC XBRL filings.

• Balance sheet: Two balance sheets are modeled, one with a noncontrolling interest and the other without a noncontrolling interest.  The point of this is to show which concept should be used for equity under each scenario. Those creating filings are using one of the two equity accounts shown.  The point is, everyone should be using the SAME concept to model total equity. These exemplars show the answer.  The rational for the choice is this: why would having or not having a noncontrolling interest impact the concept for for "Equity"?  The concept for "Stockholders' Equity Attributable to Parent" is a subtotal, used if you have a noncontrolling interest.  If you do have a noncontrolling interest no issue exists because you have to use both concepts.  The problem exists only if you do not have a noncontrolling interest.
• Cash flow statement: The question on the cash flow statement is when should the concept which specifically identifies ", ....Continuing Operations" be used such as "Net Cash Provided by (Used in) Operating Activities, Continuing Operations" as opposed to "Net Cash Provided by (Used in) Operating Activities". Similar cases exist for operating, financing, and investing activities. If you have discontinued operations how things should be modeled is clear.  But if you don't, then the question is model QQQ appropriate?  Most filers model their cash flow statements like QQQ, but it does not specifically state that cash flows are from continuing operations.
• Income statement: If you are a filer and you have income from equity method investments, extraordinary items, discontinued operations, a noncontrolling interest, preferred dividends, and you pay income taxes; then how to model the income statement is clear.  But, who has all that stuff? If you turn this around and if you only have income taxes (we all have to pay the tax man) figuring out what concepts to use can be challenging. Exemplar BBB shows how this should be modeled if you have what amounts to "Income (Loss) from Continuing Operations Before Taxes", "Income Tax Expense (Benefit)" and "Net Income (Loss)". Exemplar CCC shows how to model things if you add a net income from a noncontrolling interest.  Exemplar DDD shows a "flat" organization of CCC.  Exemplar EEE shows adding discontinued operations.  Exemplar FFF shows adding preferred dividends.

NOTE!!! I am not yet ready to hold these out as undisputed examples, but hopefully I will get to that point.  I am discussing these issues with others at this point.  Those discussions are getting closer and closer to a consensus, but we are not there yet.

Do you have an opintion? Post a comment or email me (CharlesHoffman@olywa.net).

So of course you are asking, "What the heck is an exemplar?"  Well go to this web page and click on "Show Specific Examples", those are exemplars. An exemplar is a $50 word for example. When I was trying to figure out the right word to use, I considered these three terms:

• Exemplar: A model or pattern to be copied or imitated.  A typical example or instance.  An original or archetype.
• Archetype: The original pattern or model from which all things of the same kind are copied or on which they are based; a model or first form; prototype.
• Prototype: The original or model on which something is based or formed. Someone or something that serves to illustrate the typical qualities of a class; model; exemplar.

The three definitions seem a bit circular, each one referencing the other. Reading all three gives you a really good idea of what an exemplar is and why these might be quite useful for the creation of SEC XBRL financial filings. Think of an exemplar as an "undisputed example".

Reading the US GAAP Taxonomy itself will not help you create a proper SEC XBRL filing. The taxonomy takes exactly the opposite approach of what is needed in my view. It packs every option into one model and you have to figure out which one to use from that.

Looking at other SEC XBRL financial filings can be helpful, but today it is hard to differentiate a good filing from a not-so-good filing.  Eventually I see actual filing serviing as models.  This is just like Accounting Trends and Techniques is used today (or how my XBRL Trends and Techniques will be used eventually).

Granted, it is just a start. And I won't hold these out as "undisputed" just yet.  But if you consider these two small balance sheet samples, you will see why this is useful. In my analysis of 1474 SEC XBRL filingsI noticed that, throwing out filers who used partners' capital and the ones which were obviously incorrect, 732 of the filings used "us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest" to express total equity and 596 used the concept "us-gaap:StockholdersEquity".  Now, don't jump to any conclusions by looking at the concept name. Names are meaningless.  What matters is first the definition, second the references and third to a smaller degree the label of the concept.  But, those numbers are rather close all things considered.  Perhaps they simply flipped a coin.

There is way more variabilty on the income statement. Now, if you have preferred stock and pay dividends, have a noncontrolling interest, have discontinued operations, have an extraordinary item, have an equity method investment and pay taxes; then it is pretty easy to figure out what concepts to use on your income statement.  But now look at this from the other perspective and how you might assign concepts to in your SEC XBRL financial filing if you had none of those.  Or what about the various possible permutations and combinations.

Eventually we will have undisputed examples, exemplars, of the right way to create SEC XBRL financial filings.  Until then, be careful.