Understanding SEC XBRL Financial Filings
(NOTE: An understanding of information on the page Digital Financial Reporting is helpful in understanding the information explained on this page. In particular the chapters Digital Financial Reporting Principles and Knowledge Engineering Basics for Professional Accountants will help you see the big picture.)
This page provides a collection of resources which are helpful in understanding XBRL-based public company financial filings to the Securities and Exchange Commission (SEC). This collection of resources helps professional accountants understand, create, and better understand these digital financial reports which are on their way to becoming the new financial reporting paradigm.
The Legal Information Institute provides a summary of the legal requirements of a financial statement per the various applicable laws. Here specifically are the requirements of a balance sheet and income statement of commercial and industrial companies.
Understanding the Minimum criteria
The minimum criteria are a set of consistency constraints that every financial report must satisfy to be fundamentally useable by machine-based processes.
- Understanding Minimum Processing Steps for Effective Use of SEC XBRL Financial Filing Information: Helps you understand each of the minimum criteria, why the criteria is necessary, and how to avoid errors in a digital financial report that causes inconsistency with these minimum criteria.
- Arriving at 2014 Digital Financial Reporting All Stars: Summary: An analysis of the 2014 10-K financial reports of public companies against the minimum criteria.
Understanding the Fundamental Accounting Concept Relations: Reasons Why Fundamental Accounting Concept Relations Fail
Part of the minumum criteria are the fundamental accounting concept relations which are a set of basic numeric relations which never change in a financial report. The accounting equation is a good example of such a relationship: Assets = Liabilities and equty. All financial reports are expected to follow that basic rule. This set of documents provides information which is useful in interpreting fundamental accounting concept relation rules and consistency with such rules:
- Interpretation of Fundamental Accounting Concept Test Results: This is the best starting point. It helps you understand the big picture perspective. After reading this overview, these details are also helpful in geting started.
- Fundamental accounting concepts: This is a list of the fundamental accounting concepts and the relations between those concepts.
- Mapping rules: This is a human readable version of the mappings between the fundamental accounting concepts and US GAAP XBRL Taxonomy Concepts.
- Imput rules: These are the rules used to impute facts which have not been reported within a financial report.
- Required to be reported and allowed to be extended: Some concepts may be required to be reported, others are optional. Some concepts may be extended, others may not. The point is that concepts behave differently. Be aware of this.
- Summary of Conformance with Fundamental Accounting Concepts: Summary information related to how well public companies conform to the fundamental accounting concept relations.
- Pass all tests: A good way to understand the reasons why reporting entities do not conform to these fundamental accounting concepts is to understand why they satisfy all of these fundamental relations. This document walks you thorugh that process.
- Example Analysis of Conformance Test: This is an analysis of one fundamental accounting concept conformace test. It helps you understand how to think about these tests. This shows an analysis of IS3. This same sort of analysis can be done for every one of these fundament accounting concept relation rules/tests.
- Balance sheet
- BS1: Equity = Equity Attributable to Parent + Equity Attributable to Noncontrolling Interest
- BS2: Assets = Liabilities and Equity
- BS3: Assets = Current Assets + Noncurrent Assets (classified balance sheet)
- BS4: Liabilities = Current Liabilities + Noncurrent Liabilities (classified balance sheet)
- BS5: Liabilities and Equity = Liabilities + Commitments and Contingencies + Temporary Equity + Redeemable Noncontrolling Interest + Equity
- Income statement
- IS1: Gross Profit = Revenues - Cost of Revenues
- IS2: Operating Income (Loss) = Gross Profit - Operating Expenses + Other Operating Income (Expenses) (Multi-step approach)
- IS3: Income (Loss) from Continuing Operations Before Equity Method Investments = Operating Income (Loss) + Nonoperating Income (Loss) - Interest And Debt Expense
- IS4: Income (Loss) from Continuing Operations Before Tax = Income (Loss) from Continuing Operations Before Equity Method Investments + Income (Loss) from Equity Method Investments
- IS5: Income (Loss) from Continuing Operations after Tax = Income (Loss) from Continuing Operations Before Tax - Income Tax Expense (Benefit)
- IS6: Net Income (Loss) = Income (Loss) from Continuing Operations After Tax + Income (Loss) from Discontinued Operations, Net of Tax + Extraordinary Items, Gain (Loss)
- IS7: Net Income (Loss) = Net Income (Loss) Attributable to Parent + Net Income (Loss) Attributable to Noncontrolling Interest
- IS8: Net Income (Loss) Available to Common Stockholders, Basic = Net Income (Loss) Attributable to Parent - Preferred Stock Dividends and Other Adjustments
- Statement of comprehensive Income
- Cash flow statement
- CF1: Net Cash Flow = Net Cash Flows, Operating + Net Cash Flows, Investing + Net Cash Flows, Financing + Exchange Gains (Losses)
- CF2: Net Cash Flows, Continuing = Net Cash Flows, Operating, Continuing + Net Cash Flows, Investing, Continuing + Net Cash Flows, Financing, Continuing
- CF3: Net Cash Flows, Discontinued = Net Cash Flows, Operating, Discontinued + Net Cash Flows, Investing, Discontinued + Net Cash Flows, Financing, Discontinued
- CF4: Net Cash Flows, Operating = Net Cash Flows, Operating, Continuing + Net Cash Flows, Operating, Discontinued
- CF5: Net Cash Flows, Investing = Net Cash Flows, Investing, Continuing + Net Cash Flows, Investing, Discontinued
- CF6: Net Cash Flows, Financing = Net Cash Flows, Financing, Continuing + Net Cash Flows, Financing, Discontinued
- Report Frames and Report Frames (i.e. different industry/activity reporting styles and filer presentation styles): Most companies are commercial and industrial, about 85% of public companies. However, there are industries/activities which have specific reporting styles. Also, some companies report using a single step income statement and others use a multi-step approach. Some companies report operating income (loss) while othere so not. Each of these groupings is called a "report frame":
- Disclosures (handful of examples) (Disclosures Viewer) (Another Disclosure Viewer) (Information Model Focused Disclosure Viewer) (Disclosures Organized by ASC Topic) (Comparing Level 3 Text Block and Level 4 Detail)
- Nature of operations, basis of reporting, significant accounting policies, revenue recognition policy
- Accounts receivable net roll up
- Capitalized computer software, net, roll forward
- Finite lived intangible assets estimated useful lives
- Long lived assets by geographic area
- Property, plant and equipment estimated useful lives
- Property, plant and equipment components by type roll up
- Long term debt maturities roll up
- Future minimum payments under operating leases
- Future minimum payments under capital leases
- Deferred tax asset (liability) net
- Others (coming soon)
- US GAAP XBRL Taxonomy: (Commercial and industrial companies ONLY)
- Other information: This is other helpful information to help you think through the process of the reasons why fundamental accounting concept relations tests fail.
- Digital Disclosure Checklist Summary: The fundamental accounting concepts are useful, but only an example of where all this is headed. Digital financial reports are not useful if 22 relations are correct, there are thousands of relations in every financial report. This Digital Disclosure Checklist Summary will help you realize where all this is headed.
XBRL US Data Quatliy Committee Rules:
- Data Quality Committee Rules: This rules are published by the Data Quality Committee of XBRL US.
US GAAP Financial Reporting XBRL Taxonomy Inconsistencies:
Summary of inconsistencies that exist in the US GAAP Financial Reporting XBRL Taxonomy and how to overcome them:
Other informational resources resources:
- Financial Report Semantics and Dynamics Theory: Foundation upon which everything else is built.
- Digital Financial Reporting Principles: Additional details.
- Understanding the Mechanics of an SEC-type Digital Financial Report: Provides insight into the inner workings of an XBRL-based digital financial report of the type used by the SEC.
- Understanding the Basic Mechanics of a Digital Financial Report: Explains the basic mechanics of a digital financial report.
- Understanding Blocks, Slots, Templates and Exemplars: Helps software developers understand and leverage patterns in digital financial reports.
- XBRL Cloud SEC Edgar Dashboard: This is a link to the XBRL Cloud Edgar Dashboard where they provide a viewer useful in understanding SEC XBRL financial filings.