XBRL 2.0

Digital financial reporting that actually works

IS XBRL COMPLIANCE SOFTWARE SMART ENOUGH?

XBRL data quality is not improving. Not from the investor's perspective. Here are 5 examples of filings produced using Certent Disclosure Management software. Certent scores  near the top of XBRLogic’s Quality Score, so its clients make marginally fewer errors than the competition. But is their software, and compliance software in general, smart enough to:

  1. Guide companies to produce complete, well-formed reporting taxonomies, consistent with relevant US-GAAP sector taxonomies
  2. Encourage standardization by presenting industry filing data to inform tagging, labeling and table formatting decisions.
  3. Produce financial data sets that can be easily and cheaply accessed by investors without validation, modification and re-tagging of items?

Let’s look at the 5 examples, then decide.


EXAMPLE I. CONOCOPHILLIPS

  1. The company tagged an item to an element in the bank taxonomy. CononcoPhillips is not a bank. This requires the investor to replace this tag with one from the commercial taxonomy. XBRLogic’s tagging solution searches prior filings in the commercial sector for similar items and provides a menu of choices. SUGGESTION: Restrict tagging to standard elements in the companies target taxonomy and common elements.
  2. Anytime an investor is confronted with an extension (custom tag), he must find a standard element and replace the tag. In this case XBRLogic’s expert system tagger was used. Remember that companies are giving wide latitude to shade the meaning of a closely related standard element by using custom labels. Since a related item is almost always available, extensions should be rarely needed. SUGGESTION: Provide filers with a menu of potential tags for each item that reflects the sector or peer group consensus for like items?
  3. Here an unclassified element is tagged in a classified balance sheet. The investor is left to guess whether the item is current or noncurrent. SUGGESTION: Only allow tags to classified elements if the target statement is classified.



EXAMPLE II. READING INTERNATIONAL

  1. Segments should be represented in the company’s taxonomy as dimensions. And ‘segment’ should be broadly defined as company-specific components of an element. In the case below, the filer correctly tagged revenue segments as dimensions, and incorrectly tagged cost of revenue segments as extensions. This is obviously inconsistent and asymetric, creating matching problems for the investor. SUGGESTION: Guide filers to use dimensions instead of extensions whenever and however possible. It preserves the comparability of the data.
  2. Unnecessary extension. Note that XBRLogic’s tagging algorithms include an expert system using taxonomy blocks, exact matching of both labels and qualified names, and partial matching using NLP, shown here.


EXAMPLE III. HALLADOR ENERGY

  1. Here’s an example of a simple input error, transposing subtotals causing a mismatch between labels and qualified names. Human error is understandable, but failure to engineer checks to identify and correct human error is not. SUGGESTION: Enforce your validation checks. If an error is flagged, the filer should not be able to continue with file preparation until the exception is corrected.