Digital Financial Reporting

Transcription

1 Digital Financial Reporting Using an XBRL-based Model A resource for accountants, internal auditors, external auditors, financial analysts, regulators, and other business professionals when creating, reviewing, auditing, using, or analysing XBRL-based digital financial reports by Charles Hoffman, CPA and Raynier van Egmond DRAFT of This work is licensed under a Creative Commons License. Attribution 3.0 Unported (CC BY 3.0) 1

2 About the authors: Charles Hoffman, CPA, is credited as being the Father of XBRL. He started his public accounting career as an auditor with the international firm then called Price Waterhouse, served various roles in industry and public accounting for over 25 years, and has worked with XBRL since its introduction by the AICPA in In 2006, he received the AICPA Special Recognition Award for his pioneering role in developing XBRL. He has authored numerous publications including XBRL for Dummies, a number of Journal of Accountancy articles, writes a blog relating to XBRL, and contributed to a number of XBRL related technical specification and best practices documents. Currently, Charlie works as a consultant to CPAs and software vendors who want to better understand the subtle details of this new digital medium. Charlie was co-editor of the first ever US GAAP XBRL taxonomy, contributor to the XBRL 2.1 Specification and the XBRL Dimensions specification, editor of the Financial Reporting Taxonomy Architecture and Financial Reporting Instance Standards, coauthor of the US GAAP Taxonomy Architecture, part of the project team which created the US GAAP Taxonomy, and a major contributor to the IFRS XBRL taxonomy for a five year period, and consultant to numerous other XBRL taxonomy projects. Raynier van Egmond is an IT professional with more than 25 years of ICT development and design expertise in financial and manufacturing industries and research. He has been involved in the XBRL community since its inception in 1999, and he s been an active participant in development of the XBRL standard. Raynier contributed to and coauthored several parts of the XBRL specification and bestpractices definitions. He managed development and deployment of XBRL solutions worldwide for the private, public, and nonprofit sector and national governments. He was the architect of the final version of the Dutch government Netherlands 2008 taxonomy and consulted as technical manager for the project responsible for quality assurance and its deployment. Most recently he has defined the Medical Protocol Markup Language using XBRL to support a proof of concept application of XBRL in the Healthcare industry. Raynier is currently the CEO of XBRL Consulting Partners LLC. This work is licensed under a Creative Commons License. Attribution 3.0 Unported (CC BY 3.0) 2

3 Table of Contents 1. Introduction About this document Assumptions about reader Organization of this document Additional resources Where next Acknowledgements Digitizing Financial Reports Value proposition: actionable information Digital business reports Digital business reports ends spread sheet hell Understanding the term actionable information Understanding the structured information and metadata opportunity (or threat) Evolution of financial report mediums Understanding semantic, model-based digital financial reporting SEC primes the pump Ramifications and unexpected consequences of going digital Presented on the face of the financial statements Filling in a box Dance between implicit and explicit Mastering the digital medium Digital financial reporting means change, but to what? Road work ahead: last mile of finance Understand digital financial reporting to remain relevant Overview of Accountants Perspective Financial reports tell a story Separating facts from opinions Facts are more important that organization or formatting True and fair representation of financial information Quantitative and qualitative; objective and subjective Identifiable, definitive, discrete set of pieces Many aspects of financial reporting is standardized43 This work is licensed under a Creative Commons License. Attribution 3.0 Unported (CC BY 3.0) 3

4 4. Foundation for Understanding Interactive data Unstructured versus structured information Structured for presentation versus structured for meaning Differentiating syntax and semantics Interoperability Metadata Notion of logical model Notion of semantic model Business information is inherently dimensional Role of software Semantic, structured authoring Understanding the multidimensional model Strength of the multidimensional model Strength of the OLAP Business intelligence systems Model based reporting and the multidimensional model Reconciling multidimensional terminology XBRL is only one of many digital financial report technical syntaxes Business system to business system information exchange Additional Resources for Getting Started XBRL, the big picture Hello world! example An XBRL technical syntax primer Putting the pieces together Identifying and Defining Financial Report Semantics Financial Report Semantics and Dynamics Theory Pieces of a financial report Relations between numeric facts Relations between characteristics Relations between components Narrative Understanding Financial Reporting Domain Semantics This work is licensed under a Creative Commons License. Attribution 3.0 Unported (CC BY 3.0) 4

5 7.1. Difference between report level model semantics and financial reporting domain level semantics Financial reporting conceptual framework Financial report elements Financial statement components Industries and reporting entities with certain activities have different reporting practices and therefore use the financial reporting conceptual framework differently Common characteristics of financial facts exist Financial report components may have core facts and relations common to all reporting entities Reporting entities which created financial reports can be categorized into industries/activities Financial analysts use certain common key financial ratios when analyzing financial report information Financial reports are a true and fair representation of the reporting entity s financial information Financial reports have traits which impact their quality Financial reports are used individually, compared across periods, and compared across reporting entities Reporting entity segment definitions are inconsistent in financial reporting literature Financial Report Model Elements Differentiating XBRL technical syntax and model Report elements overview Network Number Category Label Table Explicit tables Implicit tables Axis Member Member or domain partition aggregation models Line items Component Sub component Concept Abstract Concept relation metapatterns Business rules This work is licensed under a Creative Commons License. Attribution 3.0 Unported (CC BY 3.0) 5

6 8.15. Fact Intersection with line items (concepts) Intersection with axis Value Fact traits Footnote (parenthetical explanation) Integrity models Flow models Semantic models Summary visualization of report model Summary narrative of financial report model Digital financial report examples Simple example More complex example Relations between Financial Report Model Elements Overview or relations between report elements Concept relation metapatterns Hierarchy Roll up Roll forward Adjustment Variance Complex computation Text block Grid (not really a metapattern) Compound fact (not really a metapattern) Member aggregation models Recall that Domains are Sets of Members Recall that Domains have Partitions Aggregation Domain Partition Aggregation Models Modelling Options Impact Aggregation Models Component flow models Metadata Constraints Impacting Ordering Ordering/sequencing Examples Networks with numbers and categories Tables organized into a list Notion of the Implied [Table] The Statement [Table] Which Approach is Best? Integrity models Facts only exist in fact tables Notion of relations between [Table]s Notion of summary and detail related [Table]s Domain partition aggregation models Pulling relations and summary/detail together using examples This work is licensed under a Creative Commons License. Attribution 3.0 Unported (CC BY 3.0) 6

7 Don t mix modelling approaches Choosing between alternative modelling approaches US GAAP taxonomy examples Intersections Verification of Digital Financial Reports Defining verification True and fair representation is the goal Properly differentiating semantics and syntax Realizing what accountants and other business users need to be successful Definition of semantic objects, relations, and properties Financial report level semantics US GAAP taxonomy implementation model of financial report semantics Connecting the report level model to its implementation model Visualizations of semantic objects, relations, and properties Verification dashboard Report properties Report objects summary Report component summary Report business rules Report elements Networks Tables Table properties Axes Axes properties Members Members properties Line items Line items properties Abstract Abstract properties Concepts Concept properties Component model structure (for each component) Component model structural relations report element properties Component fact table (for each component) Component fact table, fact characteristics and properties Fact parenthetical explanations Component semantic rendering (for each component) Component fact or characteristic properties (for any fact or characteristic of component) This work is licensed under a Creative Commons License. Attribution 3.0 Unported (CC BY 3.0) 7

8 Component business rule relations (for each component) Business rule relations properties Verification risks and categories Risks and risk mitigation Categories of Verification Verification tasks and steps Role of software in verification process Unanswered verification related questions Analysis and Comparison of Digital Financial Reports Change in the analysis paradigm Financial reporting analysis use cases Two approaches to comparing information Top down comparison Bottom up comparison: fundamentals of Prototype Theory Issues identifying components within SEC XBRL financial filings Other issues Looking deeper in to SEC XBRL financial filings Prototypes for creation and analysis are the same Exemplar theory and prototype theory For more information about prototype theory Special or Specific Modelling Considerations Notion of [Line Items] key concepts Deciding between isomorphic and polymorphic tables Modeling classes with only one member Modeling as nested domain members Choosing between modeling as concepts or member of axis Understanding XBRL calculation inconsistencies Restricting XBRL data types Information Model Metapattern Examples Hierarchy Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Business Rules Description Extension Points This work is licensed under a Creative Commons License. Attribution 3.0 Unported (CC BY 3.0) 8

9 13.2. Roll up Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Business Rules Description Extension Points Roll forward Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Business Rules Description Extension Points Compound fact Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Business rules Description Extension Points Adjustment Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Business Rules Description Extension Points Variance Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Business Rules Description Extension Points Complex computation Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Business Rules Description Extension Points Text block Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Business Rules Description Extension Points Grid This work is licensed under a Creative Commons License. Attribution 3.0 Unported (CC BY 3.0) 9

10 Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Business Rules Description Extension Points Business Use Case Examples Overview of business use cases Business Use Case Documentation Business Use Case Files and Reports Background Understanding Required Flat hierarchy Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Nested hierarchy Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Simple roll up Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Nested roll up Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Inverted roll up Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Multiple roll ups Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Simple roll forward Visual Example This work is licensed under a Creative Commons License. Attribution 3.0 Unported (CC BY 3.0) 10

11 Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Complex roll forward Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Simple compound fact Visual Example Basic Automated Semantic Rendering Model structure Description Important distinguishing aspects and dynamics Repeating fact Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Multiple periods compound fact Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Roll forward in compound fact Visual Example Basic Automated Semantic Rendering Model structure Description Important distinguishing aspects and dynamics Nested compound fact Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Reconciliation of balance Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Adjustment Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure This work is licensed under a Creative Commons License. Attribution 3.0 Unported (CC BY 3.0) 11

12 Description Important distinguishing aspects and dynamics Variance Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Complex computation Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Text block Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Prose Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Escaped XHTML Visual Example Metapattern(s) employed Report Elements and Model Structure Description Important distinguishing aspects and dynamics Using JSON Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics General comment (parenthetical explanation) Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Classes Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics This work is licensed under a Creative Commons License. Attribution 3.0 Unported (CC BY 3.0) 12

13 Class properties Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Grid Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Pivot table Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Grouped report Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Flow Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Restatement Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Reissue report Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Reclassification Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Reason not reported Visual Example This work is licensed under a Creative Commons License. Attribution 3.0 Unported (CC BY 3.0) 13

14 Metapattern(s) employed Report Elements and Model Structure Description Important distinguishing aspects and dynamics Non financial information Visual Example Basic Automated Semantic Rendering Report Elements and Model Structure Description Important distinguishing aspects and dynamics Comprehensive Example Overview of comprehensive example Details of each network Financial Disclosure Template Examples Overview of financial disclosure templates Details of financial disclosure templates Information available for each disclosure template Reference Implementation of SEC XBRL Financial Filing Overview of reference implementation How to read component information Understanding the notion of intersections Reference implementation components Document information Entity information Entity listing information Balance sheet Balance sheet parenthetical, general Balance sheet parenthetical, preferred stock Balance sheet parenthetical, common stock Balance sheet parenthetical, treasury stock Income statement Statement of comprehensive income Cash flow statement Prior period adjustment Total stockholders' equity Statement of changes in equity Nature of business Significant accounting policies Property, plant and equipment policies This work is licensed under a Creative Commons License. Attribution 3.0 Unported (CC BY 3.0) 14

15 Cash, cash equivalents, and marketable securities details Inventories details Property, plant and equipment details Deferred Costs details Product warranty accrual Long-term debt instruments Long-term debt maturities Other noncurrent liabilities details Business segment breakdown Geographic areas breakdown Nonmonetary transactions details Selected financial information Subsequent events APPENDIX: Financial Report Semantic Object Properties Reconciliation of financial report semantics terminology to XBRL Abstract Model 2.0 terminology: Semantic objects and their properties APPENDIX: Report Element Properties Implementation model terminology summary Reconciliation of implementation model terminology to financial report semantic terminology Reconciliation of implementation model terminology to XBRL Abstract Model 2.0 terminology: Network Table Sub Component Axis Member Line Items Concept Abstract (line items) Fact Parenthetical Explanation (Footnote) Concept Relations or Information Model Domain Partition or Member Aggregation Models Business rules Labels References This work is licensed under a Creative Commons License. Attribution 3.0 Unported (CC BY 3.0) 15

16 20. APPENDIX: Analysis of 1474 SEC XBRL Filings Assets Liabilities and Equity Equity Income from Continuing Operations before Tax Net Income (Loss) Revenue Cost of Goods Sold Gross Profit Operating Income (Loss) Net Changes in Cash Cash and Cash Equivalents APPENDIX: Top XBRL Technical Syntax Related Modeling Tips Define a clear, unambiguous, formally documented financial report model layer Define a clear, unambiguous, formally documented information model Don't mix dimensional and non-dimensional models Make each hypercube unique (use isomorphic hypercubes) Close all hypercubes Provide dimension-defaults for each dimension Clearly differentiate members and concepts Use either segment or scenario, there is no real reason to use both Use XBRL Dimensions or use tuples, don t use both in the same XBRL taxonomy Use decimals or precision, don t allow both Avoid complex typed members unless you really need them Be explicit, consistent and concise when expressing taxonomy information Consider ditching XBRL calculations Realize that XBRL instance contexts and XBRL Dimensions hypercubes constrain facts differently APPENDIX: Benefits and Limitations of Inline XBRL This work is licensed under a Creative Commons License. Attribution 3.0 Unported (CC BY 3.0) 16

17 This work is licensed under a Creative Commons License. Attribution 3.0 Unported (CC BY 3.0) 17