a comparison of xbrl filings to corporate 10-ks
TRANSCRIPT
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8/6/2019 A Comparison of XBRL Filings to Corporate 10-Ks
1/51Electronic copy available at: http://ssrn.com/abstract=1397658
A Comparison of XBRL Filings to Corporate 10-Ks -
Evidence from the Voluntary Filing Program
Jon Bartley, Ph.D.Department of Accounting
College of ManagementNorth Carolina State UniversityCampus Box 8113, Nelson Hall
Raleigh, NC 27695Telephone: 919-515-4441
e-mail:[email protected]
Al Y. S. Chen, Ph.D.Department of Accounting
College of ManagementNorth Carolina State UniversityCampus Box 8113, Nelson Hall
Raleigh, NC 27695Telephone: 919-515-4437e-mail:[email protected]
Eileen Z. Taylor, Ph.D.*Department of Accounting
College of ManagementNorth Carolina State UniversityCampus Box 8113, Nelson Hall
Raleigh, NC 27695Telephone: 919-513-2476
e-mail:[email protected]
Revision 2/17/2010
*Contact Author
For their helpful comments, thank you to Eric Cohen, PriceWaterhouseCoopers, participants in a
workshop at North Carolina State University, reviewers for the 2009 AAA Annual Meeting and other
anonymous reviewers. We especially thank Brad Homer, XBRL Technical Manager AICPA, for spending
time teaching us about the technical aspects of XBRL.
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected] -
8/6/2019 A Comparison of XBRL Filings to Corporate 10-Ks
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A Comparison of XBRL Filings to Corporate 10-Ks -
Evidence from the Voluntary Filing Program
AbstractThe SEC phase-in of XBRL financial statement filings began June 2009, and by 2011, all
public registrants will be required to file XBRL disclosures. While the SEC expects theinteractivity of XBRL-tagged data to add value to financial reports, this benefit will materializeonly if the XBRL statements are accurate and reliable. If inaccuracies or other significantproblems occur in initial XBRL filings, registrants stand to lose credibility and users will loseconfidence in the data, potentially forcing the abandonment of the XBRL reporting initiative.This study evaluates the accuracy of early voluntary filings and develops an expectation aboutthe accuracy of mandated filings. While improvements in the XBRL standard and relatedtechnology will mitigate certain errors, other errors, related to inexperience, will persist. Thisstudy identifies those errors and makes recommendations about how to reduce experience-relatederrors.
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A Comparison of XBRL Filings to Corporate 10-Ks -
Evidence from the Voluntary Filing Program
INTRODUCTION
In December 2008, the Securities and Exchange Commission adoptedInteractive Data to
Improve Financial Reporting (SEC, 2009) mandating the phase-in of supplemental filings of
financial statements using eXtensible Business Reporting Language (XBRL) during the 2009-
2011 period. The SEC continues to rely on HTML and PDF formats for registrants official
filings, however, it is apparent that the SEC hopes that the mandated extension of supplemental
XBRL filings will demonstrate that interactive data adds value to financial reports and can
replace HTML and PDF documents for official filings. For this transition to occur, XBRL filings
must be accurate, reliable, and cost effective. The SECs expansion of supplemental XBRL filing
requirements to essentially all public registrants is not without risks. If inaccuracies or other
significant problems occur in initial XBRL filings, registrants stand to lose credibility and users
will lose confidence in the data potentially forcing the abandonment of the XBRL reporting
initiative.
XBRL provides data in an interactive,1 context-rich format that users can download
directly into analytical software. In contrast, the current official filings are static documents that
require users to rekey data before using them in electronic analysis.The advantages of XBRL
have been widely demonstrated for documents prepared in standardized, form-based formats, but
1The term interactive means that the data are electronic and tagged with computer-readable code that can providerich information about the context and value of financial statement concepts.
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the practicality of extending XBRL filing requirements to much less standardized documents
such as the Form 10-K remains untested.
In 2005, the SEC initiated theXBRL Voluntary Financial Reporting Program on the
EDGAR System (SEC, 2005), better known as the Voluntary Filing Program (VFP). In order to
explore the potential application of XBRL to U.S. corporate financial reporting, the SEC invited
public-company registrants to experiment with XBRL data tagging2
and to file the resulting
XBRL documents online. Our study identifies errors that companies made in their voluntary
filings and thus may make in their mandatory filings, and whenever possible we point out the
likely sources of the errors and propose solutions.3
Even though a safe harbor provision greatly reduced participants risk of legal liability
for errors in XBRL documents filed in the VFP, fewer than 40 companies participated in the first
full year, 2006; and through 2008, approximately 125 companies had participated. The SEC
collected comments from VFP participants and other parties involved in the process, and as a
result, major improvements occurred during the 2005-2008 period. Unfortunately, the SEC never
published any systematic analyses of XBRL data accuracy or its use by financial analysts and
investors. Our study seeks to fill that gap.
In order to provide systematic information about the problems that companies currently
confront in producing accurate XBRL documents, we evaluated the accuracy of initial and
2 Tagging is the process of assigning XBRL computer codes to financial information.3 Our study does not examine all types of errors that can occur in XBRL documents. In particular, we do not reporton the types of XBRL syntax errors routinely identified by validation software. Validation software does not detectmany types of potentially material errors that can be detected by the direct comparisions we make of XBRLrendered financial statements to the corresponding audited financial statements submitted to the SEC. For studies oferrors detected by validation software, see Boritz and No (2009) and Boritz and No (2008).
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subsequent filings of XBRL instance documents4by companies participating in the SECs VFP.
We extend these results by comparing them to the initial observations of the SEC staff regarding
errors observed in the first Form 10-Qs filed in 2009 in compliance with the new mandatory
XBRL filing requirements. We emphasize that the XBRL filings in both the VFP and the
mandatory program are unaudited and that participants are subject to limited liability regarding
inaccuracies. While using the term filed, the SEC considers XBRL documents as furnished
not filed, so there is a clear distinction between these supplemental documents and the official
filed documents for which registrants are subject of many more legal requirements (SEC, 2005).5
The absence of a requirement for third-party assurance and the limitation of legal liability may
have reduced the motivation of VFP participants to provide error-free XBRL documents.
However, the SEC clearly stated in the VFP rule that XBRL exhibits will be required to
accurately reflect the information that appears in the corresponding part of the official filing
(SEC, 2005). Although we recognize that the main purpose of the VFP was to generate feedback
about the process of XBRL tagging rather than the accuracy of the final product, accuracy cannot
be ignored as it was explicitly required by the VFP rule, and accuracy is of paramount
importance to the ultimate success of XBRL for financial reporting.
4
An XBRL instance document is a computer file containing the computer readable tags that are representations offinancial information contained in a companys financial statements. The instance document is intended for input tocomputer software rather than to be read directly by people. The instance document consists of six interrelatedcomputer files: taxonomy of the companys financial statement elements and five files known as linkbases
containing the labels, calculations, references, definitions, and financial statement structureassociated with thefinancial statements. See Appendix A and Plumlee and Plumlee (2008) for more detailed descriptions of instancedocument structure and preparation.5In keeping with the SECs continued use of the traditional terms filed and filing to refer to the submission ofXBRL documents that are legally furnished, we also use the terms filed and filing.
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We detected numerous errors and inconsistencies in the 2006 voluntary filings, including
missing financial statement elements, incorrect amounts, incorrect signs, duplicate elements,
financial statement concepts not tagged with the appropriate elements, and inaccuracies in the
display of the financial statements. The number of errors that we could systematically document
was much less in 2008 than in 2006, but errors persisted even though most sample companies
had three years of experience preparing both quarterly and annual XBRL submissions to the
SEC. XBRL protocols are still works in progress, and most registrants will be filing XBRL
financial statement documents for the first time during the 2009-2011 phase-in period.
Limitations of XBRL protocols and the software used to create and validate XBRL documents
combine with weaknesses in companies processes of preparing those documents to threaten the
accuracy and reliability of these filings.6
Our results demonstrate the challenge of XBRL
implementation and suggest that companies must give substantial attention to the process of
preparing XBRL documents if they are to avoid unacceptable numbers of errors in their
submissions to the SEC.
We organize the remainder of this paper as follows. First, we present an overview of
XBRL reporting and the VFP. We then review the relevant XBRL literature and pose two
research questions to guide our study. Following this, we describe the research method, sample
companies, and the results of the research. The final section summarizes findings and provides
recommendations, describes limitations, and includes potential avenues for future research. The
appendix describes the process and challenges of XBRL tagging.
6 Janvrin and No (2009) conducted a field study of the XBRL Form 10-Q document preparation processes of fivecompanies in 2009. They found that these companies experienced significant difficulties and uncertainties in theirinitial preparation of XBRL documents.
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Overview of XBRLWhat is XBRL?
XBRL is a computer-based, free, and open standard used for tagging business-related
data (including financial statement concepts) with a broad set of relevant information. Preparers
electronically tag quantitative data with XBRL codes to comprise a standardized document
(dataset) that is computer readable and searchable. XBRL International, a nonprofit consortium
of over 550 companies, organizations, and government agencies develops the standards for
XBRL. Individual jurisdictions develop their own taxonomy7 of financial statement concepts,
rules, and guides for implementation. Under the auspices of the SEC, XBRL US (a nonprofit
consortium of corporations, public accounting firms, the AICPA, and other interested
organizations) manages this process in the United States. XBRL US originated from an XBRL
committee established by the AICPA in 1998.
Conceptually, XBRL financial report data are analogous to financial report data provided
by third-party aggregators such as Standard & Poors Compustat, but with a much greater level
of detail, representativeness, and usability. For example, the latest U.S. GAAP taxonomy
includes over 18,000 elements, compared to the several hundred that are typically available from
third-party aggregators.8 XBRL documents have the advantage of providing additional
contextual information such as definitions and references to authoritative literature, and perhaps
7 Taxonomies resemble dictionaries that provide computer tags that can be assigned to numerical and textual data(the elements or concepts) in financial reports. These tags provide a wide range of information about each financialstatement element including definition, descriptive label, time period, unit of measurement, and mathematicalrelationships between elements. The U.S. GAAP taxonomy is a comprehensive taxonomy of financial statementelements representing the financial concepts appropriate for public registrants that apply U.S. GAAP.8 Approximately 3,500 of the 18,000 XBRL elements in the most recent update of the taxonomy represent typicalfinancial statement line-items (XBRL US, Inc., 2008a). The SEC and XBRL US are attempting to expand the U.S.GAAP taxonomy so that companies rarely will need to create new, unique elements.
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In early 2009, the Securities and Exchange Commission issued the final amendments to
its mandatory XBRL filing rules.Interactive Data to Improve Financial Reporting (SEC, 2009)
requires registrants that apply U.S. GAAP or International Financial Reporting Standards to file
supplemental XBRL documents in addition to the current HTML or PDF formatted filings for
Forms 10-Q, 10-K, and 8-K, among others. The rules took effect for Form 10-Q filings for
quarterly statements ending on or after June 15, 2009, for the approximately 500 accelerated
filers with a public float over $5 billion. The phase-in rules for all non-accelerated registrants
require XBRL submissions for fiscal periods ending on or after June 15, 2011. To support XBRL
reporting, the SEC upgraded its on-line EDGAR system in 2009 to facilitate easy viewing and
downloading of financial reports filed as XBRL documents. Registrants are required to post the
XBRL documents simultaneously on their company websites. In the initial year of filing,
registrants are required to tag every financial statement concept in the basic financial statements
and tag the footnotes and schedules as blocks of text. In subsequent years, they must individually
tag all financial statement concepts in footnotes and schedules as well.
Extending the limitation of liability provided in the VFP, the SEC provided a safe harbor
from specified anti-fraud provisions for a period of 24 months from the date a registrant is first
required to file XBRL documents (SEC, 2009). The safe harbor provisions require that a
registrant makes a good faith effort to comply with XBRL tagging requirements and correct any
failure within 24 hours after the company becomes aware of the failure. The inclusion of the safe
harbor provision signals the SECs recognition that XBRL implementation is still a work-in-
progress. At the time of this writing, it is unclear the extent to which the SEC will validate filings
and enforce corrections of errors.
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While the SEC has worked to ease XBRL adoption by not requiring third-party assurance
and by limiting liability for errors in XBRL filings, other forces exist that pressure registrants to
provide accurate and reliable statements. First, since XBRL filings are publicly available, errors
in those filings may damage the registrants reputation and cause investors to make decisions
based on inaccurate disclosures. Second, the SECs enforcement division expects to rely heavily
on interactive data to improve the efficiency and effectiveness of their analyses. Error-laden
XBRL filings will negatively affect their work, and perhaps result in unwarranted attention to
otherwise compliant registrants. Third, the SEC has a financial and political interest in the
success of XBRL making it likely the SEC will aggressively enforce the XBRL reporting
requirements.
LITERATURE REVIEW AND DEVELOPMENT OF RESEARCH QUESTIONS
About the same time as the VFP began, Debreceny, Chandra, and Cheh et al. (2005)
identified research issues whose investigation and results would guide preparers, users, and
regulators in the process of XBRL financial reporting. They specifically mention the potential
errors that could occur in the complex task of creating the XBRL documents that describe all of a
companys financial statement concepts and the related amounts (The appendix provides a
description of the process of preparing XBRL documents). Several studies have documented the
problem of errors when financial statement data are converted to a database format by third-party
aggregators (Yang, Vasarhelyi, & Liu, 2003; Kinney & Swanson, 1993; San Miguel, 1977).
Even with the assistance of data tagging software, the complexity of preparing XBRL documents
is much greater than that of populating any of the existing third-party databases.
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Although limited in scope and sample size, initial studies of XBRL VFP filings have
found evidence indicating that high numbers of errors have occurred. Following the guidance
provided by the PCAOB (2005) for attestation of XBRL documents, Boritz and No (2009)
performed a mock audit on the October, 2005, Form 10-Q XBRL filing for United Technologies
Corporation. One of the earliest filings, this 10-Q was selected because the XBRL documents
had been formally reviewed by PriceWaterhouseCoopers LLP.10 Although Bortiz and No
concluded through a manual tracing that the XBRL rendered document produced a complete and
accurate representation of the data in Form 10-Q, they were unable to comment on the fairness of
the presentation in accordance with GAAP. They found several problem areas including
redundant elements, inconsistent labels, missing totals, and misspellings.
Boritz and No (2008) extended their earlier research by using XBRL validation software
to evaluate filings for 304 quarterly and annual reports for 74 companies from the inception of
the VFP through December 31, 2007. This study did not attempt a manual validation due to the
sample size. They found that just under two-thirds of the filings contained errors in the XBRL
instance documents that were detected by validation software. While some of these validation
errors represented legitimate management disclosure choices (such as not reporting all
components of the net accounts receivable calculation), others represented inconsistencies that
could confuse users. Further, they found that over half of the elements included in the instance
documents were unique extensions of the U.S. GAAP taxonomy created by the registrants.
10 The most current guidance for attestation of XBRL documents is provided by Auditing Standards BoardStatement of Position 09-1: Performing Agreed-Upon Procedures Engagements That Address the Completeness,
Accuracy, and Consistency of XBRL-Tagged Data (Assurance Services Executive Committee (ASEC) XBRLAssurance Task Force, 2009).
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Although they did not comment on the appropriateness of these extensions, it is likely that at
least some were unnecessary. Additionally, Boritz and No found that the frequency of errors for
all validation tests increased each year from 2005 through 2007.
The Bortiz and No studies focused on errors identified by software validation tools
although they did perform a manual tracing in their first study. Plumlee and Plumlee (2008)
observed that software validation of the instance documents and the extension taxonomies cannot
identify all errors in XBRL documents, e.g., the appropriateness of the tag and the accuracy of
the value tagged. We extend the Bortiz and No work by conducting a side-by-side comparison of
XBRL rendered filings with the companies original Form 10-K, accessing the XBRL instance
document when necessary. Our manual approach enables us to identify errors that are
undetectable by validation software. Additionally, our longitudinal data set provides further
evidence about the effects of preparer experience on accuracy and reliability, with consideration
to improvements in XBRL technology and specifications. We also compare our findings to the
preliminary observations of the SEC staff about errors in the XBRL Form 10-Q documents filed
for the second and third quarters of 2009. When practical, we attempt to identify the likely
sources of the errors and pose recommendations for reducing them.
We design our study to answer the following research questions.
RQ1: What are the types and frequencies of errors made by companies participating in
the XBRL Voluntary Filing Program (VFP)?
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financial statements ending in 2006.We excluded four companies resulting in a sample size of
22 companies (see Table 1).11
For 2008, we identified 11 of the 22 companies in the 2006 sample
that also filed 10-K XBRL documents in 2008. Limiting the 2008 sample to companies also in
the 2006 sample allows us to make better inferences about the effects of preparer experience
with XBRL on the accuracy of the instance documents.
(Insert Table 1 about here)List of Sample Companies
We downloaded the related XBRL-rendered financial statements and the underlying
XBRL instance documents for the 22 (11) sample companies from the SEC website, and the
official 10-K filing for each company from EDGAR. We limited our analysis to the four basic
financial statements (income statement,balance sheet, statement of stockholders equity and
statement of cash flows). Only two companies in the sample attempted XBRL tagging of
significant amounts of other information such as footnotes, management discussion and analysis,
and executive compensation. The 2006 XBRL filings were evaluated relative to the 2005 version
of the commercial and industrial US GAAP Taxonomy (XBRL US, Inc., 2005), and the 2008
XBRL filings were evaluated relative to the 2008 version of the commercial and industrial US
GAAP Taxonomy (XBRL US, Inc., 2008a).12
Since the 10-K is the registrants original audited document and official filing, we assume
that it is always correct and that any difference between the 10-K and the XBRL rendered
11 South Financial Group Inc., EDGAR Online Inc., and ENGLOBAL Corp. either omitted some financialstatements or we were unable to access the complete set of XBRL instance documents. We excluded SatyamComputer SVC because it is a foreign company.12 General Electric was the only sample company that continued to use the 2005 version of the U.S. GAAPtaxonomy in its 2008 filings. All but one sample company used the commercial and industrial entry point of thetaxonomy. T. Rowe Price Group used the broker and dealers entry point.
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document is an error in the XBRL filing.13 On a line-by-line basis, we compared labels, values,
and signs between the XBRL rendered financial statements and the 10-K. We traced most
differences between the two documents to the computer tags in the XBRL instance document in
order to determine the source of the difference.14
We also applied validation software (Fujisu
Taxonomy Editor) to help interpret the nature of the differences between the XBRL document
and the 10-K. With the exception of inconsequential labeling and formatting differences that are
permitted by the SEC, we recorded all differences between the XBRL rendered financial
statements and the Form 10-K.
Legitimate questions can be raised about whether the individual errors we document are
material. We provide commentary on our view of the significance of the errors, but we do not
attempt to classify them based on materiality. Plumlee and Plumlee (2008) observe that in the
context of an audit, the risk associated with a material misstatement may be unrelated to the size
of the item and that it is not known how the traditional concept of financial statement materiality
applies to XBRL documents.
Our manual tracing of differences between the 33 rendered XBRL financial statements
and the 10-Ks is a significant extension of this form of validation over what has been reported
previously in the accounting literature; however, practical considerations limit the extent of our
validation tests just as they have limited manual validation tests in prior XBRL research. It was
13 We thank an anonymous reviewer for pointing out that XBRL documents may provide a more accuratedescription or formatting of data than the official Form 10-K. In this study, we presume that deviations from aregistrants 10-K disclosures are the appropriate basis for defining errors because of the SECs requirement that the
XBRL documents accurately represent the 10-K; however, we did not count obvious improvements in disclosure aserrors.14 Label errors were so common that we chose not to trace all of them to their source.
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not practical to devote the time necessary to perform a complete manual validation of every
financial statement conceptin the 33 financial statements included in our study. Boritz and No
(2009) reported that it required approximately 63 hours to trace all of the concepts in a single
United Technologies Form 10-Q to the XBRL instance documents, and a Form 10-K has many
more financial statement concepts than a Form 10-Q for the same company.
Plumlee and Plumlee (2008)point out that the agreeing of the XBRL rendered
documents and the 10-K cannot detect all possible errors in the XBRL instance documents. In
particular, our methodology does not detect the XBRL syntax errors that Boritz and No (2008)
identified using validation software. Further, there are a variety of other serious errors that can
only be discovered by a manual validation of the computer tags of every financial statement
concept, not just for the tags of those elements whose rendering in the financial statements
differs from that in the 10-K . For example, our lack of detailed knowledge of a companys
financial statement concepts makes it impractical to identify all the financial statement concepts
that appear to be labeled correctly but are tagged with an incorrect element in the U.S. GAAP
taxonomy. A related form of this error occurs when a company creates a unique company-
specific element even though an appropriate element to represent the financial statement concept
already exists in the U.S. GAAP taxonomy. Although these serious errors appear to be common
and we are able to identify a few obvious cases, we are unable to document what are potentially
much larger numbers of incorrect elements.
As we proceeded with the analysis, we identified six general categories of errors (see
Table 2). Table 3 summarizes the effects of each type of error on the XBRL data that will be
input into analytical software and on the display of the data when rendered as financial
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statements. Table 3 also describes the ability of current software validation tools and of limited
manual validation as performed in this study to detect each type of error.
(Insert Tables 2 and 3 about here) Error Classification, Effects & Detection Methods
Two well-known types of errors identified in the databases of third-party data aggregators
appear in XBRL documents. These errors relate to mapping and data entry. Mapping errors occur
when there is a failure to match a financial statement concept with an appropriate element in the
database taxonomy, i.e., the financial statement concept is not described accurately in the
database. Third-party aggregators use their own judgment to consolidate and standardize
financial statement concepts to conform to their proprietary, pre-determined data fields. In the
case of XBRL, third-party judgments are avoided, but the company itself must make comparable
judgments to map its financial statement concepts to the elements in the U.S. GAAP taxonomy.
The taxonomy includes thousands of elements rather than the few hundred typical for third-party
aggregator databases. The more precise specification and fineness in the U.S. GAAP taxonomy
increase the likelihood that preparers find an exact (or very close) match for each financial
reporting concept, but the large number of choices also increases the possibility that the preparer
will select an incorrect element.
Data entry errors occur when a preparer enters incorrect data even though the accounting
concept is mapped to the correct element in the taxonomy. For third-party aggregators, data entry
errors are typically limited to transposition errors, dropped decimal places, sign errors, and
simple numerical transfer errors. Third-party aggregators can detect most of these data entry
errors by a simple rekeying of the data. Limiting data entry errors in XBRL documents is a much
greater challenge because of the large amount of descriptive information coded in the XBRL
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instance document. Consider that in addition to its numerical amount; the attributes of an XBRL
element include the companys unique label, the debit or credit balance type, the data type (e.g.,
monetary, text, shares, etc.), a definition, references to authoritative literature, and contextual
information that controls the display of the element in the rendered financial statements. For
standard elements in the U.S. GAAP taxonomy, this information is pre-coded, but for unique
elements (extensions), preparers must add the information. The complexity of XBRL protocols
and deficiencies in the XBRL tagging software can combine with coder inexperience to produce
a wide range of data entry errors in XBRL instance documents that a simple rekeying validation
cannot detect.
Other characteristics of XBRL are potential sources of errors not present in most third-
party aggregator-produced data. These issues relate to presentation and to compliance with
XBRL specifications (validation errors). While users rarely create printed financial statements
from third-party databases, users do expect to be able to render financial statements from XBRL
instance documents. Although presentation errors do not affect the underlying usability of the
individual data items, they do create differences between the printed 10-K and the rendered
XBRL document.15 These differences can cause user confusion and may reduce user confidence
in the accuracy and reliability of the data resulting in damage to the companys reputation.
Complexities in the XBRL tagging and rendering software combined with coder inexperience
lead to errors in the accurate display of the original 10-K statements.
15 Although some XBRL advocates maintain that XBRL disclosures do not have financial statement presentation asa primary objective, it is evident that accurate rendering of XBRL financial statements is essential for movingbeyond an inefficient and costly dual reporting system.
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Validation errors (not the focus of this study) occur when the XBRL documents do not
conform to XBRL protocols. Software tools are available to detect syntax errors in the XBRL
code and as well as to validate some mathematical relationships and other information in the
XBRL code. However, many serious errors such as tagging a financial statement concept with an
incorrect element are not detectable by validation software (see Table 3).
RESULTS
The XBRL filings we evaluated reveal the difficulties of accurate tagging of the basic
financial statements. In response to RQ1, we found that the frequency of errors is high for a
process that is fundamentally an electronic replication of information in the audited financial
statements (see Table 4 for frequency chart). We detected errors in the XBRL filings of all 22
companies in 2006 and 10 of 11 companies in 2008.16
The most common errors found in both
2006 and 2008 were display errors. In 2006, we also found many missing elements, sign flip
errors, incorrect amounts (including dates), duplicate elements, and incorrect elements. In
response to RQ2, we found that the frequencies of all errors other than display errors decreased
dramatically between 2006 and 2008 (see Table 4). Figures 1 and 2 present a visual comparison
of the decline in the average number of errors and in the percentage of companies making each
type of error between 2006 and 2008. The following sections of the paper describe our findings
for each type of error.
16 We detected no errors in the 2008 filing by IBM; however, we did not attempt to identify several types of errorsthat may have existed. Similar to IBM, there were no differences between General Electrics 2006 10-K financialstatements and the rendered XBRL financial statements. However, upon inspection of General Electrics XBRLdocuments, we observed that the company tagged a new element (either a standard element or a unique companyspecific element) for every appearance of a concept in its financial statements in violation of XBRL specifications.
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(Insert Table 4 and Figures 1 and 2 about here)
Missing Elements
A missing element error occurs when a financial statement concept (generally each
unique concept in the financial statements) appears in the Form 10-K, but a corresponding
element is not included in the XBRL instance document. As noted in Table 3, these errors distort
both the underlying data and the display. We detected missing elements through a manual
comparison of the rendered XBRL document to the 10-K followed by examination of the
instance document to determine if the element was omitted (missing element) or simply not
displayed in the rendered financial statements (display error).
In 2006, two of 22 sample companies, United Technologies and Bristol-Myers Squibb,
omitted numerous financial statement elements. United Technologies omitted numerous financial
statement concepts in all four statements by combining related concepts into single elements. In
addition, United Technologies omitted all of the detailed changes in its statement of
stockholders equity reporting only total changes in each balance sheet account. In a similar
manner, Bristol-Myers Squibb omitted all of the detailed changes in comprehensive income. It is
likely that these omissions were the result of preparers making a conscious choice to simplify
XBRL document preparation in 2006 rather than commit errors in application of XBRL
protocols. Prior to 2008, limitations in the XBRL technology made it difficult to code the
instance documents to create an accurate display of the changes in stockholders equity. The
current version of XBRL includes a dimensions feature that reduces the difficulty of coding
tabular formats like those commonly found in the statement of stockholders equity.
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Improvements in XBRL technology appear to have eliminated the motivation for element
omissions in 2008. We detected only two element omissions that appear to be random. For
example, United Technologies failed to code an element for its total changes in comprehensive
income concept even though it correctly coded the detailed changes in comprehensive income
concepts. We do not expect that missing elements in the four basic financial statements will be a
problem in mandatory XBRL filings beginning in 2009 due to improvements in third-party
validation software and the availability of SEC viewer software that allows previewing of
statement display. However, random element omissions may become a significant problem if
companies fail to conduct detailed manual or electronic tracing between the XBRL documents
and the footnotes and schedules in the 10-K. Beginning in the second year of mandatory filing,
registrants will be required to include detailed tagging of footnote and supplemental schedule
concepts. Software validation of the calculations that are integral to the financial statements are a
primary means of detecting detection omitted elements, e.g., a test that the amounts of all asset
elements sum to the amount of total assets.17 Unfortunately, validation by calculation is not
applicable to most of the concepts that are contained in the footnotes.
Incorrect Amounts
Incorrect amounts, including dating errors, are very serious in any financial report. Some
errors of this type distort more than one-years data. For example, an erroneous date for a XBRL
element results in removing the element from the correct years financial statements and possibly
inserting the element and its amount in the comparative financial statements for a different year.
17 Boritz and No (2008) reported that software used to prepare and edit the XBRL documents was not alwayscapable of performing complete mathematical validation of the financial statements.
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In 2006, four of 22 companies filed instance documents containing seven incorrect amounts of
which two were dates. For example, Microsoft erroneously reported two amounts as millions
rather than billions in its statement of stockholders equity. We observed no incorrect amount
errors in 2008.
The most likely source of an incorrect amount is a simple data keying error although
incorrect coding of other attributes may occur as well. Our results for 2008 suggest that these
data entry errors in the four basic financial statements should not be a significant problem from
2009 forward because most incorrect amounts can be detected by software validation of the
mathematical accuracy of the totals within the financial statements. However, manual validation
is necessary to validate amounts that are not included in a summation within the financial
statements. For example, the SEC reported observations of incorrect amounts for earnings per
share in the mandated 2009 10-Q filings, caused by use of the incorrect decimal attribute for the
amount (SEC, 2010).
Sign Flip Errors
Sign flip errors result from either incorrect coding of an elements sign or the coding of
the incorrect weight (+1 or -1) in the calculation linkbase controlling the addition or subtraction
of the element amount within the financial statement. In addition, it is possible for an elements
sign and its calculation weight to be correct, but either the elements label or its sign in the
rendered XBRL financial statements is incorrect. We did not classify these less serious display
errors as sign flip errors; rather, they were classified as display errors. Sign flip errors are more
significant than display errors because they misrepresent amount of the element in the context of
the financial statements. In 2006, 10 of 22 companies made 58 sign flip errors with the erroneous
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signs occurring across all four statements. In 2008, we detected no sign error flips. The SEC has
observed that sign flip errors continue to appear in the mandatory 2009 10-Q filings, e.g.,
incorrect signs for treasury stock, income (loss) concepts, and incorrect signs of elements in the
cash flow statement. We observed the same pattern in 2006, when analyzing statements from
inexperienced companies (first-time filers).
In 2006, sign flip errors were most common on the statements of cash flows and
stockholders equity. The cash flow statement is especially subject to sign flips because of the
large number of elements that do not have a natural debit or credit balance, e.g., many of the
adjustments to income to arrive at cash flow from operations. In 2006, a common sign flip in
both the balance sheet and the statement of stockholders equity was for the treasury stock
element. Treasury stock was coded with a positive calculation weight so that it was added to
stockholders equity rather than subtracted.
Because of the complexity of managing the sign of an element in the rendered financial
statements, it is likely that the sample companies made additional sign flip errors that we did not
observe. For example, companies may have violated XBRL protocol for assigning the sign to an
element amount as a shortcut to achieving the appropriate sign of an element in the rendered
financial statements. In this instance, we would not have observed the inconsistent sign because
there was no difference between the elements sign in the rendered XBRL financial statements
and its sign in the Form 10-K. This type of sign flip error achieves a correct display and can only
be detected by a combination of validation software and manual tracing of every element in the
financial statements.
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It is likely that the reduction in sign flips in 2008 reflects technical improvements in
XBRL protocols, XBRL editing and validation software, and an increasing familiarity of
preparers with the complex procedures necessary to control element signs. The XBRL U.S.
GAAP Taxonomies v1.0 Technical Guide (Bolgiano, 2008) describes a significant technical
improvement in XBRL that reduces the motivation of preparers to make sign flip errors as a
shortcut to achieving the correct display of elements in the rendered financial statements. The
Technical Guide introduced negating labels, a protocol that reverses the display sign of an
element (including a modified label) when it is displayed but does not reverse the sign in the
underlying XBRL data.
18
In addition, the XBRL US GAAP Taxonomy Preparers Guide (XBRL
US, Inc., 2008b) contains improved guidance for tagging the signs of element amounts. Even
with these improvements, the complexities of XBRL protocol and of financial reporting
conventions remain sources of errors for inexperienced preparers.
The basic XBRL convention that applies to most financial statement elements is that a
single polarity must be maintained, i.e., accounting elements having values with natural debit or
credit balances are to be tagged with positive signs. A negative sign is used when an elements
debit-credit balance is the opposite of its natural balance. However, some financial statement
elements do not have a natural debit-credit balance. For example, the indirect method of
presenting cash flows from operations contains many balance-sheet change elements that are
18 Even when an element is coded with the correct sign, correct display can be a challenge because of variations infinancial statement format and labeling. For example, when an amount is subtracted in the income statement it canbe displayed as a negative value (in brackets) or its label could read Less X with the amount displayed as a
positive. To complicate matters further, an element that appears in more than one location in the financial statementsmay display as a positive amount in one location and a negative in another location.
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adjustments to arrive at cash flow from operations and that have no natural debit-credit balance.
Other financial statement elements such as other income (loss) can be eithercredits or debits.
These complexities increase the likelihood that preparers who are not intimately familiar with the
XBRL tagging protocols and accounting concepts will introduce sign flip errors. Detecting all
sign flip errors requires manual validation by individuals with knowledge of XBRL rules for
signing the element, the elements debit or credit accounting balance, and the companys unique
financial statement format and labeling.
Duplicate Elements
Duplicate elements are those that have been tagged more than once in the XBRL
instance document, and they distort the underlying data and may distort the financial statement
display as well. XBRL protocol requires that each financial statement concept be represented by
a single element with its display in multiple financial statements and the notes achieved by the
linkbases controlling display and labeling. In 2006, we identified four companies with six
duplicated element errors, and in 2008, we detected none. As we discuss below, there is evidence
that a substantially larger number of duplication errors occurred.
The duplicate elements that we detected were immediately apparent in the rendered
financial statements because they appeared incorrectly multiple times in the financial statements.
We traced all duplications to the XBRL instance documents to determine if the element itself
was duplicated or only displayed incorrectly. An example of a clear duplication error in 2006
was ADPs tagging the cash and cash equivalents concept with the standard element in the
GAAP taxonomy and tagging it a second time as a unique company-specific element.
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We classified elements correctly tagged a single time but erroneously displayed multiple
times as display errors. In addition, some companies coded extra elements unnecessarily that we
did not count as duplicates. This occurred when a company correctly coded an element such as
inventory and coded a total inventory element with the identical amount. Elements labeled
total are only necessary when there are multiple component elements that sum to the total.
What is perhaps a common form of duplication error, creation of a unique element for
every appearance of a concept in the financial statements, is unobservable by examining the
rendered financial statements and is not included in our official count of duplication errors. We
observed this type of duplication error occurring frequently in 2006. For example, General
Electric coded a new element for every appearance of an accounting concept in its financial
statements. Using this technique, General Electric achieved a perfect replication of its 2006
Form10-K financial statements when the XBRL instance document was rendered for display.
Although it was not practical to identify and document all of these duplications because they
were not visible in our manual tracings between the Form 10-K and the instance documents, an
informal review of instance documents indicated that this type of duplication error appeared to
be common for several sample companies.
The complexity of controlling the XBRL financial statement display and preparers
misunderstanding of the basic XBRL requirement that elements be tagged only once were likely
contributing factors to duplication errors in 2006. Improved software for rendering XBRL
documents allowed preparers to more readily observe duplications in 2008, a year for which we
detected no errors. Nevertheless, it is likely that firms will continue to make unobserved
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duplication errors until they fully understand the XBRL protocol of tagging concepts a single
time.
Incorrect Elements
Incorrect elements occur when the preparer selects an element from the U.S. GAAP
taxonomy that does not correspond to the financial statement concept in question or when the
preparer extends the taxonomy by creating a unique company-specific element even though the
GAAP taxonomy includes an appropriate standard element. These errors are very serious
because they distort the underlying XBRL data, require manual interpretation, and/or reduce the
cross-sectional comparability of data. We are able to identify only a small number of these errors
with certainty, but it is possible that many more exist. Detection of all incorrect elements
requires tracing every financial statement concept to the corresponding XBRL element and
having knowledge of the true nature of a companys financial statement concepts. It was not
practical for us to trace every financial statement concept to the corresponding element in
companies XBRL instance documents, and even if we had, we could not have determined with
certainty whether many elements were the best choices for particular financial statement
concepts because we did not have detailed knowledge of those concepts.
The incorrect errors we detected were found serendipitously as we looked for other
errors, and we only recorded those instances where a company unambiguously selected an
incorrect element or unnecessarily created a unique element for a common financial statement
concept already included in the GAAP taxonomy. As a result, we can provide evidence of the
existence of incorrect elements, but the frequencies of incorrect elements that we report are
incomplete. We identified four companies with 14 total incorrect elements in 2006 and five
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companies with nine total incorrect elements in 2008. For example, United Technologies
combined two concepts in its 2006 Form 10-K balance sheet, common stock including
additional-paid-in capital and unearned ESOP shares, in a single XBRL element that was tagged
as Common Stock Value (Excluding Additional Paid-in Capital)All Classes even though the
element included additional paid-in capital and unearned ESOP shares. As a result, two concepts
were tagged with a single incorrect element.19 In 2008, the Microsoft XBRL statement of cash
flows contained the U.S. GAAP taxonomy element Deferred Revenue Additions as an
adjusting item to arrive at cash flow from operations. This element is intended for use in footnote
disclosures of changes in the balance of the deferred revenue element in the balance sheet.
Microsoft should have used the U.S. GAAP taxonomy element Increase Decrease in Deferred
Revenue that is the appropriate element for use in the statement of cash flows.
The second form of incorrect element is the creation of unique elements (known as
extensions of the U.S. GAAP taxonomy) that are unnecessary because the appropriate the U.S.
GAAP taxonomy already contains an element corresponding to the financial statement concept.
Validation software can highlight company created elements, but it cannot determine whether
companies created them unnecessarily. Only individuals with intimate knowledge of a
companys accounting concepts can determine with certainty whether the company-created
elements were necessary additions to the U.S. GAAP taxonomy or were created in error. The
SEC views these errors as serious because the unique company-created elements cannot be
19 The XBRL US GAAP Preparers Guide (2008b) states that every concept in the financial statements should betagged as a separate XBRL element.
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interpreted automatically by analytical software, reducing the cross-sectional comparability of
the XBRL data.
General Electrics 2006 and 2008 XBRL documents contain a large number ofunique
elements some of which provide readily observable illustrations of this type of error. For
example, in 2006 and 2008 General Electric created a unique element labeled Provision of
income taxes that included both current and deferred income taxes for the year. The U.S.
GAAP taxonomy contained the appropriate standard element, Provision for income taxes
total, that General Electric should have used to represent the concept in its income statement.
General Electric also created a unique element for cash dividends declared per common share
even though the U.S. GAAP taxonomy contains Cash Dividends Common StockAmount
per Share that is defined as including all dividends declared.
The creation of unnecessary unique elements also increases the likelihood of other data
entry and display errors because the preparer cannot rely on the default XBRL coding that exists
for elements in the U.S. GAAP taxonomy. Again, General Electrics 2008 XBRL instance
document illustrates this problem. General Electrics rendered XBRL financial statements have
44 missing elements. In substantially all instances, these missing elements are unique company-
specific elements that were not displayed because the company failed to appropriately code the
required XBRL display commands.
We used the Fujitsu editor to identify the number of unique elements created by the
sample companies. Consistent with the prior research, we found that the sample companies
created a large number of element extensions to the GAAP taxonomy, many of which appear to
be unnecessary. Although not directly comparable, the average number of unique elements
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created by the eleven sample firms with data for both years was 271 in 2006 and 80 in 2008.
Most companies created unique elements for several concepts that do not do not appear to be
unusual and for which the U.S. GAAP taxonomy contained what appears to be an appropriate
element.
The overall decline in the number of unique elements likely reflects both preparers
increasing familiarity with the taxonomy and the increase in the number of concepts in the U.S.
GAAP taxonomy. The U.S. GAAP taxonomy in use in 2006 contained approximately 3,000
financial report concepts. The revised 2008 U.S. GAAP taxonomy contains approximately
13,000 concepts, greatly reducing the need to create unique elements.20 In fact, a goal of XBRL
US and the SEC is that the taxonomy be so complete that the creation of unique elements is a
rarity.
Comparable to our findings, the SEC has observed what appear to be financial statement
concepts matched with incorrect elements and unnecessary company-specific elements in the
mandatory 2009 10-Q filings (SEC, 2010). In addition to the large number of elements to select
from (in 2009 the number of elements in the taxonomy was over 18,000), the structure of the
taxonomy contributes to this problem. The taxonomy is structured within industry groupings by
financial statement and by financial statement component, and a company may need to locate
select elements from a different industry or a different area of the financial statements.
Misspellings when using the search engine and unfamiliarity with the taxonomy lead to errors.
20 The U.S. GAAP taxonomy is organized in industry clusters, but companies should use appropriate elements in thetaxonomy without regard to where they are located in the industry structure. In 2006, the primary industrial andcommercial cluster contained approximately 2,000 financial concepts.
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As companies start to tag footnotes, the number of elements per filing is expected to increase by
threefold to between 1,200 and 2,000. This increase will compound the likelihood of incorrect
element errors. It is imperative that companies use knowledgeable accountants to select and
validate the elements that represent the companys financial statement concepts.
Incorrect Display
A display error occurs when a financial statement concept either is labeled incorrectly or
is presented in an incorrect location in the rendered XBRL financial statements, even though it
has been tagged correctly with the element, amount, and other information. Although the SEC
does not require rendered XBRL documents to be identical to those in the official filings, it is
considered good practice. The SEC does require that XBRL labels convey the same meaning as
the concepts in the 10-K, and the SEC prohibits changing, deleting, or summarizing information
in the XBRL documents in order to avoid problems in the display.
We consider incorrect display errors to be less serious than other errors because they do
not affect the usability of the individual data items when the XBRL documents are input into
analytical software. However, differences between the rendered XBRL financial statements and
the 10-K can cause user confusion and may reduce user confidence in the accuracy and
reliability of the XBRL data resulting in damage to the companys reputation and more generally
a loss of confidence in all XBRL documents. Ideally, XBRL instance documents will achieve an
exact rendering of a companys unique financial statement format making the duplicative
creation and filing of HTML or PDF documents unnecessary.
We detected display errors by tracing differences between the rendered XBRL financial
statements and the 10-K to the related XBRL instance document to determine if the difference
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occurred because of an error in underlying XBRL data or only in the XBRL protocols that
control labeling and display. We did not count simple variations in statement format or
differences between labels in the XBRL documents and those in the 10-K as errors, unless the
XBRL label failed to accurately describe the financial statement concept. Twenty-one of 22
companies made 340 total display errors in 2006, and 10 of 11 companies made 198 display
errors in 2008. A simple example is that DuPont combined all five concepts representing
changes in comprehensive income in a single XBRL element in its statement of stockholders
equity in 2006. All five of the elements were present in the XBRL instance document, but none
was displayed. The most common display error was an incorrect element sign (the elements
label incorrectly described the sign of the element). Other common errors were duplicate
displays of a single element and elements that were displayed at random locations in the
rendered financial statements rather than in their correct location.
Formatting the financial statements, especially the statement of stockholders equity, was
a significant challenge for most VFP companies in 2006; however, the current version of XBRL
includes an improved dimension feature that facilitates tabular presentations such as those
often used in the statement of stockholders equity and in notes and supplemental schedules
(XBRL US, Inc., 2008b). In 2006, the lack of a previewer (SEC financial statement rendering
software that allowed examination of the XBRL rendered financial report prior to filing) was an
obvious handicap. However, the large number of formatting errors across all statements in both
2006 and 2008 is indicative of the complexity of controlling the display of the rendered financial
statements. The SEC observes that correctable display errors continued in the mandatory 2009
10-Q filings (SEC, 2010). Thus, companies will likely continue to have difficulty with this
important aspect of preparing the XBRL instance documents.
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DISCUSSION AND CONCLUSION
The SEC mandated XBRL filings for registrants beginning in 2009 with an unstated
expectation that XBRL filings eventually will replace the HTML and PDF formats currently
required. Successful implementation and adoption of XBRL-tagged financial reports has the
potential to provide benefits in terms of efficiency, comparability, and standardization of
financial reporting. However, preparer and user acceptance of this new reporting format is a
prerequisite to full implementation of XBRL reporting. We believe that a low level of accuracy
and reliability in XBRL filings could pose a serious threat to preparer and user acceptance.
This study examines 22 companies initial voluntary XBRL Form 10-K filings in 2006
and the 2008 filings of the 11 sample companies that also filed XBRL 10-K documents that year.
We posed two research questions, what types of errors occurred and did the frequency of errors
decrease as companies gained more experience and XBRL technology improved. In a departure
from prior studies that relied primarily on software validation to identify errors, we made manual
comparisons of the concepts, labels, and amounts in the official Form 10-K to the related
elements in the XBRL documents. Software validation detects syntax errors and performs tests
of mathematical relationships that have been established by the preparer. Manual validation can
identify other forms of errors including the selection of incorrect elements, errors in amounts,
and display errors.
Giving full recognition to the limitations of the research design, our results provide
evidence about the types and frequency of errors that may exist in voluntary filings and may
persist in mandatory filings. This evidence will aid the SEC and XBRL US in improving XBRL
technology, and it will aid preparers in designing and implementing XBRL document
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preparation processes. Third-party developers of XBRL preparation and validation software may
find our results useful in improving their products. In addition, our results provide preliminary
evidence related to the question of whether some level of independent assurance will be needed
for XBRL disclosures to achieve acceptance by the investor community.
We found that all companies made varied errors in 2006, the first year of XBRL filing.
The number of errors decreased dramatically for all 11 sample companies in 2008 with the
exception of display errors. The most common errors that we identified in 2008 were display
errors, incorrect elements, and missing elements. We also provide evidence that there may be a
larger number of duplicate elements, incorrect elements, and possibly sign flip errors that we did
not detect. Display errors are of the least importance for interactive use of the data, but all of the
error types we documented have the potential to create problems for users. Although most of the
reduction in error rates may have been due to improvements in XBRL protocols and in the U.S.
GAAP taxonomy, it is likely that greater preparer experience was also an important factor. The
persistence of errors in the third year of the Voluntary Filing Program is evidence of the
difficulty of preparing accurate XBRL documents for GAAP-based financial statements.
The SEC staff has conducted preliminary reviews of a small number of the initial
mandatory 10-Q filings in 2009, and they have reported observing most of the same error types
identified in this study. Since these initial mandatory filings are from the largest SEC registrants
(based on market value), we would expect these companies to be among the most sophisticated
and well prepared. The frequency of errors that we observed for the VFP participants and the
SECs observations of the same errors in the 2009 10-Q filings is cause for concern given that
most companies have yet to file the larger 10-K (eventually including fully tagged footnotes).
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We expect smaller companies will be less prepared for XBRL document preparation, and it is
possible that third-party companies that provide assistance with the preparation and validation of
XBRL documents will be overwhelmed when thousands more companies seek assistance. To the
extent that the high error rates we observed in 2006 are a reflection of the difficulty of initial
preparation of XBRL documents, the initial mandatory filings may have excessive errors rates
because preparers do not have adequate training and experience with document preparation.
Thus, we remain concerned that the inherent complexity of the XBRL document preparation
process and limitations of XBRL technology will continue to contribute to high error rates in the
initial mandatory filings.
Although technical refinement of XBRL and increasing preparer experience can be
expected to improve XBRL document accuracy, a new threat to overall accuracy is on the
horizon. The XBRL filings mandated by the SEC must include complete footnotes in block-text
format in the first year of filing and detailed tagging of all concepts in the footnotes beginning in
the second year of filing (SEC, 2009) In 2006 and 2008, most companies did not include
footnote disclosures in their XBRL filings. Although the process of tagging blocks of text is
straightforward, the detailed tagging of all quantitative concepts in the footnotes and schedules
will greatly increase the potential for errors. Detailed footnote tagging is likely to triple the
number of tagged elements and increase the number of nonstandard, company-specific elements
that preparers need to create.
We call on the SEC, registrants, and the accounting profession to address the issues of
XBRL accuracy without delay. Since both the user and preparer communities are largely
unfamiliar with XBRL, there is a limited reservoir of support to fall back on if the initial filings
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are inaccurate.21 Users and filers will judge XBRL based on early filings. There is a risk that the
SECs program for mandatory XBRL filings could fail to gain acceptance, and if that happens, it
will be difficult to regain preparer and user confidence in the XBRL process for many years.
In order to increase the likelihood of investor acceptance, we recommend that various
stakeholders consider the following actions. The SEC should continue to improve its detailed
guidance on XBRL implementation. They should also carefully consider the addition of new
elements to the taxonomy and the resultant trade-off in the reduction of comparability between
companies. Registrants should devote sufficient resources to understanding the complexities of
the XBRL technology and specifications and to training staff in XBRL document preparation
and validation. This training should include information about common errors, such as those
identified in the current study. The accounting community as a whole (SEC, registrants, and
investor protection groups) should carefully consider whether mandated audit-level assurance is
necessary to achieve reliability and accuracy. As Nicolaou, Lord and Liu (2003) suggest,
assurance would enhance investor trust by providing independent judgment of the reliability and
accuracy of the filings.
Extending an assurance requirement to XBRL documents is one way to assure accuracy
and reliability, but its implementation would create additional challenges. The Public Accounting
Oversight Board (PCAOB) and the American Institute of Certified Public Accountants (AICPA)
would need to provide greater guidance to auditors in this area because it has not been
determined how auditors should approach providing audit-level assurance on XBRL filings.
21 An Institute of Internal Auditors survey of over 200 internal audit executives found that over 50% were unfamiliarwith XBRL, and 90% were interested in learning more about their role (Institute of Internal Auditors, 2008).
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Plumlee and Plumlee (2008) provide an extensive discussion of assurance-related issues that will
need to be resolved by the PCAOB and the AICPA.22
Limitations
There are several factors limiting conclusions drawn from our results. First, our sample
size is small because of the time required to perform manual validations and the small number of
companies that participated in all three years of the Voluntary Filing Program. Second, since the
SEC provided liability protection for inadvertent errors in the voluntary filings, and did not
display the XBRL filings on EDGAR, it is possible that companies were less attentive to the
process than they otherwise would have been.23 Third, we were unable to identify all of the
errors in the XBRL filings. Without detailed knowledge of a companys financial statement
concepts, it is not possible to detect all the financial statement concepts that are tagged with an
incorrect element or for which a unique company-specific element was created unnecessarily.
Similarly, it was not practical to detect all of the financial statement elements that were
duplicated unnecessarily. Although these types of serious errors appear to be common, we are
unable to document their frequency precisely. Our validation of elements was limited to tracing
differences between the XBRL rendered financial statements and the 10-K to the corresponding
element tags in the XBRL instance document. It was not practical to devote the time necessary to
22Audit firms may be reluctant to lobby for assurance requirements apparently out of fear of being labeled asprofiteers (much like they were after the Sarbanes-Oxley legislation). While audit firms are helping develop XBRL
technology and are preparing to provide assurance services, they have not been vocal advocates for assurance.
23 There is a long history of voluntary corporate participation in trials of new financial reporting methods anddisclosures sponsored by standard setting organizations. While it is possible that companies that oppose XBRLimplementation could have intentionally exaggerated the difficulties of implementing XBRL reporting, this seemsunlikely in the case of XBRL filings. Most participants in our sample are traditionally good corporate c itizens and/orthey were companies that are likely to benefit from either cost savings or from increased business if XBRL filingsreplace the current HTML and PDF filings.
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perform a complete manual validation all financial statement concepts in the 33 financial
statements included in our study. Finally, although we observed reduced error rates as companies
gained experience with XBRL document preparation, it was impossible to separate this
improvement from that resulting from changes in XBRL technology and the expansion of the
U.S. GAAP taxonomy. Since XBRL US is continuing to make improvements in both technology
and the taxonomy, one can optimistically expect a downward trend in error rates for experienced
filers.
Future Research
There are many avenues for academic research related to the implementation of XBRL
financial statement reporting.24 At a technical level, there is a continuing need for refinement of
the capabilities of XBRL code. The whole area of what is a material error and what attestation
processes are necessary to provide adequate assurance of XBRL accuracy are largely
unexplored. There is a need to design processes that companies can follow that will help assure
the preparation of accurate XBRL documents. An especially important opportunity lies in
developing systems that integrate XBRL tagging into automated accounting information and
enterprise resource planning systems. This integration would minimize errors and make
consolidation and closing more efficient. Without a doubt, access to accounting information in
XBRL format holds the promise of greatly reducing the cost of conducting both cross-sectional
and time-series studies based on financial report data. Research that in the past was prohibitively
expensive will become practical with XBRL data.
24 Plumlee and Plumlee (2008) provide a more extensive discussion research questions related to XBRLimplementation.
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D., et al. (2005). Financial Reporting in XBRL on the SEC's EDGAR System: A Critique and
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Appendix A
The Challenges of Manual Tagging
Conceptually, the process of tagging financial report data to create an interactive
computer-readable data file is straightforward. One might assume that the process of assigning
computer codes to the items in an audited financial report would be easy to accomplish, and in
fact, there has been widespread success in the creation of XBRL for select applications in the
U.S. and around the world. Since 2006, the Federal Deposit Insurance Corporation, Federal
Reserve and the Office of the Controller of the Currency have required approximately 8,000
financial institutions to file their quarterly financial reports (call reports) as XBRL documents
(SEC, 2009).25 Yet, this successful application of XBRL reporting does not provide strong
evidence that registrants can produce the XBRL filings mandated by the SEC reliably and
accurately. The call report filings and similarly successful XBRL applications in China and
Japan involve standardized forms and relatively simple documents. Standardized forms are easily
reproduced in XBRL and do not require preparers to undertake the specification of unique
disclosures, formats, and complex relationships among the data. The initial creation of a XBRL
instance document for a Form 10-K is much more complex than the tagging process for a call
report.
A short description of the process of creating an XBRL instance document illustrates the
complexity of this procedure. In 2006, participants in the VFP using the U.S. GAAP Commercial
25China and Japan already require listed companies to file interactive financial data, and numerous countries
including Australia, Canada, Germany, and the United Kingdom have scheduled implementation of XBRL reportingby listed companies or have voluntary programs in place.
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and Industrial taxonomy (us-gaap-ci) were required to identify the unique element in taxonomy
of over 1,500 possible elements that corresponded to each financial statement concept. Accurate
tagging requires deep knowledge of financial accounting and of a companys reporting practices.
The resulting electronic document is a taxonomy schema. Elements in the taxonomy schema link
to five interrelated XBRL files known as linkbases that provide contextual information about
each element. The label linkbase allows the company to enter its own label for each element. The
presentation linkbase specifies where and in what order the elements appear in the financial
report. The calculation linkbase defines relationships that facilitate the accurate representation of
amounts within subtotals and totals contained the in the financial statements. The definition
linkbase describes the relationships of elements (parent-child) within the financial statements.
The reference linkbase provides authoritative references for each element. The XBRL instance
document that companies file with the SEC contains all six of these interrelated files.
XBRL is extensible, allowing users to create unique financial statement elements and to
use the linkbases to create their own terminology and financial statement formats. Recall that
Boritz and No (2008) found that for companies in the VFP, 55 percent of all elements were
extensions. The process of extending the XBRL taxonomy and linkbases requires much deeper
knowledge of XBRL than using only the U.S. GAAP taxonomy and standard XBRL linkbases.
For the basic financial statements, not including footnotes, registrants must create several
thousand lines of computer code. The lines of XBRL code are not intended for humans to read
and do not produce a financial statement document that can be viewed during the input process,
i.e., XBRL does not have the capability of word processing software like Microsoft Word to
instantly produce a viewable document. Fortunately, document creation software is available that
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allows data entry using menu driven forms.26 Even with the assistance of document creation
software to create the necessary XBRL codes, the process is complex, and it requires detailed
knowledge of financial reporting, the structure of XBRL, and familiarity with the document
creation software. The creation of the XBRL instance document is most difficult in the initial
year, when financial statement concepts are mapped to the appropriate XBRL elements and the
financial statement presentation commands are created for the first time. In subsequent years, the
initial model can be used as a template, followed with only incremental changes.
Aside from the technicalities of creating a valid XBRL instance document, the process of
manually transferring all of the amounts, dates, and language in a financial report to the XBRL
documents is subject to keystroke errors. This is true even with the use of drag and tag software.
The integration of XBRL technology and a companys automated financial reporting software
could greatly reduce data entry errors, but this option is likely to be several years away for most
companies.
26 Leading instance document creation software used by companies in the VFP include Dragon Tag, EDGAR OnlineI-Metrix, Core Filing Ltd. Fujitsu Interstage XWand, and TagEzee (Phillips, 2008)
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Table 1
Sample Companies Participating in the SECs XBRL Voluntary Filing Program and
Submitting Form 10-K Financial Statement Documents for 2006 and 2008
Ticker
SymbolCompany Name 2006 2008
ADBE ADOBE SYSTEMS INC X X
ADP AUTOMATIC DATA PROCESSING INC X X
BMY BRISTOL-MYERS SQUIBB CO X
BNE BOWNE & CO INC X
CMCSA COMCAST CORP X X
DD DUPONT E I DE MEMOURS & CO X X
DOW DOW CHEMICAL CO X
F FORD MOTOR CO X
GE GENERAL ELECTRIC CO X X
IBM INTERNATIONAL BUSINESS MACHINES CORP X X
ISE INTL SECURITIES EXCHANGE INC X
LMT LOCKHEED MARTIN CORP X
MMM 3M CO X
MSFT MICROSOFT CORP X X
PEP PEPSICO INC X X
PFE PFIZER INC X
RADN RADYNE CORP X
RRD DONNELLEY (R R) & SONS CO X X
TROW PRICE T ROWE GROUP INC X
UTX UNITED TECHNOLOGIES CORP X X
XMSR XM SATELLITE RADIO INC X
XRX XEROX CORP X X
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Table 2
Classifications of Errors in XBRL Instance Documents
Error Type Description of Error
MissingElements
Elements (concept) appear in Form 10-K, but not in the XBRL instancedocuments.
IncorrectAmounts
Correct elements are in the XBRL documents, but the amount or date isincorrect (excludes sign flips).
Sign FlipsElements coded with the incorrect sign or calculation weight. (Sign errors onlyin the display of an elements value classified as incorrect display errors.)
DuplicateElements
Financial statement concepts coded more than once so that they appear morethan once in the instance document.
IncorrectElements
Financial statement concepts coded with an incorrect element in the U.S. GAAPtaxonomy or unique company-specific elements created unnecessarily.
IncorrectDisplay
Elements are otherwise correctly coded are displayed with an erroneous label, inthe wrong location, or not at all in the rendered XBRL financial statements.
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Table 3
Effects of XBRL Errors and How Errors Can Be Detected
Effects Detection Methods*
Errors DistortsData
DistortsDisplay
SoftwareValidation**
Manual Inspection ofDifferences Between
the Rendered Financial
Statement and the
Original Financial
Statement
Missing Elements Yes Yes Often Yes
Incorrect Amounts Yes Yes Often Yes
Sign Flips Often Often Often Often
Duplicate Elements Yes Yes Occasionally Yes
Incorrect Elements Yes Often Occasionally Often
Incorrect Display No Yes Occasionally Yes
*All XBRL document errors can be detected by a complete manual examination of alltags in the XBRL instance documents in combination with a comparison of the renderedfinancial statements to the original financial statements.
**Software validation is much less effective in detecting errors in financial statement
footnotes and supplement disclosur