If one were to view filings from fifty companies in similar industries, they would notice that the financial statements are generally consistent among those companies in structure, tagging style, and content. Within the footnotes this is not the case. Most of those companies would have similar overall structure to their footnotes, but the content and the way it is displayed would likely vary greatly. Some companies might list several items in paragraph form that others would have in tables. Or tables that are used by one might have different headers and row items the other. This all leads to inconsistent and possibly erroneous tagging among companies in similar industries.
The following tips have been gathered from industry experts, SEC staff, and our internal staff to assist in creating better XBRL financial statement and detailed footnote (DFN) tagging.
1. Prepare your financials properly.
A large portion of the battle to success starts in planning. Start by preparing your financials early so auditors can effectively review the finished documents with time to spare. One of the largest contributors to a quick turnaround of financial statements is creating a standardized template.
2. Create a standardized template.
To create a standardized template, it is important to keep the line item labels from quarter to quarter consistent. For example, on the Statements of Cash Flows under "Changes in operating assets and liabilities:"
Another point to consider is that if you have a line item that represents the same item on multiple statements, ensure that the labels match on each corresponding statement. For example, on the Statements of Cash Flows, "Net (loss) for the year" should match the same label representing that tag on the Statements of Operations ("Net Loss"). Thus, this item should be labeled as "Net Loss" on both statements.
A similar issue can be seen on the Statement of Stockholders' Equity. For example, "Issuance of shares for services valued at $500,000" and "Issuance of shares for services valued at $75,000" can be combined into one entry: "Issuance of shares for services". It is best practice to leave off distinguishing descriptive values with the same element tags and rather combine them into one item and amount.
Consider adjusting your statement line item labels as seen above to facilitate the creation of a more standardized template.
3. Learn about the best practices.
You may not know all of the best practices at this point, but it is important to keep learning from your third-party provider and other industry experts. You may even consider reviewing filings from other filers that have come before you.
4. Beware of common mistakes.
Formatting of the DFN
• Some companies will list accounting policies in more than one financial statement footnote. If possible, group all accounting policies into one note titled “Significant Accounting Policies” within the financial statement footnotes.
• List textual numerical data as values rather than text. Textual numbers may be overlooked and may provide inconsistencies with the rest of your filing structure. Additionally, these must be tagged with a numerical value rather than a string.
• There are no requirements to adjust the formatting of the XBRL submission to match the appearance of the HTML version. However, there is a requirement to tag the data accurately.
• Consider converting paragraphs of data to tables recommended by the US GAAP Taxonomy.
Extension Concepts
• Do not use extension elements solely to achieve a desired formatting of the XBRL data. They should only be used when there is a material difference between the standard US GAAP element and the filer’s financial statement line item.
Registration Statements
• Filers that are subject to the interactive data requirements must include XBRL with certain registration statements filed under the Securities Act of 1933 that physically include financial statements once the registration statement contains a price or price range. Failure to comply with this requirement will result in the loss of short form eligibility and may be remedied only by both submitting the XBRL to the Commission and posting it on the issuer’s corporate website, if any.
5. XBRL is another language used to express your financial data.
Although information expressed in XBRL and HTML is exactly the same, XBRL may display differently. In the financial statements, you may notice that underlines may be missing, headings may not match exactly, or even some additional parenthetical tables may exist. In the footnotes, you may see that text values will often be expressed in tables, tables will have extra columns or rows, or even some text itself may be tagged separately. Don't worry, this is normal. XBRL is based off of an automated computer process that verifies that the data is accurate and ties in correctly through several series of validations. The SEC has reiterated many times that the quality of the tagging, not the formatting, should be the focus of XBRL.
6. Understand the relationship between your financial statements and footnootes.
On average, the number of XBRL tags has nearly doubled or tripled from year 1 to year 2 for the same type of filings (10-Qs and 10-Ks). Companies should take into consideration the extra time required to review the increased amount of tagging and how each particular tag is related to items in the financial statements.
Matching line items in the financial statements and footnotes should be represented with the same element tag and value all throughout XBRL filing. Some companies may either round or spell out values in the footnotes that are the same in the financial statements. Human beings can make the connection between disparities, but computers processing XBRL will interpret the data as different items. Each company can work with its SEC XBRL filing agent to recognize the relationship and difference between the primary financial statements and detailed footnotes.
