xbrl conference brussels - bas groenveld and paul hulst - comparability of sec data set analysis and...
DESCRIPTION
The US Securities & Exchange Commission (SEC) mandated the use of XBRL for filing quarterly and annual statements (10-K, 10-Q, 20-F, and other forms). According to research by several organizations, around 80% of the XBRL filings was prepared by a third-party. Most of these firms are so-called ‘financial printers’. However, because of the stricter requirements in the second and third year, many organizations are expected to want more control over the filing process to increase quality and to reduce risks. In this session, Deloitte will share with the audience a detailed analysis result performed on XBRL filings submitted to the SEC. The research looks into the comparability of the concepts used (and not used), in terms of the approach taken (in-house, outsourced, and in-between) and tools used. To illustrate the impact, we will further present the comparability result on some important financial ratios. Then, this session will be concluded with recommendations specifically addressed for SEC, taxonomy owners, and filers (both in-house filers or outsourced filers).TRANSCRIPT
Comparability of SEC data Analysis and recommendation for improvement
Bas Groenveld & Paul Hulst
Deloitte Innovation, Netherlands
19 May 2011 14:00 – 14:30
22nd XBRL International Conference, Brussels
Bas Groenveld
Deloitte XBRL team
Involved in XBRL since 2005
Projects:
◦ Taxonomy creation
◦ SEC Filing
◦ Disclosure management
◦ Deloitte annual report in XBRL
Paul Hulst
Deloitte XBRLteam
Involved in XBRL since 2007
Projects:
◦ Taxonomy creation
◦ e-reporting architectures and processes
◦ Automating instance document creation for statutory reporting and credit reporting
◦ Design of formulas for validation
© Deloitte Innovation B.V. 2
XBRL claims to create transparency xbrl.org: “...Consumers of financial data, including investors, analysts, financial institutions and regulators, can receive, find, compare and analyse data much more rapidly and efficiently if it is in XBRL format. ...”
Transparency relies on two aspects of XBRL ◦ Standardisation of data exchange format (instance)
◦ Standardisation of data definitions (taxonomy)
Today we present the results of our analyses of SEC data to investigate "transparency“
The SEC data is the best source available today to investigate this.
© Deloitte Innovation B.V. 3
“The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” (1)
An efficient market requires that investors are able to compare companies to find the best investment. The investors also need that data to present a comprehensive picture of the company.
Value of financial reporting = comparability * comprehensiveness
© Deloitte Innovation B.V. 4
Period: 2009 – May 2011
Forms: 10-K, 10-Q, 20-F, 40-F
Data: > 7,500 filings ~ 1,700 companies > 4,800,000 facts
We estimate that the number of facts will rise to more then 80M per year.
© Deloitte Innovation B.V. 5
Number of filings
0
500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
4.500
2005 2006 2007 2008 2009 2010 2011
POS AM
N-Q
S-4
40-F
N-CSR
20-F
6-K
Other
8-K
485BPOS
10-K
10-Q
(YTD)
© Deloitte Innovation B.V. 6
US GAAP 2009 (core + investment +dei) Total
All concepts 13,651
-/- dimensional concepts 1,947
-/- abstracts 2,155
reportable concepts 9,549
used in filings 6,282
not used in filings 3,177
© Deloitte Innovation B.V. 7
Number of US GAAP taxonomy
concepts and number of extension
concepts
Facts for US GAAP taxonomy
concepts and facts for extension
concepts
120000 6282
extension
us-gaap
77%
23%
us gaap
extension
© Deloitte Innovation B.V. 8
Group Ratio %
Liquidity Current ratio 80.3
Quick ratio 54.3
Net working capital ratio 79.8
Current liabilities to inventory ratio 54.3
Cash ratio 79.1
Operating ratio 14.3
Advertising Expense to Sales Ratio 1.4
Marketing Expense to Sales Ratio 4.7
Assets Inventory Turnover Ratio 19.9
Fixed Assets Turnover Ratio 2.6
Total Assets Ratio 45.8
Assets to Equity Ratio 82.4
Profitability Return on Assets Ratio 85.8
Return on Equity Ratio 78.7
Profit Margin Ratio 39.8
Basic Earnings Power Ratio 23.6
Earnings per Share Ratio (1) 90.5
Debt Total Debt Ratio 62.7
Interest Coverage Ratio (2) 1.2
Debt/Equity Ratio 53.5
Market Payout Ratio 29.3
Current Ratio = Current assets / Current liabilities
can be calculated for 80% of the filings
Using multiple ratio’s limits this further
+ Current ratio
+ Net working capital ratio
+ Return on Equity Ratio
+ Earnings per Share
can be calculated for 60%.
Only 8%:
+ Quick ratio
+ Total Assets Ratio
+ Return on Assets Ratio
+ Return on Equity Ratio
+ Debt/Equity Ratio (1) EPS is a single definition
(2) EBIT calculation
The taxonomy contains very narrowly described concepts. Resulting in the need for additional concepts if they don’t fit completely. CertainLoansAcquiredInTransferAccountedForAsAvailableForSaleDebtSecuritiesAcquired
DuringPeriodContractuallyRequiredPaymentsReceivableAtAcquisition
Allowance to define individual measures for the company.
◦ Helps the company to describe very precisely
◦ Limits comparability
AccuredLiabilityForPayoutEstimateAndOtherCostsRelatingToPreferredShareholdersWho
ExercisedTheirDissenterSRights
Errors and misconceptions about extensions
© Deloitte Innovation B.V. 9
Extending a taxonomy
Means that a filing gives a comprehensive description of a company,
but also means that it is more difficult to compare companies.
Interesting difference US – EU: US: extensions most European countries use a closed taxonomy with special concepts for disclosure
© Deloitte Innovation B.V. 10
© Deloitte Innovation B.V. 11
Value of
business
information
for multiple
reports
Company specific Standardised
Maximum value
with paper-
based reporting Increased value
through comparability Semantic
standardisation
Loss of
detail
Higher value with
standardised digital
reporting
Align taxonomy design with legislation design.
Prescribe the use of top level concepts making the most important information comparable for all filings. Only allow extension at lower levels.
Model recurring extension patterns in the taxonomy Analyse filing behaviour
Build industry extensions with representative bodies creating authoritative structures.
Provide additional guidance on extensions
© Deloitte Innovation B.V. 12
Preparation
◦ Understand the idea behind XBRL and extensions
◦ Look for and learn from best practices.
Creation of filing
◦ Use tools
that support XBRL extension and instance creation
check for EDGAR Filer Manual rules
◦ look up official US GAAP taxonomy concepts before creating extensions.
◦ Match extensions with frequently used extensions from other companies.
Quality control
◦ Make sure the service provider understands your business and accounting, so the right reporting concepts are chosen and appropriate extensions created.
◦ Gain trust on your filing by getting an assurance report.
© Deloitte Innovation B.V. 13
SEC provides a unique source of data for analysis.
The value of the XBRL financial reports can be maximised by carefully choosing the level of extension.
The regulator and the filer both play an important role in this.
© Deloitte Innovation B.V. 14
Questions?
We invite you to our booth in the exhibition hall.
Contact us directly:
◦ Bas Groenveld, [email protected]
◦ Paul Hulst, [email protected]
or visit www.xbrlplus.com
Follow us on Twitter: @xbrlplus
© Deloitte Innovation B.V. 15
(1): http://www.sec.gov/about/whatwedo.shtml
© Deloitte Innovation B.V. 16