On June 28 2015, XBRL US announced the formation of XBRL US Center for Data Quality to improve the utility of XBRL financial data filed with the U.S. Securities and Exchange Commission (SEC). The Center for Data Quality will work through the existing XBRL US Data Quality Committee to address the public's concerns about XBRL financial data being reported to the SEC. Press Release
As per a previous statement from XBRL US, out of thousands of XBRL submissions to date, the data issues related to calculation errors are the most. And out of all the calculation errors, more than 50% of the data issues are related to Negative Value Reported for a Concept that is expected to have a Positive Value,and more than 10% of the data issues are related to “Positive Value Reported for a Concept that is expected to have a Negative Value”
Looking at the high number of issues across Calculation Errors, this post aims to simplify the concepts of Calculation Link of XBRL.
To read a detailed note on the analysis of such errors,please refer our blogpost on What happens when values in XBRL are captured with wrong signage.
Calculation link can be viewed as a simple but effective means of identifying calculation errors in a reported financial data to ensure its accuracy.In a report, it helps to associate one concept with another with reference to their caculation relationships so that values appearing in an XBRL document are consistent with actual data to be reported.
A financial report is a sum total of a set of accounting elements grouped together based on a mathematical replationship between them. The end result is derived through a calculation relationship between these elements. For example, a balance sheet shows total assets as a sum of current assets and non-current assets. Current assets in turn represent the sum of all the components of current assets.
A calculation link defines this relationship betweentotal assets (i.e. parent element) and current and non-current assets (i.e. child elements) by assigning appropriate weights (+ or -) based on the balance type(pre-defined weight of an element in the taxonomy) of parent element. This helps to check values appearing in the XBRL document for accuracy.
Figure 1: Calculation Linkbase simplified
As per EDGAR Filer Manual (EFM) sec 6.15.2 “If the original HTML/ASCII document shows two or more line items along with their net or total during or at the end of the Required Context period, and the instance contains corresponding numeric facts, then the DTS(Discoverable Taxonomy Set) of the instance must have an effective calculation arc from the total element to each of the contributing line items.”
As per EFM, a calculation link needs to be constructed for all the calculation relationships that exist in the report, provided EFM rules for calculation are met. In case the calculation links are created incorrectly or the values reported are incorrect or entered incorrectly in the instance document, it will show a calculation inconsistency.
Cause of data issues/ inconsistencies:
Consider the following scenarios in a calculation link when a particular value is getting subtracted from the other - the values are reported as negative but the concept is expected to have positive values.
Figure 2: Condensed Consolidated Statement of Comprehensive Income showing Total Revenues and Total Costs & Expenses
In the above condensed consolidated statement of comprehensive income, “Total cost and expenses” are deducted from “Total revenues” to derive “Gross Profit”. The value for cost of sales is given as negative in the report.
In above example, calculation link will be prepared with Gross Profit as parent element with “Total revenues” and “Total cost and expenses” as child elements. Gross Profit has credit balance, hence, +1 weight will be assigned to total revenues (credit) and -1 to total costs and expenses (debit). In such cases, if the cost of revenue is entered asnegative in the instance to replicate the html report, it will not only convey incorrect information but also result in calculation inconsistency because of the weights assigned as shown below.
Table 1: Actual Gross Profit $ 3,370 million for 3 months ended Sept. 30, 2011 vs. calculated Gross Profit $32,084 million.
The XBRL Way
The calculation linkbase helps in ensuring the accuracy of financial reporting. Many calculation issues can be avoided by inputting the values in an XBRL Documentby considering the attributes of element used (like balance type in the above case) and not the way the value is reported in the annual report. The right approach isto enter a value as positive and use the appropriate Preferred Label Role(Signage) to make the XBRL filings replicate the html documents.
“If calculation links are properly created and the calculation inconsistencies are reviewed, most of the errors related to “Calculation errors” can be resolved, ensuring higher accuracy of XBRL financial reporting". -Revathy Ramanan Member, Implementation Guidance Task Force, XII, Asian representative, Best Practices Board, XII
Reviewing of calculation link alone may not ensure 100% accuracy of the XBRL filings but it will certainly help in identifying and reducing data issues. This reinforces the need for thorough knowledge of XBRL taxonomies, understanding of accounting concepts and their application for accurate XBRL financial reporting.
Quality and Accuracy are the key questions often being raised with XBRL financial reporting. Using XBRL in business reporting can help ensure more reliable and accurate handling of data, improved analysis and better quality of information and decision-making , but all these benefits eventually depend on the quality and accuracy of the XBRL filings.
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