Introduction

Economic entities report using different reporting styles. The different styles are determined by several things.

The US GAAP conceptual framework defines the elements of a financial report such as "assets", "equity", "revenues". The conceptual frameworks also states (SFAC 8) that 'comparison' and 'comparison (including consistency)' are part of the qualitative characteristics of a financial report. See the next section for more information.

Comparibility including Consistency

The FASB in SFAC 8 makes the following statements about comparability:

As the conceptual framework points out "comparibility is NOT uniformaty". What makes US GAAP such a robust reporting scheme is that it strikes an appropriate equilibrium between uniformity and flexibility. This does not mean that financial reports can be "random". The judgement of a professional accountant is used, that judgement helps economic entities reach a sensible conclusion about how information is reported.

So although financial statements are not "uniform" or "forms", they DO HAVE recognizable patterns. These prototype tools can help you see these patterns:

Income statements have the most variability; the other statements tend to be much more comparible.

The next section starts to dig deeper into two specific reporting styles and tries to "map" between the two styles so specific issues related to comparing across different reporting styles can be understood.

Reporting style: Commercial and Industrial Company, Gross Profit, Operating Income (Loss)

This reporting style is used by approximately 1,579 public companies. If you go to this web page you can see the specifics of this reporting style.

On the LEFT is the income statement from one company that reports using this style. On the RIGHT is the standardized "pattern" of the report elements for this reporting style.

Reporting style: Interest-based Revenues

This reporting style is used by approximately 535 public companies, generally depository institutions (i.e. banks). If you go to this web page you can see the specifics of this reporting style.

On the RIGHT is the income statement from one company that reports using this style. On the LEFT is the standardized "pattern" of the report elements for this reporting style.

Reporting style: Mapping Between the Two

This graphic shows BOTH standard reporting patterns; one on the left and the other on the right; and tries to "map" one style to the other style. This is what is necessary in order to effectively compare economic entities that use different reporting styles.

Conclusions

And so, the following information is helpful in understanding the comparibility of XBRL-based public company financial reports.

  1. Financial reports are not "uniform". Such reoprts are not forms. However, there are patterns that exist in reported information and those patterns can be used to compare financial reports.
  2. Period-to-period comparisons for one economic entity are generally not an issue because such economic entities are required to create financial reports consistently from one period to another. They can make changes, but there are rules that govern such reporting changes. Such changes are not arbitrary.
  3. Comparibility across economic entities that use the same reporting style are generally straight forward.
  4. Comparibility across economic entities that use different reporting styles is possible, exactly how to do these comparisons involves personal preferences and judgement.
  5. Key to creating comparinsons between different reporting styles involves distilling the pieces that make up a financial report component.
  6. The FASB defines nine fundamental elements of a financial report; while that set is helpful, it is not sufficient for comparing across economic entities. Standard defintions for these terms are necessary: (this is not a complete set but rather just examples, precise definitions for these terms is critical)
  7. All of this information should be provide in machine-readable form.
  8. Based on evidence from XBRL-based public company financial filings to the SEC, 90% of all public companies fit into one of 80 different reporting styles. It is estimated that 100% of public companies would fit into less than 250 different reporting styles (perhaps less).
  9. It is possible for an economic entity to have a reporting style that is unique to that one entity. (i.e. a set of reporting styles could have only one member, but every public company can be said to have some reporting style.)

Understanding what you are comparing is critical. Thinking that you are comparing similar line items because they are labeled the same, but the meaning is truly different should be avoided.