By Jen Stretch. XBRL is an important process requiring a significant amount of time and effort. Incorrect tagging may compromise the accuracy and quality of financial statements and undermine a company’s reputation. However, a large number of companies continue to make basic mistakes in their filings to the SEC. In this blog series we are exploring the four most common XBRL errors. Part two will focus on negative value errors.
The negative value error is the 2nd most common error committed by filers and accounts for over 12% of all XBRL errors. This error occurs when a concept reported as a negative value is expected to have a positive value. According to XBRL US, certain concepts should only have negative values in exceptional circumstances. A validation tool is a great way to check for this type of error; however, with over 15,000 elements in the taxonomy and numerous unique company disclosures, it is important to review your negative values internally as an additional line of defense.
In order to perform a negative value check, you will need to filter by instance document values. In Certent’s Disclosure Management Platform, you can quickly pull up all negative instance document values and navigate directly to their location in the document with a click of your mouse. Once you have identified the negative values in your document, it is important to understand why it was reported as negative in order to make any appropriate corrections.
Example 1: Reverse Sign and/or Negate Label
There are certain situations in which a change will always have a negative effect; the repurchase of common stock, for example, will always reduce shareholders’ equity. For this reason the element TreasuryStockValueAcquiredCostMethod (which would typically be applied to this concept/line item) has a balance type of debit in the US GAAP taxonomy. When this element is applied without being negated, a negative value error is created. Following is an example of a concept that is susceptible to negative value errors – treasury stock. Stock repurchases have a negative effect on shareholders’ equity and are presented in the equity statement in parentheses.
Microsoft Corporation 2015 10-K
If TreasuryStockValueAcquiredCostMethod is applied to this line with a standard label role, the balance type of the element (debit) combined with the negative presentation gives us a negative debit, or a credit, and a credit balance type is incorrect for a concept that reduces equity. This particular element should, therefore, have a reverse sign and negated label applied. Reversing the sign changes a value to the opposite sign in the instance document (i.e., negative to a positive or positive to a negative.) Once the instance document value is positive, it will also show as positive in the XBRL rendering. This needs to be corrected by changing the preferred label role in the company taxonomy to NegatedLabel, which will cause the values tagged with the negated label to be presented as the opposite sign.
Another example of a common area that requires a reversed sign and negated label is a standard stock option activity roll forward table. In this standard disclosure, exercised, cancelled, and expired shares are typically presented as negative values because they reduce the number of options available for grant. It isn’t possible for a negative number of shares be exercised, cancelled, or expired, however, so these concepts also require reversed signs and negated label roles. SEC XBRL Staff Observations identify additional examples of concepts that should only have positive values.
Yahoo! Inc. 2013 Form 10-K
Example 2: Incorrect Element Use
There are two types of elements in the taxonomy when negative value errors are being discussed: one-way elements and two-way elements. One-way elements are intended to capture a one way change in a concept – a derivative gain, for example. Two-way elements capture both increases and decreases (i.e., gains and losses on derivatives.)
It is important to make the proper element selection for your company’s individual situation. If a concept in your document will almost always have the same balance type, and therefore almost always be presented as either positive or negative (but not both), it is better to choose the element with the narrower definition. If the balance type of the concept fluctuates between debit and credit, however, it would be more appropriate to use a two way element. If you come across a negative value associated with a one-way element in your review, you may want to consider replacing it with an element that is more specific to the concept being disclosed.
Example 3: Dimensional Qualification (Members)
The third type of negative value error is related to missing dimensional tags, or members. Sometimes there are legitimate reasons to have a negative value for a concept that is expected to be positive, such as accounting adjustments and inter-company eliminations. The structure of the taxonomy for these types of disclosures generally provides for the use of members such as RestatementAdjustmentMember and ConsolidationEliminationsMember. These types of members allow concepts that typically should be positive to be negative, without causing errors. Some other members that can indicate reductions in otherwise positive values may include text such as “reconciliation,” “netting,” and “adjustment.”
Sunvault Energy, Inc. 2014 Form 10K/A
The quality of your XBRL tagging speaks volumes about your company’s financial disclosures. Be sure to read part one of our XBRL errors blog series to learn more about invalid member axis combinations. A Disclosure Management platform can help you avoid these errors with a series of validation warnings. Stay tuned for the next installment of this series where we will explore the thirds most common error: Required Value Not Reported.