Wednesday 23 January 2019

Fixing XBRL to Build a Set of Investment Grade Financials in which you can have Total Confidence

So as promised, here's how you fix the XBRL to get your very own set of investment grade financials. See my last post as to why you need to do this.

This of course is also a sales pitch. We have a set of tools that we think does just that.

I've chosen a very simple single ratio model so you can see exactly what's going on and how easy it is to improve on the XBRL tagging filed by companies. I'm using our fully featured totaliZd product to do this and you can download both a before and after X Sheet to see the impact of these tools.

So lets say I'm a strong believer that research & development drives future growth. How does my target company stack up against its competitors?

Well I don't know, because as a result of extensions (and standard totals missing from as reported filed financials - a common problem), my model in Excel is currently a mess.

Now to give this analysis some credence, I've chosen the first company with a significant extension issue off our previous list of the DJ30 companies and found four of its competitors against which to compare. And I'm getting not a single R&D figure, coming through from the XBRL on the face of the financial statements, for any of them!

This is not uncommon behaviour for a peer group of companies. They watch each others disclosures and follow suit. There is even a button in the leading brands of XBRL creation software to allow you to do this! This is good and bad. Bad that it happens in the first place. Good in that it makes it easier to fix - we can quickly roll out the same change across the whole group.

Now at this point I would recommend you watch the video to see how to do this and how quickly it can be done. I was able to make the change, from model to filing and back again, for 4 companies in under 30 seconds.

totaliZd allows for layers of tagging so we never change the sacred as reported numbers and tags, we just build layers on top until we get exactly what we want, a view of the company that truly reflects what we wish to see. This way we can always get back to the genuine source figures. So we pick up the tag we want from our handy set of X Financials (broad set of the most commonly used set of values and adjustments used in modelling companies) and plonk it in the User Tag column. Job done. And when you have finished, this is what you will end up with.

So continuing our narrative, 3M looks like a poor performer compared to Corning, so based on our (very) simple and crude analysis, we should instead back Corning to generate greater revenues in the future.

Now we have only changed one tag here. And we can leave it at that if that's all we want to look at. But what other changes might we have to make, if we wanted to fully prepare 3M, to create a full set of VAXBRL (Verified & Adjusted XBRL), ready for any analytical challenges we might want to throw at our target company? Well if you look at the X Sheet after adjustments, you will see I had to add only five other tags to turn dubious as reported XBRL into Verified & Adjusted XBRL.

As the name implies, part of the process is Verifying the accuracy and validity of the XBRL and this is what the totaliZd sheet enables you to do. One glance at this sheet tells you everything is tickety boo and good to go. More on this in a later post - suffice to say there is an awful lot of checking going on here (we instigate a triple check procedure that enables you to look at the XBRL from three angles).

totaliZd enables you to adjust the XBRL, not to change it, but improve on it to match your own modelling requirements. User Tagging creates a backstop so no matter what the company churns out as a filing, you can easily fix or improve on it. You can make as many or as few adjustments as you wish and they will all be reflected in the totaliZd validation. You are in control, enabling you to decide what values go into your models. This way you can create a set of Financials which surpass any that you might purchase from the likes of Capital IQ or Bloombergs. This is serious value for money.

So confident are we that it will change the way you analyse companies, we have decided to offer a 60 day free trial of totaliZd (no credit card details or prepayment required). Just email us at to take up this offer.

This post is part of series that started here and is a follow on to my last post - Why Verified and Adjusted XBRL is the Best Choice for Company Analysis


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