One of things has continued to surprise me with the adoption of XBRL is the amount of discussion that the question of tagging figures with the correct sign can generate. Brendan Mullan recently managed to start no fewer than 12 separate threads on this topic on the xbrl-public list, some of which resulted in significant further discussion.
Marking up figures in electronic format is not a new phenomenon, and I’m not aware of any other domains that have managed to get so tangled up in sign issues. What is it about the application of XBRL to financial reports that causes such difficulty? I have some ideas, but first let’s look at how to do it right.
Let’s consider the following extract from a Profit and Loss statement:
|Cost of sales||(321)||(299)|
There’s a really simple way to get the sign right in XBRL, every time. Simply take the name of the concept that you’re using to tag the figure, and turn it into a question by prefixing it with “What was the… ”
For example, suppose our concept is called “Cost of Sales”.
Question: What was the Cost Of Sales?
Even though the figure in the accounts is shown as “(321)”, you wouldn’t answer that question by saying “minus £321,000”, would you? So we tag a positive number.
On the other hand, if in your answer you need to correct the question, then the sign should be negative:
Question: “What was the Operating Profit?”
Answer: “Actually, there was a loss of £14,000.”
Our answer is the opposite of the question that was asked, so we’d tag a negative number against a concept called “Operating Profit”.
Sometimes the concept name will be more explicit about the sign convention. For example, you might have a concept called “Increase (Decrease) in Accounts Receivable”. In this case, just ignore the bit in brackets, so your question becomes:
Question: “What was the Increase in Accounts Receivable?”
If your answer starts, “actually there was a decrease…” then you should tag a negative number. Otherwise, you should tag a positive number.
It really is that simple. Nothing to do with balance attributes, negated labels, calculation weights or any of that stuff.
There’s a number of reasons why what should have been a really straightforward issue has become confused into something much more complicated. I’ll address these in a series of follow-up articles: