Understanding Facts

Financial Report Semantics and Dynamics Theory

Overview

• Facts– Value– Additional traits of numeric fact values– Characteristics– Parenthetical explanations

Fact

Fact Value

20001000

A fact is a piece of information. Financial reports communicate facts. Facts reported by a financial report can be numeric, text, or even prose.

For example, the two facts above with the values of “2000” and “1000”.

Values

A value is the piece of information being reported. The screen shot of a financial statement note above which discloses information about commitments and contingencies shows three types of values: numeric, textual, prose.

Numeric and textual are rather straight forward. Prose can be thought of as information which has sophisticated formatting: paragraphs, tables, lists, etc. Generally prose should be read in a specific ordering or sequence.

Numeric:1147

Textual:Sed elementum feugiat augue. Nam

non tortor non leo porta bibendum...

Prose:

Additional traits of numeric fact values

Value

20001000

Numeric facts have two additional and important traits: units and rounding. Units help computers understand if the numeric value is expressed in say US Dollars, Euros, shares, per share, etc. Rounding helps to understand what can be thought of as the significant decimal places of the number; it the number expressed to the nearest thousands, to the dollar, or to the penny.

Computers need this information to work with the numbers correctly; both for processing computations and in generating renderings of the numeric information.

Characteristic

Concept Value

Revenues 2000Net income 1000

A characteristic describes a fact. Characteristics help you understand a fact.

For example, a characteristic of the number “2000” above is that it relates to revenues as opposed to the number “1000” which relates to net income .

Characteristics

Reporting entity Legal entity Period Concept ValueABC Company Consolidated entity Jan 1, 2011 to Dec 31, 2011 Revenues 2000

ABC Company Consolidated entity Jan 1, 2011 to Dec 31, 2011 Net income 1000

Financial facts can have a number of characteristics.

For example, some common characteristics include the reporting entity, legal entity, period, and concept which describe a reported financial fact.

Fact

Reporting entity

Legal entity Period Concept Value Units Rounding

ABC Company

Consolidated entity Jan 1, 2011 to Dec 31, 2011

Revenues 2000 US Dollars Thousands of dollars

ABC Company

Consolidated entity Jan 1, 2011 to Dec 31, 2011

Net income 1000 US Dollars Thousands of dollars

So the fact is the value (including the traits which further describe numeric values) and all of the characteristics which describe the value.

So above we know that the value “2000” is for the concept “Revenues”, for the period “Jan 1, 2011 to Dec 31, 2011”, relates to the legal entity “Consolidated entity”, of the reporting entity “ABC Company”. We also know that the numeric value is expressed in the units US Dollars and are rounded to the nearest thousands of dollars.

Further, the example above contains two facts.

Parenthetical Explanations

Facts may have parenthetical explanations which provide additional descriptive information about a fact.

For example, information contained within a line item of a financial statement or as a footnote on the bottom of the page of one of the financial statements are examples of parenthetical explanations.

Parenthetical explanation

Parenthetical explanation

Summary

• Facts– Value– Characteristics– Additional traits of numeric fact values– Parenthetical explanations