XBRL has been around 10 years! A lot of people would say it’s still good for absolutely nothing – among other reasons, because it requires extra software to consume, doesn’t cover non-GAAP disclosures and can be error-prone. But there are a few cheerleaders. A FEI interview gives some insight into how Famous Dave’s CFO Paul Malazita is using data tags to evaluate acquisition targets and the company’s competitive position:
We’re working with a third-party company right now to use their software to build out a peer set of companies with certain metrics that we look at in the restaurant industry for the purposes of setting up templates and data for when we perform our annual Goodwill impairment analysis. It also helps us to understand certain transaction multiples. We pay close attention to what’s going on in our industry. Why certain brands traded at different multiples is not necessarily apparent at the outset.
Being able to use XBRL data to normalize the company, looking at the strength of their balance sheet, the strength of their revenues, their profitability metrics, things like that, really starts to get a sense of what our company is truly worth. We’re a public company. But, oftentimes, there is intrinsic value that might not be captured by the market. As we look either into acquiring other companies or what we look like in the market, using XBRL data is extremely helpful in being able to do those analyses.
Also, our note disclosures and financial statements are compared across our industry using software that provides search function on XBRL filings. So, for example, when I have something come up in a certain quarter and we’ve never had to disclose it before, I go out and search through XBRL filings to find similar companies within our industry that have had to present certain similar things in the past. And that really helps me in crafting our disclosures to make sure that we’re complying with the spirit of GAAP and providing the information that we’re supposed to be providing.
Here’s another tip from Paul: moving away from narrative disclosure in 10-Qs and 10-Ks and more toward a tabular format doesn’t just make the report easier to read for normal humans – it also makes it easier (and presumably less expensive) to add the XBRL tags.
-Liz Dunshee, TheCorporateCounsel.net September 17, 2019
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