Digital Financial Reporting

ACTUS (Algorithmic Contract Types Unified Standards) is doing some very interesting work related to standard financial contracts. The basis for this work is the book Unified Financial Analysis: The Missing Links of Finance.

The stated goal of ACTUS is:

The goal of ACTUS is to break down the diversity in financial instruments into a manageable number of cash flow patterns – so called Contract Types (CT).

This standardization work is based on the same observation that I had related to financial reporting: patterns. What Dr. Willi Brammertz observed is that 98% of all financial contracts can be represented by a small number (about 30).

What they call "contract types" is very similar to my notion of "reporting styles". Here are the similarities that I see: 

• Contract types (these are Structures)
• Taxonomy (these are Structures)
• Data dictionary (these are Terms)
• Applicability (these are Rules)
• Demo application (these show the Associations)
• Technical specification (these are Rules)

You can look at all this information within an Excel spreadsheet here. Here is their blog.

What would be interesting is to convert all this information into XBRL.  This is somewhat of an example of a financial instrument in XBRL.  Maybe I will do that.

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Ariadne

A recommender system or a recommendation system is an automated system that makes recommendations based on metadata and other information the recommender system has access to.

Recommender systems can make use of collaborative filtering, content-based filtering, and/or metadata stored in a knowledge graph. 

• The collaborative filtering approach build a model from a user's past behavior as well as similar decisions made by other users. This model is then used to predict items that the user may have an interest in.
• A content-based filtering approach uses application state information to help figure out what the application user is trying to do.
• Metadata stored in a knowledge base can be used by a recommender system to help a software application make decisions.

Recommender systems can combine these approaches to create a hybrid system.

How could a recommender system be used in XBRL-based digital financial reporting? Here are some examples: 

• Help an accountant select a financial reporting scheme.
• Help an accountant pick a reporting style from a financial reporting scheme.
• Help an accountant pick a disclosure they want to construct for a financial reporting scheme using some specific reporting style.
• Help an accountant construct a structure or type of structure.
• Help an accountant construct a rule.
• Help an accountant select XBRL taxonomy report elements that would be used to represent a specific disclosure per their report model.
• Help an accountant pick between reporting disclosure alternatives.
• Help an accountant understand which disclosures are required to be provided in their report.
• Report creation wizard.
• Report disclosure wizard.
• Report agenda.
• Report information search.
• Template search.
• Exemplar search.

Recommender systems can use a combination of rule-based information (deductive reasoning) or patterns-based information (inductive reasoning or machine learning) to make recommendations.

Here are three videos that help you understand more about recommender systems:

• Introduction to Recommender Systems
• How Recommender Systems Work
• How does Netflix recommend movies? Matrix Factorization
• How to Design and Build a Recommendation System Pipeline in Python

Recommender systems work using semantic information rather than basic search of text. A recommender system is a type of expert system functionality.

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The Emancipation Of Expert Knowledge

Modano has a motto: "One Model for All Stakeholders". That is explained well in this YouTube video, One Model Technology. They talk about streamlining disjointed processes.  If you go to their web site you can see beautifully laid out sample PDF documents and there is even a Sample Model you can explore.  At the heart of Modano sees to be Microsoft Excel per this download page.  All this is built on top of what they seem to refer to as their "One Model Technology".

But there is a problem. That model is not standard.  Because the model is not standard, there are some issues you will run into.

But what if there was a "one model technology" that really was one model and STANDARD!

Enter the Logical Theory Describing Financial Report, the Standard Business Report Model (SBRM), the Pacioli rules/logic/reasoning engine, the Luca financial report creation tool, the XBRL global standard, and a method that ties all these things together to effectively streamline disjointed accounting, reporting, auditing, and analysis processes.

Imagine "One GLOBAL STANDARD MODEL for All Stakeholders”. Well, you don't really need to imagine it; all this exists today. (Click the image for a larger view.)

So how is what I pointing out different than the "One Model Technology" of Modano? Here are the benefits of those two words "global standard": 

• You get ONE MODEL but that model is FLEXIBLE and ADJUSTABLE enough to support the unique reporting needs of literally ANY ECONOMIC ENTITY.  This has been proven by the fact that over 6,000 economic entities that report to the SEC using US GAAP and about 400 reporting to the SEC using IFRS and about 10,000 reporting to the ESMA using IFRS all use one fundamental financial report model.
• You get machine-readable process control mechanisms that makes sure those adjustments to the global standard model stay within permissible boundaries and therefore don’t break the fundamental logical model. 
• You get a global standard syntax, XBRL, that can be used to move information from one step to the next step in your processes. But it does not stop there.  That same XBRL global standard syntax can be used to move information throughout the financial reporting supply chain.  From accounting system to reporting; from reporting to your auditor; from your audited report to regulators, investors, and financial analysts.
• Digital distributed ledgers are used to make certain that the information has not been manipulated, improving trust and guaranteeing provenance of the information. 
• A powerful ISO Modern PROLOG GLOBAL STANDARD rules/logic/reasoning engine can operate over all the financial information in that one flexible, adjustable model. 
• RULES for controlling processes and model manipulations are represented in a standard global syntax, XBRL. So, all your models are transferable from system to system using that global standard XBRL technical syntax. 
• Global standards based models can be transferred from an economic entity to their CPA and auditors. Models can be transferred to shareholders, analysts, investors, and regulators rather than being locked into a proprietary enterprises internal reporting system.
• Handles not only numerical financial information, but also non-financial information such as sustainability reporting, accounting policies, textual disclosures whether the information comes from your accounting systems or any other information source.
• Software vendor lockin is reduced, forcing software vendors to compete by adding value rather than making it hard for you to change software applications.

That, my friends, is the power of global standards and improving the semantic hygiene just a bit. When financial report models are properly implemented financial accounting, reporting, auditing, and analysis flows without the need for rekeying information or all the other grueling but unnecessary tasks caused by a lack of these standards or improperly implemented financial report knowledge graphs. 

In a prior blog post I mentioned the Luca application for creating XBRL-based financial reports that a software engineer and I created.

Another software engineer, Yury Volkovich, undertook to duplicate and enhance the functionality of the original desktop version of Luca. 

• YAXBRL browser-based version of Luca!

Auditchain also built a cloud-based version of what Luca provided, you can use that application here:

• Auditchain browser-based version of Luca (Part of Auditchain Suite, these videos help you understand how to use the application)

These Excel files it a ZIP archive can be used to create reports.

The following tutorials can help you understand how to use this cloud-based version of Luca. The tutorias were created using the YAXBRL version; but the Auditchain version works the same. Documentation is the tutorial documentation and the Excel Import Files is the ZIP archive of the files you will be using to import information into the report model and report: (where there is no link yet, the information is forth coming.

1. Start Here: This is a 11 minute video walk through of using the Luca application (highly recommended)
2. Using import: This is a 7 minute video walk through of using the Luca IMPORT functionality (highly recommended; note that you can grap the Excel import files below)
3. Accounting equation Tutorial: Documentation
4. Hello World! Tutorial: Documentation | Excel Import Files
5. Hello World! with Dimensions: Documentation | Excel Import Files
6. Hello World! with Dimensions, no dimension-default: Documentation | Excel Import Files
7. Hello World! PPE components represented using dimensions: Documentation | Excel Import Files
8. SFAC 6 Tutorial: Documentation | Excel Import Files
9. Common Elements of Finacial Statement Tutorial: Documentation | Excel Import Files
10. MINI Financial Reporting Scheme Tutorial: Documentation | Excel Import Files
11. PROOF Tutorial: Documentation | Excel Import Files (does not currently import certain types of rules and dimensions of facts...coming soon)
12. METHOD Tutorial: Documentation | XBRL-based Report (Coming Soon)
13. FAC example: Documentation | Excel Import Files
14. NFT example: Documentation | Excel Import Files
15. Microsoft test: Documentation | Excel Import File (This is a work in progress, not done yet)

After the above exercises are done, it would be worth while to do these exercises also. These additional examples add import and verification of the reports.  Then, these examples should be looked at to help consolidate your understanding.

To take your skills to the next level:

• Essentials of XBRL-based Digital Financial Reporting: Documentation | Files and Other Information
• Mastering XBRL-based Digital Financial Reporting: Documentation | Files and Other Information

This version of Luca is an excellent tool to learn about XBRL-based financial reporting.  Stay tuned and watch for updates on this web page. The ultimate objective is to create an Expert System for Creating Financial Reports.

The U.S. Securities and Exchange Commission has published an EDGAR API that is worth having a look at. With the API, you can do things like the following:

• Get a list of submissions to the SEC for a specific CIK number. Here are Microsoft's submissions.
• Get a list of fact values for a specific concept for a specific CIK. Here is the concept Assets for Microsoft reports submitted.
• Get a list of all facts reported by a specific CIK.  Here are all facts reported by Microsoft.
• Here is another list of facts.  Don't exactly understand what they are doing here frankly.

Well...this is a start.