Financial Report Semantics and Dynamics Theory

We are in the process of updating this document.  The working draft is available here, feedback is welcome. 

This page is home of the Financial Report Semantics and Dynamics Theory.  This theory is an expository paper which explains the semantics and dynamics of a financial report.  The theory is a resource for software vendors, accountants, internal auditors, external auditors, regulators, financial analysts, and other business professionals working with semantic, structured, model based digital financial reports which leverage the XBRL medium.

FINAL version of the Financial Report Semantics and Dynamics Theory

Prior version: 2012-03-08

Prior version: 2012-02-11

Overview

A theory is a tool for understanding, explaining, and making predictions about a given subject matter. A theory describes absolutes. A theory describes the world and tries to describe the principles by which the world operates. A theory can be right or a theory can be wrong; but it has one intent: to discover the essence of some subject matter.

The Financial Report Semantics and Dynamics Theory is NOT a theory of financial reporting; the FASB, IASB, and others establish frameworks for financial reporting. This theory in no way proposes anything related to the profession of financial reporting. This theory explains the semantics and dynamics of a financial report.  This theory explains the report itself.

The Financial Report Semantics and Dynamics Theory contains the following:

  • Axioms, or self-evident principles, which are hard to dispute
  • Theorems, or deductions from the axioms, which must be true if the axioms are true
  • Ethics, or world view, which summarizes observations, experience, introspection, and intuition
  • A proof (partial proof at this time, more proofs are encouraged) which uses 8,098 SEC XBRL financial filings to test this theory

This theory was pieced together by its authors, Charles Hoffman and Raynier van Egmond, based on many years of experience working to create the XBRL global standard, using the XBRL global standard, and building software to support the use of the XBRL global standard.

Input and feedback is sought to test this theory in order to improve it, from those who might dispute this theory in order to improve the theory, or from those who have other thoughts and ideas which would other make this theory better.

Model for Implementing this Theory

The document Modeling Business Information Using XBRL provides a model for and other information related to implementing this theory within software applications.

This document provides a terminology reconcilition between the theory, the model described in that document, other commonly used terminolgy, and the XBRL technical syntax.

This document updates the terminology reconciliation above and provides a reconciliation between the semantic objects of this theory, the model for implementing the theory, and the XBRL technical syntax. This web page summarizes the implemenation model and will eventually contain one document which pulls all these pieces together.

This document contains ideas and prototypes related to what a financial report creation application might look like. The document summarizes in one location ideas which this blog has posed over the years.  The consistency and explicitness offered by the modeling approach used which leverages the theory articulate here allows for easier to use software applications for business users as opposed to the XBRL technical syntax editors which must exist if this, or some other, model is not utilized.

While the document does show an implementation of this model and test cases which prove that the model works, this information does not necessarily provide the exact, approprate technical architecture through which this model can or should be implemented.  That is not the purpose of this information; the purpose of the information is to communcate the benefits of such a logical model.

 

Videos Which Explain this Theory

This is a set of videos which explain the Financial Report Semantics and Dynamics Theory. (Note that slide decks and PDFs for each video are also provided.  All videos, slide shows, and PDFs are made available under a Creative Commons Attribution 3.0 Unported license): 

  1. Foundational Building Blocks (Slideshare) (PDF)
  2. Understanding Facts (Slideshare) (PDF)
  3. Understanding Characteristics (Slideshare) (PDF)
  4. Understanding Relations (Slideshare) (PDF)
  5. Understanding Components (Slideshare) (PDF)
  6. Relations between Characteristics of a Fact (Domain partition models)
  7. Relations between Concepts (Information models)
  8. Understanding Fidelity
  9. Understanding Integrity
  10. Relations between Components (Flow models)
  11. Core Financial Facts which Always Exist
  12. Generating Component Renderings (Slideshare) (PDF)
  13. Industries and Activities
  14. Financial Report Analysis
  15. Financial Report Elements
  16. Financial Statement Components
  17. Common Characteristics of Financial Facts
  18. Common Financial Report Modeling Errors
  19. Verification Framework