« XBRL and OLAP | Main | Use of XBRL Around the World »

Financial Reporting and Business Intelligence

I don't have all my thoughts together related to what I am trying to say here, but this is an interim step in this incomplete process.

The conclusion which I think I am reaching is that a fundamental characteristic of financial reporting of the past several hundred years which is paper is getting in the way of understanding what financial reporting needs to look like in the future.

Financial information is multidimensional.  Accountants tend not to realize this apparently for two reasons.  The first reason is that accountants typically have never heard the term multidimensional.  The second is that paper limits one to two dimensions, the rows and columns of a table.  Paper is not a good way of looking at things which contain more than two dimensions because the paper itself only has two dimensions.  There are ways to put multidimensional information on a two dimensional surface.  When this is done in a financial statement, accountants then begin to see that certain areas of a financial statement are multidimensional, for example the business segment and geographic area information within a financial statement.  But truth be known, all of the information is multidimensional.  Now, a lot of financial information tends to be summarized into high level groupings such as "consolidated entity".  But the information is still multidimensional.

Why is this important to understand?  There are two reasons.

First, multidimensional analysis is about more than the ability to "slice and dice" information.  Multidimensional organization of information provides a foundation on which flexible access to information can be built.  Multidimensional organization of information removes the formatting and presentation characteristics from the information freeing that information to be used in more than one presentation format.

The second is that financial reporting has a lot it can learn from the folks creating the "business intelligence world."  I use the term business intelligence world because I am personally still trying to figure out how relational databases, data warehouses, OLAP, BI, etc. all relate to one another.  I am also trying to understand precisely how XBRL fits into all this.

There are two great videos which explains all this.  One video is very high level and talks about business intelligence from a strategic level.  The other is a video gets into the details of how all these things fit together.  Here are the two videos:

The first video provides a very good definition of business intelligence which is this:

Business Intelligence - Ability of a business to convert its data into timely and accurate information that generates competitive advantage and stockholder value.

Why is it that BI software cannot be used for financial reporting?  Isn't financial reporting just another type of BI reporting?  Why is a pivot table exclusive to the domain of BI? Why can't pivot tables be used as a base presentation method of financial information, allowing users to pivot the data as they see fit, rather than a company locking their data into one difficult to move format?  Should the FASB or SEC even be in the business of prescribing presentation formats?  These are some of the questions which are floating around in the mind of this CPA.


Posted on Sunday, October 26, 2008 at 07:49AM by Registered CommenterCharlie in | Comments1 Comment

PrintView Printer Friendly Version

EmailEmail Article to Friend

Reader Comments (1)

hi charles, further to your response with regard to my post on my blog - Infact my views are close to your prespectives in terms of extending BI architectures for XBRL and providing an integrated platform that servers the compliance needs using XBRL and parallely analyse the impact using BI. This seamless convergence will provide a next generation architecture with real time delivery capabilites
October 26, 2008 | Unregistered CommenterYugandhar Reddy

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
All HTML will be escaped. Hyperlinks will be created for URLs automatically.