Perhaps it is not clear exactly what financial reporting will look like in the future, but there are some things that provide some clues and glimpses that I have come across.
IFRS
First, IFRS (International Financial Reporting Standards) will play a major role. I personally did not even know IFRS existed prior to working with XBRL. Frankly, I really had no need to know about it, I did financial reporting for smaller organizations which only operated in the United States. I learned about IFRS when working on XBRL. IFRS makes a lot of sense. I look at IFRS as something somewhat similar to the metric system. There really is no good reason for the entire world not to use the metric system. There are a lot of bad reasons. There is perhaps a lack of will to push and make a change to the metric system. I remember when the US "converted to the metric system". Did not quite happen all at once. But you can see that gradually changes are occurring. You can see products being labeled using the old standard measuring system plus metric measurements. Look down at your odometer. I bet it shows both miles and kilometers. The US will eventually move to the metric system. May take 25 or 100 years, but it will get there.
The same with IFRS. The US will use IFRS eventually. And I am not talking about multinational public companies. I am talking everyone. Even the smaller companies I worked for. Think about it. Public companies will likely convert to IFRS soon, pushed by the SEC. There is no way one set of financial reporting standards would be used for private companies and another for public companies. That does not make a lot of sense.
One set of robust financial reporting standards used globally makes a lot of sense to me. People talk about cultural differences as a reason this will not happen. Cultural differences did not seem to have an impact on the universal product code, MP3, HTTP, HDTV, Blueray, or other standards.
Anyway, personally believe that IFRS is a great idea and that it will be used globally by anyone who wants to play in the global markes sooner than one may think. The AICPA has already begun making financial and accounting reources such as IFRS Accounting Trends and Techniques available.
Less Obsession with Presentation
It has been my observation that most accountants are obsessed with how information looks on a printed page. I think this will change. The FASB and IASB are already looking into this. The FASB published this discussion paper: Preliminary Views on Financial Statement Presentation. Take a look at pages 123 through 126.
Here is a link to one statement from that discussion paper: Reconciliation of Statement of Financial Position. In my view, this is precisely how what information which should be disclosed should be articulated. Many years ago I was taught by an audit manager how to prepare audit schedules used to create or check a cash flow statement using a very similar approach to this. That was 30 years ago. There will be other organizations of this information, but that reconciliation organizes the fundamental information which should be into a very clear form which makes the disclosures crystal clear. I speculate analysts and investors will love this.
On page 125 and 126 of the discussion paper is another incredibly useful schedule: Statement of Comprehensive Income Matrix. Take a look at that. If you look at those and all you see is an ugly presentation and something that looks complex you are missing the point. The point is the clarity that the format requires. These reconciliations force clarity. THAT is the point.
XBRL
You can already see the XBRL flowing into the SEC. You can go to the SEC web site from that "dashboard" and have a look at the financial information in the HTML/SGML formats or in the rendered XBRL format. You can also go and look at the XBRL format if you are so bold.
While the XBRL part helps provides a peek into what the format of the future financial filings might look like, or at least one version of them which is readable by a computer, there is really a lot of effort going into making the XBRL look exactly like the pretty dead tree (i.e. the paper) format which has been used for hundreds of years.
People will eventually realize that these historical practices, not all of them but many of them, are more of a liability than an asset. The SEC coined the term interactive data. Paper is not interactive. The presentation formats of the past hinder this interactivity, not help it.
I have had a couple of posts on my blog which show prototypes of what this interactive financial statement might look like. See this blog post where I talk about and even show a prototype of an interactive data viewer. Here is that prototype. Most people probably won't get this yet, but some will.
Financial Information is Not Enough
I think the people who are pushing things like the triple bottom line and enhanced business reporting are moving in the right direction. The Global Reporting Initiative pushes these sorts of things. Another term used is sustainability reporting. There are many other terms like corporate social responsibility reporting and environmental, social and governance practices reporting. The list is long.
The bottom line here is more relevant information. Companies who focus on quarterly earnings are misguided in my view. However, they tend to respond to investors who analyze based on quarterly earnings. This is a cycle which needs to be broken.
Pulling The Pieces Together
Imagine financial reporting where:
Could financial reporting have some of these characteristics? I think so. Who knows. Maybe someone has an even better vision of what might be possible. What you can be sure of is that things will change. You can already see many of these changes today.