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Fundamental Accounting Concepts and Report Frames are Tip of Digital Financial Reporting Iceberg

The basic, common sense fundamental accounting concept relations and the "report frames" or different reporting styles that are used by public companies reporting under US GAAP are the tip of the digital financial reporting iceberg.  Below that you have the disclosures which work consistent with the reporting styles/fundamental accounting concept relations.  All of this information (the report frames, the fundamental accounting concepts, and the disclosure information) can be represented in machine-readable form using XBRL.  Key to this is XBRL definition relations and XBRL Formula.

Already, I have 98.80% consistency with the set of about 22 basic, common sense accounting relations represented. That provides emperical evidence to support these basic accounting relations which are not defined by XBRL; rather they are defined by US GAAP.

Already, I have 80% consistency with a set of approximately 119 different reporting styles used by public companies.  Currently, 2,149 public companies report using the exact same reporting style.  Of that one report style, 82% of all those public companies are also consistent with all of the basic common sense fundamental accounting concept relations.

I was able to figure this out by essentially reverse engineering the rules from XBRL-based public company financial reports submitted to the SEC. This information is incredibly useful for two reason:

  1. It provides positive evidence of how to properly represent financial information consistent with US GAAP and consistent with XBRL technical rules.
  2. It provides contra examples or positive evidence using negative examples of how NOT to use US GAAP or XBRL technical rules.

And the best thing is that 100% of these business rules can be represented using XBRL definition relations and XBRL Formula and are machine-readable.

No one is really arguing against these fundamental accounting concept relations or reporting styles; yet.  Why?  Because I am focusing on the obvious mistakes that no one really disputes.  But what is going to happen is that at a certain point reaching concensus will become harder.  For example, one issue pointed out by the fundamental accounting relations is rounding errors.  Are rounding errors allowed or are they not allowed?  There are two different positions that people have currently.  Neither view is "right" or "wrong", they are simply different positions with different sets of "pros" and "cons" when it comes to working with digital financial reports.

These fundamental accounting concept relations and reporting styles will, and are, establishing patterns which can be used to think about other aspects of the US GAAP Financial Reporting XBRL Taxonomy and XBRL-based digital financial reports.  These patterns are basically principles of digital financial reporting.

While the fundamental accounting concepts and report frames are not suffecient to make digital financial reporting work correctly; they are necessary.  Digital financial reporting cannot be proven to work unless you can prove that the basics work.

Image is from https://ukpr.files.wordpress.com/2015/09/iceberg.jpg

Digital financial reporting is the future of financial reporting. XBRL-based public company financial reports are defining digital financial reporting.


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