Digital Financial Reporting

The Resource-Event-Agent (REA) model is an approach to conceptualizing the semantics of economic exchanges such as accounting transactions. The REA model is an ISO standard, ISO/IEC 15944-4:2007.  (You can download a FREE copy of the 2007 version of the ISO standard, the newest 2015 version requires a purchase. Appendix B: REA Model Background, page 70.)

The REA model is best understood by understanding the "R" the "E" and the "A".

• Resources: Economic resources or claims are objects that are under the control of an economic agent.  Economic resources/claims may things such as goods, services, rights, obligations, claims.
• Event: Economic events are the events, transactions, circumstances, and other phenomena which change economic resources from production, exchange, consumption, and distribution.
• Agent: Economic agents are identifiable parties which obtain, use, or dispose of economic resources.

People seem to use the REA model for various things: describing databases, capturing information about value creation patterns, explaining how to make accounting systems better, and so on.

My interest in REA is simple: use the semantics to represent economic exchanges such as accounting transactions in machine-readable form such as XBRL.  Can I do that?  Well, I already have.  I built an XBRL taxonomy and an XBRL instance to prove the idea.  I want to build a good set of examples before I make my XBRL taxonomy and XBRL instance available.

Here are several resources for more detailed information about REA:

• REA Models video: This is an 8 minute video which provides an overview of the REA model.
• REA Ontology Video: This is a 50 minute video which dives into more detail.
• REA Model Tutorial: Very basic tutorial which takes about 60 minutes to work through.
• What is REA?: An explanation of REA by REA Technology, lists of books and other resources.
• Research papers: A bunch of research papers related to REA provided by Bill McCarthy, the creator of REA.

One obvious question is: What is the difference between XBRL Global Ledger (XBRL GL) and REA?  From what I can tell, REA and XBRL GL tend to do many of the same things.  REA is more top down, big picture, work to the details.  REA is not really a syntax, it is semantics.  XBRL GL is a syntax that also provides detailed semantics.  XBRL GL tends to be bottom up, working from the details to the big picture.  From what I see, REA and XBRL GL tend to be complementary in nature.  REA is an ISO/IEC standard.  XBRL GL is an XBRL International standard.

Why am I interested in REA?  Think drill-down from an XBRL-based financial report to the underlying transactions.  Stay tuned!  I will make my prototypes available, but I want to tune them some more.