Digital Financial Reporting

The Center for Corporate Reporting published an excellent article about XBRL. The article, The Role of XBRL in Digital Financial Reporting, by Prof. (FH) Mag. Monika Kovarova-Simecek and Prof. (FH) Dr. Tassilo Pellegrini, provides one of the better descriptions of what XBRL really is.

The authors of the article issue the following wake-up call as part of their conclusion:

"This article should be considered a wake-up call to encourage rapid familiarization with new technologies in financial reporting – not just ensuring it is in place at the time of the “digital switch-over”, but by being proactive in understanding advantages and pitfalls. Because in a digital reporting world only those who understand the technology and are able to exploit its creative potential will benefit from digitization."

So, how do you achieve "rapid familiarization"?

First, read Getting Ready for the Digital Age of Accounting, Reporting and Auditing: a Guide for Professional Accountants. That document provides a 15 page high-level overview of what is happening to financial reporting.

Second, read the 187 pages of material suggested at the end of the above document:

• Accounting and Auditing in the Digital Age: About 14 pages which provides additional details related to the big picture of how accounting and auditing will change over the next 10 years and why.
• Conceptual Overview of an XBRL-based, Structured, Digital Financial Report: About a 25 page conceptual overview of what an XBRL-based digital financial report is.
• Digital Financial Reporting General Principles: About 6 pages that synthesize important principles and provides a framework for thinking about XBRL-based digital financial reports and how to make them work correctly.
• Introduction to Knowledge Engineering for Professional Accountants: A 49 page introduction to important basic ideas related to representing knowledge in machine-readable form.
• Comprehensive Introduction to Business Rules: A 28 page introduction to the important role business rules play in making XBRL-based digital financial reports work correctly.
• Comprehensive Introduction to Problem Solving Logic: A 28 page introduction to the important notion of problem solving logic.
• Comprehensive Introduction to Expert Systems: A 17 page introduction to expert systems or knowledge based systems; what they are, how they work, what their capabilities are, etc.
• Comprehensive Introduction to Intelligent Software Agents: A 20 page introduction to intelligent software agents which use business rules and problem solving logic to perform work for professional accountants.

It is a bit of a slog, but until someone condenses this information and lays it out on a silver platter; I contend that it is the best information that is currently available to either business professionals or information technology professionals who want an accurate understanding of this topic.

Why slog through this material?  It will provide you with the ability to understand the future of XBRL-based digital financial reporting.