Digital Financial Reporting

In a prior blog post, Understanding that XBRL is a Knowledge Media, I pointed out that XBRL enables a knowledge bearer to impart knowledge to a knowledge receiver.  This is similar to how you can impart knowledge using word of mouth, a book, or a video.  Each of these knowledge media has strengths and weaknesses.

XBRL's "sweet spot" in terms of capabilities for imparting knowledge are the following:

• Exchange of rich, complex, high-fidelity information:  The information exchange transaction type for which XBRL was designed is rich, complex, and high-fidelity information as contrast to a simple information transaction of low fidelity.
• Zero to very low tolerance for error:  As accountants say, information must "tick and tie" and "cross cast and foot."  There should be no mathematical or logical inconsistencies, contradictions, or other such anomalies within a financial report. XBRL has a lot of expressive power.
• Information variability, flexibility, reconfigurability: XBRL was intentionally designed to handle the variability of financial reporting.  A financial report is not a ridged form.  Information reported might not be uniform.  But that is not to say the information does not follow patterns and is arbitrary and random.  For example, various intermediate concepts (subtotals) might be used to summarize basic concepts.  XBRL offers flexibility where flexibility is necessary.

What many who look at XBRL and view as complexity is really XBRL's capabilities to enable the exchange of high-fidelity, high-resolution information with a high-degree of reliability, accuracy, and precision.

• Reliability is about getting consistent results each time an activity is repeated.
• Accuracy is about identifying the correct target. Accuracy relates to correctness in all details; conformity or correspondence to fact or given quality, condition; deviating within acceptable limits from a standard.  Accuracy means with no loss of resolution or fidelity of what the sender wishes to communicate and no introduction of false knowledge or misinterpretation of communicated information.
• Precision is the closeness of repeated measurements to one another.  Precision involves choosing the right equipment and using that equipment properly. Precise readings are not necessarily accurate. A faulty piece of equipment or incorrectly used equipment may give precise readings (all repeated values are close together) but inaccurate (not correct) results.

Bad equipment, such as software with the wrong capabilities, leads to poor precision which causes poor accuracy, which causes poor reliability.

Capability is the measure of the ability of something to achieve its objectives, specially in relation to its overall mission.

Quality is a measure of a state of being free from defects, deficiencies and significant variations. Quality is brought about by strict and consistent commitment to certain standards that achieve uniformity of some result in order to satisfy specific requirements.

A significant problem that XBRL suffers from is underutilization of its capabilities.

Per Wikipedia, a methodology is defined as the systematic, theoretical analysis of the methods applied to a field of study.  It comprises the theoretical analysis of the body of methodology and principles associated with a branch of knowledge.  Typically, it encompasses concepts such as paradigm, theoretical model, phases, and quantitative or qualitative techniques.

A methodology does not set out to provide a solution.  A methodology is, therefore, not the same as a method.

Instead, a methodology offers the theoretical underpinnings for understanding which method, or set of methods, or so called "best practices" can be applied to a specific case, for example, to calculating a specific result. 

A best practice is a method or technique that has been generally accepted as superior to any alternatives because it produces results that are superior to those achieved by other means or because it has become a standard way of doing things.