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Method of Implementing a Standard Digital Financial Report Using the XBRL Syntax

Method of Implementing a Standard Digital Financial Report Using the XBRL Syntax is a document that explains a best practice based, open standard approach to implementing a financial report leveraging the proposed and forth coming Standard Business Report Model (SBRM). (This document describes implementing the method in more detail.)

A general purpose financial report is a high-fidelity, high-resolution, high-quality information exchange mechanism.  That mechanism has historically used the media of "paper".  Over the past 50 years or so, that paper-based mechanism has given way to a new mechanism, "e-paper".  By "e-paper" I mean PDF documents, HTML documents, Word documents and such.

XBRL is a new media, a new mechanism for creating a general purpose financial report.  XBRL is a high-fidelity, high-resolution information exchange media that allows for the creation of high-quality financial reports.

So, how do you use XBRL to create a general purpose financial report?  Today, XBRL tends to be underutilized.  Part of this underutilization relates to people not understanding how exactly to employ XBRL.  Other underutilization relates to an effort to make XBRL "easier".  By "easier" I give the example of not using tools such as XBRL Formula to represent important mathematical computations because "XBRL Formula is too hard".

But, "simplifying" XBRL by not using XBRL Formula and thus reducing the complexity involved has a consequence of allowing errors to slip into XBRL-based financial reports.  This sort of approach to "simplifying" the complexity of implementing XBRL really is dumbing down the problem to make things easier, not solving the problem.

The correct approach to solving this problem is to build better software.  Better software will lead to better taxonomies.  Better taxonomies lead to better metadata.  Better metadata leads to better quality and easier to use software applications.

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.

The method describes best practices learned from analyzing thousands of XBRL-based financial reports prepared using US GAAP and IFRS to the U.S. Securities and Exchange Commission and other testing.  An engineering design process was used, not personal opinion, philosophical debates, political discussions, or theological dogma.  Pure engineering.

The method properly adjusts for all the necessary variability that is part of financial reporting.  This method is not about what goes into a financial report, the method relates to the structure, mathematics, mechanics, logic, and a few accounting details when appropriate. 

What goes into a financial report is based on professional judgement.  But if you put a roll up into the report; that roll up better actually roll up.  Even the SEC, ESMA, FASB, and IASB all have to follow the rules of mathematics and logic.  No way around that.

The method has already been implemented by two software applications and two additional software applications are in the process of being created using this method.

Why re-invent the wheel?  Why not use a best practices, open standard, proven approach when one exists?

When I say, "the forth coming Standard Business Report Methodology and the Business Report Meta-Meta Model", this is what I mean.  A financial report is a type of business report. While different reporting schemes that have implemented XBRL do so in slightly different ways; those slightly different "meta-models" can all be represented by one standard "meta-meta-model".

Thus every financial report "model" created by an economic entity that fits into a "meta-model" mandated by some regulator such as the SEC and ESMA; all also fit into a standard "meta-meta model" for a financial report which also fits into the "meta-meta model" of a general business report.

Mind numbingly confusing?  Not to worry.  Good software engineers understand this stuff. This is all about leveraging patterns to make creating software easier.  We are working to make this business report meta-meta logical model a global standard.

If you are a business professional trying to wrap you head around this, here is all you need to know: Good standards make markets.

Posted on Friday, January 11, 2019 at 08:57AM by Registered CommenterCharlie in | CommentsPost a Comment

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