Digital Financial Reporting

In a video presentation, Louis Matherne of the FASB made the following statement (see between minute 52:40 and 53:00)

"I believe in this vision: The XBRL report is a replacement for the traditional print report."

Now, I am not saying that this is the official position of the FASB.  I am simply pointing out that in a video presentation, Louis Matherne who works at the FASB made a statement.

That statement is a bit more aggressive that my belief.  In my personal view, an XBRL-based general purpose financial report will be a digital alternative to traditional paper or "e-paper" (HTML, PDF, Word) general purpose financial report.  The case for digital financial report is straight forward.

Are we there yet?  Not quite.  XBRL-based financial reports have been used by public companies reporting to the SEC for over ten years now.  The ESMA in the European Union recently formalized into lawthe use of XBRL for the reporting of listed companies which will begin in January 2020.  Many other regulators around the world use XBRL.  The U.S. states of Florida and Californiaare ramping up to use XBRL-based reporting.  The momentum is building in other states.  While not there yet, even the federal government is moving toward digital financial reporting.

But why would private companies use XBRL? What if XBRL-based reporting were better, faster, and cheaper than traditional approaches? With things like "the finance factory" and "the modern finance platform" that can happen.

But for an XBRL-based report to replace traditional reports, quality must be paramount. If XBRL-based reports don't work and therefore the information is not reliable, that will be a deal breaker.

XBRL-based reports can work.  When you want to put a payload into earth's orbit, you have to follow the laws of physics.  Similarly, when you want to effectively exchange information between machines, you must follow the laws of computer science. It really is that straight forward.

In order to get XBRL-based reports to work the way professional accountants and other stakeholders to work the way they want them to work; stakeholders need to be effectively engaged.  To be effectively engaged, all stakeholders need to come to the table prepared.

And so how do you prepare?  Where do you start?  Start here.  Understand how computers perform work.  I took notes for the past 10 years and synthesize, summarized, and organized those notes into the document Computer Empathy.  The document is not perfect, but it has the information you need.

Keep in the back of your mind that this is a paradigm shift.  Your existing maps of the world will not help you to understand the new world.

Want to know more? Here is everything you need to konw to have an intelligent conversation about XBRL-based digital financial reporting.