XBRL-based structured digital financial reporting - Blog: Digital Financial Reporting (using XBRL)

Successful engineering is all about understanding how and why things break or fail so that all issues can be fixed so that ultimately nothing breaks or fails. I have spent 10 years breaking things and understanding failures in order to understand how to not let them break/fail.

As I mentioned in another blog post, the American Institute of Certified Public Accountants (AICPA) publishes a free, open reporting framework for small and medium sized companies that report but are not required to use US GAAP. That financial reporting framework is called FRF for SMEs™. This short video explains the framework. This is a brief description of the framework provided by the AICPA:

The FRF for SMEs framework provides efficient, meaningful financial statements without needless complexity or cost for those SMEs that are not required to issue GAAP-based reports. The FRF for SMEs framework is a cost-beneficial solution for owner-managers and others who need financial statements that are prepared in a consistent and reliable manner in accordance with a framework that has undergone public comment and professional scrutiny. The accounting principles composing the FRF for SMEs reporting option are intended to be the most appropriate for the preparation of small business financial statements based on the needs of the financial statement users and cost-benefit considerations. Accounting principles in the FRF for SMEs framework are responsive to the well-documented issues and concerns stakeholders currently encounter when preparing financial statements for small private businesses.

I am going to create a high-quality XBRL taxonomy (really an ontology-like thing) for FRF for SMEs;

FRF for SMEs Ontology.

The FRF for SMEs Ontology will follow the informally described open source framework that I created but more importantly it will also follow the OMG's upcoming Standard Business Report Model (SBRM). I will use this ontology to both exercise and test the SBRM.

Here is the most current version of the knowledge graph for FRF for SMEs.

Why am I doing this?

There are a number of reasons that I am creating this FRF for SMEs ontology:

To synthesize 20 years of learning.
The reporting framework is freely available and documentation is good.
There are 20 million potential users of the framework (not sure how many companies actually use the reporting scheme).
The reporting scheme has all of the variability characteristics of US GAAP and IFRS.
To provide an ultra high quality XBRL taxonomy that can be used to raise questions about the approach taken by the very important US GAAP XBRL Taxonomy and IFRS XBRL Taxonomy.
To help software vendors get their heads around XBRL-based digital financial reporting.
To provide the metadata for a software application that I am helping to create called Pesseract. Pesseract is an expert system for constructing a financial report.
To help some additional software vendors tune their software.
To help people see the possibilities of having high-quality curated metadata.
To help people compare and contrast different approaches to creating XBRL taxonomies.
To help introduce the benefits of XBRL-based reports to private companies.
To provide information for academics to study.
To create a complete system that works for those 20 million private companies to report to banks in support of commercial loans.

If you don't know why you might want to get involved in this project, you might want to read this document. If you want to get involved, contact me via email or LinkedIn. If you have any suggestions or questions, I am always looking for good ideas.

If you want to follow the blog posts related to the FRF for SMEs, follow this category on my blog.

You don't need to understand anything about XBRL to contribute to this project. All you need to do is have an understanding of financial reporting. Professional accountants can both learn and contribute by creating a podcast, creating a YouTube video, creating commentary about or interpretations of FRF for SMEs, making sure the information in the ontology is correctly conveyed, providing examples of reporting use cases that need to be provided for by the ontology, etc. Again, contact me if interested.