Digital Financial Reporting

In the document the Essence of Accounting I point out the mathematical model of double entry accounting and the accounting equation.  I pointed out that there are a number of financial reporting schemes and that every financial reporting scheme, by definition, follows the double entry accounting model and some form of the accounting equation.

I also pointed out that each financial reporting scheme defines some set of high-level financial report elements that make up the foundation or "key stones" of the financial reporting scheme.  This is usually done in the conceptual framework of the financial reporting scheme.  For example, the FASB defines the ten terms that form the foundation of US GAAP in SFAC 6 Elements of Financial Statements: Assets, Liabilities, Equity, Comprehensive Income, Investments by Owners, Distributions to Owners, Revenues, Expenses, Gains, Losses.

This is the same for: 

• US GAAP
• IFRS
• UK GAAP (FRS 102)
• Australian IFRS

So, you can expand the patterns down a little lower which I have summarised in my baseline PROOF representation and compared my PROOF representation to US GAAP and IFRS (working on FRS 102 now which will be forth coming).

And so while such financial reporting schemes are described inconsistently for a number of reasons, the essence of what all of these financial reporting schemes is saying, or should be saying, is very consistent.  While the definitions of the terms are not necessarily consistent, the mechanical aspects are very, very consistent.  What I mean is that US GAAP, IFRS, and UK GAAP define "Assets", "Liabilities" and "Equity" differently; each of the financial reporting schemes does define Assets, Liabilities, and Equity and it is always the case that the rule "Assets = Liabilities + Equity" in some form.

This is the true for a high-level set of about 100 or so terms, associations between terms, structures, and rules which are consistently defined or implied by US GAAP, IFRS, UK GAAP (FRS 102).  I will compile that list. Here is a prototype of that list: 

• Fundamental Accounting Concepts Associations: Human readable | Machine readable
• Fundamental Accounting Concepts Roll Up Relations: Human readable | Machine readable
• Fundamental Accounting Concepts: Machine readable

I suggest that this is also true for IPSAS, FRF for SMEs, Canadian GAAP, Australian GAAP, and many other (any other) financial reporting schemes. Why would you go through all this trouble.  Have a look at this:

Machine readable:

• Mapping between/across financial reporting schemes

Don't understand? The ZIP archive below contains an Excel spreadsheet for extracting information from the XBRL file above.  Run that and have a look at the code.  The code is pretty simplistic, but the point is you can grab information from the XBRL file. 

• Excel tool for extracting information from XBRL file

Still don't understand? You are going to want to read Computational Professional Services.  Have a look at this financial reporting metadata. This is not going to work by magic.  Start at the top, work your way down; each financial reporting scheme pretty much works the same way.

This is a huge opportunity for software engineers that understand how to communicate with accountants and accountants that understand how to communicate with software engineers.

Piece by piece, the metadata that will drive the next era of accounting, reporting, auditing, and analysis will be put together.  Here is some US GAAP and IFRS financial reports to fiddle with. HMRC does not make information available, ESMA is not up and running yet.  This is not about reporting to the SEC, this is about understanding the sorts of things you can do with reports because the information is structured, complements of 10 years of XBRL-based reports submitted to the SEC.

Will XBRL be the format used?  Maybe, maybe not.