Digital Financial Reporting

It seems that Luca Pacioli either neglected to include something in the double-entry accounting model or he included it but it did not get used in practice for one reason or another.

Why do I say that?  Because when I add just this one piece to a general ledger, it enables a complete and verifiably correct set of primary financial statements to be generated: balance sheet, income statement, changes in equity, and a fully baked, proper cash flow statement. 

You can also get a roll forward of each real account (i.e. balance sheet line items).  To see what I mean, watch this video which does this using existing software you can get your hands on today: 

• Seeing XBRL Work

There were multiple key ideas that contributed to achieving this result.  Several years ago, someone summarized this notion that an XBRL-based report could be an algorithm or mathematical model.  Someone else had this notion of a financial report is a “tree” (actually a graph) and that the “branches” (subtotals) and “leaves” (line items) where different parts of a report and the branches and leaves naturally “rolled up”.  Someone else gave a class in FRx about 25 years ago that I attended and many of the things in the FRx “report writer” are applicable to this process.  FRx also had a lesser known product called FRL (I think it was) which was essentially a stand alone general ledger (i.e. not an accounting system) into which GL transactions can be “posted”.  Someone else, probably 20 years ago, provided an Excel spreadsheet that demonstrated how to extract information from an XBRL-based document.  Everything that I learned about working with XML had it’s roots in that Excel VBA code.  Someone else who was a Price Waterhouse (pre Coopers and Lybrand) audit senior taught me a slick way to model a financial report that he used in Lotus 1-2-3.

What does all this mean?  It means that Deloitte is right with their vision of the Finance Factory.  What I was able to do was cobble together the sort of “machinery” that will be running the finance department of the future.  That video and these files explains HOW to implement that “Finance Factory” vision, turning it into reality.

"Bolt on" approaches to implementing XBRL-based reporting are doomed.  Record to report will undergo significant automation over the next 10 to 20 years.  What I am showing is only the tip of the iceberg. You should have a look at EngineB if you don't believe me.