BLOG:  Digital Financial Reporting

This is a blog for information relating to digital financial reporting.  It is for innovators and early adopters who are ushering in a new era of digital financial reporting.

Much of the information contained in this blog is summarized, condensed, better organized and articulated in my book XBRL for Dummies and in the three documents on this digital financial reporting page.

FASB ISSUES INVITATION TO COMMENT ON EFFICIENCY AND EFFECTIVENESS OF GAAP FINANCIAL REPORTING TAXONOMY

The FASB has issued an invitation to comment on the efficiency and effectiveness of the US GAAP XBRL Financial Reporting Taxonomy.

Norwalk, CT, May 10, 2017-The Financial Accounting Standards Board (FASB) staff today issued an Invitation to Comment (ITC) designed to allow it to assess the efficiency and effectiveness of the U.S. GAAP Financial Reporting Taxonomy (GAAP Taxonomy).

The ITC, U.S. GAAP Financial Reporting Taxonomy-Efficiency and Effectiveness Review, addresses potential improvements to the usability of the GAAP Taxonomy and to the processes that support taxonomy-related activities. It is intended to obtain feedback from stakeholders at an early stage in the Board's review of the GAAP Taxonomy. Interested parties are asked to provide input on the ITC by June 15, 2017.

Here is the press release.

Posted on Monday, May 15, 2017 at 09:54AM by Registered CommenterCharlie in | CommentsPost a Comment | EmailEmail | PrintPrint

High-Quality XBRL Examples

I have updated a set of high-quality XBRL instance, XBRL taxonomy, XBRL formula examples that I have been maintaining for probably 15 years now.  Each example has been validated using three different XBRL processors and XBRL Formula processors.

The concept arrangement patterns, member arrangement patterns, and business use cases represent individual fragments of a report and help make sure the individual fragments work as expected.  The reference implementations take all of the individual fragments, put them TOGETHER into one document, and make sure the document as a whole works properly.  These examples are excellent training tools and excellent for software testing.

I consider all of these examples to be public domain. These examples are housed on the Learning about XBRL page of my blog.

Happy learning!

Posted on Thursday, May 11, 2017 at 02:03PM by Registered CommenterCharlie in | CommentsPost a Comment | EmailEmail | PrintPrint

NPR: The Digital Industrial Revolution

Whether you consider the changes that are occurring the Fourth Industrial Revolution, or the Digital Industrial Revolution, the rise of artificial intelligence, or refer to these changes as something else; call them what you want be the change is real.

Sometimes it is hard to separate the science-fiction from the science-fact. But not differentiating fiction from fact can lead you down the wrong path. There is also a risk of using the strategy of ignoring change.

The NPR program TED Radio Hour has an episode, The Digital Industrial Revolution, that helps you understand your future which is rapidly arriving.

There is one very, very important point that this radio program is getting right that most people get wrong.  Technical people tend to overstate the capabilities of technology, business professionals tend to under estimate the impact of technology.

Who is the world chess champion today; a computer or a human?  In 1997, IBM's Deep Blue took the title.

Today, a computer is no longer the world chess champion.  Neither is a human. Today, a team of computers and humans working together can beat any computer or any human working alone.

That is how the power of computers will be harnessed; by human and computer teamwork.  Human are good at some tasks; not as good at other tasks.  Computers are good at some tasks; not as good at other tasks.  Teaming humans and computers together and leveraging the strengths of each is how work will get done in the future.

The revolution will likely impact you sooner than you might believe.

A report created by the DATA Foundation and Deloitte, DATA Act 2022: Changing Technology, Changing Culture, predicts the following:

By 2022, if all goes well, spending information will also be automated: reported, exchanged, and audited without manual interference. Systems will deliver reports instantly; grantee and contractor software will communicate automatically with agency and government-wide systems.

2022 is only five years away. Federal government spending information "reported, exchanged, and audited without manual interference" in five years.  We will see.

What might XBRL-based financial reporting by public companies to the SEC look like in five years?  Financial reports are sets of complex logical information. Knowledge based systems are helpful tools for creating those financial reports and using the complex logical information contained in the reports.

Learning how to work effectively with you new teammates is important. Leveraging available tools properly can help you change old processes into new, improved processes.

Posted on Thursday, May 4, 2017 at 07:16AM by Registered CommenterCharlie in | CommentsPost a Comment | EmailEmail | PrintPrint

Understanding Knowledge Based Systems

I am collecting my thoughts which I will use to explain what a knowledge based system is.

Simply put,

knowledge based system is a system that draws upon the knowledge of human experts that has been represented in machine-readable form and stored in a fact database and knowledge base. The system applies problem solving logic using a problem solving method to solve problems that normally would require human effort and thought to solve. The knowledge based system supplies an explanation and justification mechanism to support conclusions reached by the knowledge base system and presents that information to the user of the system.

What I am trying to do is convey this information such that the information is understandable by the average business professional.  The challenge is that the average business professional does not have an adequate background in computer science to understand how such a system works.  I am trying to explain how knowledge based systems work.  Not sure if that is necessary, but if I were trying to understand this stuff; I would want to understand how it all worked so that I could get a good understanding of the true capabilities.

Any feedback, suggestions, corrections, or other comments are welcomed.

More to come...stay tuned.

Posted on Wednesday, May 3, 2017 at 05:06PM by Registered CommenterCharlie in | CommentsPost a Comment | EmailEmail | PrintPrint

High Quality Examples of Errors in XBRL-based Financial Reports

Below are links to PDF files that have high-quality documentation of approximately 380 errors that exist in XBRL-based financial reports of public companies which and been submitted to the SEC as of March 1, 2017. I detected these errors as part of my measurement of the fundamental accounting concept relations and the continuity errors discovered as part of those cross-checks.

Examining and understanding these errors can help professional accountants improve their skills in working with XBRL-based digital financial reports and software developers create software useful to business professionals that help them not make these sorts of mistakes.

I created this information so that I could provide it to professional accountants who were not detecting these errors when they created their XBRL-based financial reports.  Over the past several years I have made this information available to filing agents and software vendors which they used to understand and fix these sorts of errors.  These 380 errors are about one quarter of the remaining high-level errors in the set of about 7,000 public company financial reports.

These errors tend to be very uncontroversial.  Proof of that is that software vendors and filing agents, once they are made aware of these errors; fix these errors.  For example between 2015 and 2017; Merrill went from 55% consistent to 97% consistent; RR Donnelley went from 73% to 98% consistent; DataTracks went from 62% to 98% consistent. (See the comparison of periods here.)

All of these errors were detected using processes that have been implemented in commercial software. For example, here is a tool provided by XBRL Cloud which they make available on their Edgar Dashboard.

None of these errors are related to the XBRL techical syntax.  The errors all relate to employing XBRL to convey meaning.  These are logical, mechanical, and mathematical mistakes made by the creators of the reports.  Software needs to support the functionallity to detect these sorts of errors.  Here are a few examples of the patterns of errors that you find in the XBRL-based financial reports of public companies: (documented by the PDFs provided below)

  • Reporting contradictory/conflicting information. For example, reporting "revenues" facts that contradict one another.
  • Using concepts incorrectly relative to other concepts. For example, WHOLE/PART relations that are wrong such as using "us-gaap:CostOfRevenues" (DIRECT operating expenses) as a PART OF "us-gaap:OperatingExpenses" (INDIRECT operating expenses) when they should have used the concept "us-gaap:CostsAndExpenses" (TOTAL DIRECT + INDIRECT operating expenses)
  • Simply using the wrong concept.  For example, a common error that you will see is using a concept that relates to "Other comprehensive Income" to represent a line item related to "Comprehensive income" because an incorrect concept was mistakenly selected.
  • Creating completely XBRL valid relations, but the relations either is inconsistent with the US GAAP XBRL taxonomy or literally CHANGES THE MEANING of US GAAP.
  • Creating unjustifiable extension concepts.  For example, a handful of public companies create the extension concept "my:TotalAssets".  Really?

Each of these errors are logical errors, mechanical errors, or mathematical errors which have NOTHING to do with XBRL technical syntax.  Each error was represented using PERFECT XBRL technical syntax; but the information conveyed was just wrong.

Principles help you think about something thoroughly and consistently.  As a result of my measurement of the fundamental accounting concept relations, I created the XBRL-based digital financial reporting principles.  They help you think about XBRL-based reports.

This information should be very helpful to professional accountants creating XBRL-based reports and software developers building tools those professional accountants use.  There are those reports grouped by audit firm.  I am not saying that any of these audit firms have responsibility for any of these inconsistencies, I am simply making this information available in this form because I also sent this information to each audit form to help them understand these sorts of errors. (April 2017)

Happy learning! Oh, if you are wondering why I am taking time to put together the business rules for discovering there errors; have a look at the components of an expert system and/or check out my little expert system for creating financial reports. The rules contribute to making the expert system work.

Posted on Saturday, April 29, 2017 at 10:59AM by Registered CommenterCharlie in | CommentsPost a Comment | EmailEmail | PrintPrint