BLOG:  Digital Financial Reporting

This is a blog for information relating to digital financial reporting.  This is my brain storming platform.  This is where I think out loud (i.e. publicly) about digital financial reporting. It is for innovators and early adopters who are ushering in a new era of accounting, reporting, auditing, and analysis in a digital environment.

Much of the information contained in this blog is synthasized, summarized, condensed, better organized and articulated in my book XBRL for Dummies and in the chapters of Intelligent XBRL-based Digital Financial Reporting. If you have any questions, feel free to contact me.

Logical Theory Describing a Business Report

A logical theory defines and describes things. Details must be explained to brainless robots.  Once you define things you can ask questions. Interestingly, the discipline of describing something in a form a computer algorithm can understand assists you in understanding the world better, weeding out myths and misconceptions.

Several years ago Rene van Egmond and I wrote a logical theory which describes a financial report, Financial Report Semantics and Dynamics Theory.

We used that base, removed everything related to the domain of financial reporting (which is a specialization of a business report), and now we have a Logical Theory Describing a Business Report (the more general use case).

There really are very few differences.  One difference is that a financial report has "disclosures".  The equivalent in a business report is a "fact set".

A logical theory is an excellent communications tool. In order to get a software engineer or a team of software engineers to be able to work together and build the right software, a logical theory is very helpful.

If anyone has any feedback, please send it.  Always looking for ways to improve!

 

Posted on Sunday, February 10, 2019 at 01:54PM by Registered CommenterCharlie in | CommentsPost a Comment | EmailEmail | PrintPrint

Case for XBRL-based General Purpose Financial Reporting on One Slide

The following is a summary for the case for XBRL-based general purpose financial reporting summarized on one slide:

(Click image for a larger view)

A general purpose financial report is a high-fidelity, high-resolution, high-quality information exchange mechanism.  That mechanism has historically used the media of "paper".  Over the past 50 years or so, that paper-based mechanism has given way to a new mechanism, "e-paper".  By "e-paper" I mean PDF documents, HTML documents, Word documents and such.

XBRL is a new media, a new mechanism for creating a general purpose financial report.  XBRL is a high-fidelity, high-resolution information exchange media that allows for the creation of high-quality financial reports.  Those reports can be read by human-based processes as before but because of their structured nature are also effectively readable by machine-based processes.

If you don't understand how this would work, read Computer Empathy and maybe Financial Tansformation and the Modern Finance Platform.  If you want to understand how to implement this, read Method of Implementing a Standard Digital Financial Report Using the XBRL Syntax and this step-by-step example of that method.

Here is a graphic that shows more details about the tasks involved in creating a financial report:

 (Click image for larger view)                                                                                                         

Posted on Sunday, February 10, 2019 at 09:42AM by Registered CommenterCharlie in | CommentsPost a Comment | EmailEmail | PrintPrint

Digital Financial Reporting Conformance Suite

This page is set up to accumulate sets of XBRL instances, related XBRL taxonomies, XBRL Formulas, and other such technical artifacts that make up an XBRL-based digital financial report.  This digital financial reporting conformance suite supports the Method of Implementing a Standard Digital Financial Report Using the XBRL Syntax, Open Source Framework for Implementing XBRL-based Digital Financial Reporting, and Accounting Process Automation XBRL Application Profile.

The goal of this conformance suite is to enable software engineers to create high-quality XBRL-based information for use internally for accounting process automation projects or for XBRL-based reporting where quality matters.

This is currently a work in progress:

  1. Positive Examples: This contains a link to an RSS feed that has either (a) a link to another RSS feed that has a set of positive examples of an XBRL instance and related taxonomies and linkbases (like this) or (b) direct reference to an XBRL instance and related taxonomies and linkbases (like this).  All of these are POSITIVE EXAMPLES meaning that you should find no errors.  Each of these XBRL instances and related XBRL taxonomies have been tested against three different XBRL software applications each of which reports no errors. (While it is conceivably possible that you find an error, it is highly unlikely.  If you do find an error, check to make sure that you do not have a bug in your application.  If you believe that the error is mine, please contact me and I will investigate.  If I do confirm that I have an error, I will fix the error.)
  2. Positive and Negative Examples: This conformance suite is set up identical to the XBRL International conformance suites.  It has both POSTIVE examples and NEGATIVE or contra-examples.
Posted on Tuesday, February 5, 2019 at 03:11PM by Registered CommenterCharlie in | CommentsPost a Comment | EmailEmail | PrintPrint

Understanding the Utility of a Logical Theory

A theory is a formal statement of rules about some subject that describes and otherwise explains the nature of that subject.

A theory describes some aspect of the world and tries to describe the principles by which that aspect of the world operates.  A theory can be right or wrong, but a theory is characterized by its intent: the discovery of essence.  A theory does not simplify.  A theory describes absolutes.  A successful theory can become a fact. A theory is a tool for contemplating something with an intent to gain insight or understanding.

Logic a set of principles that form a framework for correct reasoning. Logic is a process of deducing information correctly.  Logic is about the correct methods that can be used to prove a statement is true or false.  Logic tells us exactly what is meant.  Logic allows systems to be proven.

Logic is the process of deducing information correctly; logic is not about deducing correct information. Understanding the distinction between correct logic and correct information is important because it is important to follow the consequences of an incorrect assumption. Ideally, we want both our logic to be correct and the facts we are applying the logic to, to be correct.  But the point here is that correct logic and correct information are two different things.  If our logic is correct, then anything we deduce from such information will also be correct.

In logic, a statement is a sentence that is either true or false. You can think of statements as pieces of information that are either correct or incorrect. And therefore, statements are pieces of information that you apply logic to in order to derive other pieces of information which are also statements.

A logical theory is a set of logical statements that formally describes some subject or system.  Axioms are statements that describe self-evident logical principles that no one would argue with.  Theorems are logical deductions which can be proven by constructing a chain of reasoning by applying axioms and the rules of logic in the form of IF…THEN statements.

A rule, or business rule or assertion, is a true statement with respect to some model of the real world that could possibly exist given some logical theory.  You cannot create rules that are true in worlds that can never exist.   A rule can be a mathematical expression.  A rule is a type of logical statement.

The Financial Report Semantics and Dynamics Theory is a logical theory that explains how the mechanical aspects of a financial report work.  The Method of Implementing a Standard Digital Financial Report Using the XBRL Syntax is an approach to creating XBRL-based reports consistent with the Financial Report Semantics and Dynamics Theory.

There are many different approaches to describing logical systems: taxonomies, ontologies, UML, conceptual models, or logical theory.  But logical theories are the easiest form of describing systems that is approachable by business professionals.

Posted on Tuesday, January 29, 2019 at 07:29AM by Registered CommenterCharlie in | CommentsPost a Comment | EmailEmail | PrintPrint

Populous is Ready to Disrupt the Multi-trillion Dollar Discounting Industry Using XBRL

Populous is ready to disrupt the multi-trillion dollar discounting industry using XBRL. They provide a lot of information on their web site, including this.

Posted on Tuesday, January 29, 2019 at 07:04AM by Registered CommenterCharlie in | CommentsPost a Comment | EmailEmail | PrintPrint