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.

Modernizing Accounting and Auditing: Three Technology Trends

There are three specific new technologies that can be leveraged to significantly improve accounting and financial reporting.  Those technologies will transition into the mainstream, modernizing accounting and auditing over the coming years.  Those three technologies are:

  • XBRL-based structured digital financial reports: The general purpose financial report is getting a face lift for the digital age.  In the past, general purpose financial reports were readable only by humans.  In the future, general purpose financial reports will be human-readable and machine-readable.
  • Knowledge-based systems and other application of artificial intelligence: 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 in the Digital Age; by human and computer teamwork.  Humans 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. In the first industrial revolution, steam engines amplified the power of or muscles.  In the fourth industrial revolutions, computers will amplify the power of our brains. 
  • Blockchain-based digital distributed ledgers: Many people say that blockchain will enable "triple-entry" accounting.  So what is a digital distributed ledger?  A digital distributed ledger is an indestructible and uneditable decentralized computer record, or ledger.  It provides a full and complete history of transactions in that ledger.  Ledgers can be as public and open or private, limited, or confidential as the use case demands. Ledgers can be permissioned or permission-less in determining who can add new transactions. Different approaches can be used to determine how new transactions are authorized (proof-of-stake, proof-of-work, consensus, identity mechanisms) before they can update the ledger. Ledgers can be interlinked with one or more other ledgers.

Double-entry bookkeeping was the invention of medieval merchants and was first documented by the Italian mathematician and Franciscan Friar Luca Pacioli. Double-entry bookkeeping is one of the greatest discoveries of commerce and its significance is difficult to overstate.  Which came first, double-entry bookkeeping or the enterprise?  Was it double-entry bookkeeping and what it offered that enable the large enterprise to exist; or did the large enterprise create the need for double-entry bookkeeping?

Accounting practices, processes, and procedures evolve over time.  Accounting was first done using clay tablets.  Today, we use electronic spreadsheets.

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.

Don't remain an information barbarian.  Don't wait for robots make you irrelative.  Don't wait for the change to be done to you.  Adapt.  Innovate.  Lead.  That is what professional accountants do.

Posted on Saturday, May 27, 2017 at 06:47AM by Registered CommenterCharlie in | CommentsPost a Comment | EmailEmail | PrintPrint

Accountants and auditors are financial doctors; We’ve just given them penicillin

In a presentation at South by Southwest March 21, 2015, How Bitcoin will Disrupt Accounting and Auditing, LibraTax CEO Jake Benson summarized the impact of blockchain technology as follows:

"Accountants and Auditors are financial doctors.  We've just given them penicillin."

I did a post on digital distributed ledgers a while back. That is worth reading through.  Also, watch this video by Alex Tapscott, in particular between minutes 8:30 and 11:00 in the presentation.

I now understand specifically how accountants made the top 5 list of those who will be losing their jobs to automation.

More to come...

Posted on Wednesday, May 24, 2017 at 08:32AM by Registered CommenterCharlie in | CommentsPost a Comment | EmailEmail | PrintPrint

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