BLOG:  Digital Financial Reporting

This is a blog for information relating to digital financial reporting.  This blog is basically my "lab notebook" for experimenting and learning about XBRL-based digital financial reporting.  This is my brain storming platform.  This is where I think out loud (i.e. publicly) about digital financial reporting. This information 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.

Entries from April 1, 2022 - April 30, 2022

The End (Start Here)

Mastering something is very hard work and you need to make sure you are mastering the right thing. It is an evolution, a progression. This graphic shows that evolution, that progression:

The Great Transmutation of financial accounting, reporting, auditing, and analysis is underway. The Evolution of a System provides a framework for understanding that change and my personal predictions.

If you want to master XBRL-based digital financial reporting, start here.  You don't need to read each of the 1,692 posts to my blog.  That was just a method for me to organize my brainstorming; my sensemaking activities.

But now my sensemaking activities are over and commercialization activities have begun. Maybe there will be a Universal Digital Financial Reporting Framework. That would be optimal in my view.  There are 10 key things that are necessary to create a proper framework: 

  • Key 1: Rules Served by Immutable Standards based Machine Readable Declarative Rules
  • Key 2: Ease of Use is Required
  • Key 3: Clear, Understandable Logic
  • Key 4: Good Practices and Best Practices
  • Key 5: Clear, Understandable Terms, Associations, Rules, Facts
  • Key 6: Control of Report Model Modifications to Maintain High Report Quality
  • Key 7: Tamper Proof Audit Trail
  • Key 8: Standards Convertible into Multiple Technology Stacks
  • Key 9: Nothing is a “Black Box”
  • Key 10: Standard Logical Conceptualization of a Business Report

A financial reporting scheme represented digitally using an XBRL taxonomy which is then used to represent a report model for a report created by an economic entity in machine readable form serves multiple purposes: 

  • Description: It is a clear and should be complete description of a report model (specification of what is permitted); created by standards setters or regulators or anyone else specifying a report.  And obviously the clear and complete description should represent accounting and reporting rules precisely and accurately.
  • Construction: It is a guide to the creation of a report based on that permitted report model description whereby a human can be assisted by software applications utilizing that machine readable description of permitted report models.
  • Verification: The actual report constructed can be verified against the clear, complete description assisted by software applications utilizing that machine readable description.
  • Extraction: Information can be effectively extracted from machine readable reports and report models assisted by software utilizing that machine readable clear and complete description.

Machine readable knowledge graphs of financial reporting schemes and financial reports are the next step in the evolution of financial reporting.

The Seattle Method is an approach I created to making XBRL-based digital financial reporting work effectively.  Auditchain enhances the Seattle Method with the immutable digital distributed ledger "stuff" to take it to the next level, a possible candidate for a Universal Digital Financial Reporting Framework.  The business case for a digital version of a general purpose financial report and the case for enhanced transparency are crystal clear. Modern accounting approaches can, and will, ultimately prevail.

Here is a summary of the information that I have to help accountants and software engineers understand XBRL-based digital financial reporting: (You might want to start with this playlist which provides a video overview of digital general purpose financial report)

Examples Reports: 

Golden versions: The very best examples of XBRL taxonomies and reports creatied using the Seattle Method; Standard Business Report Model (SBRM) or Conceptual Model (CM). (SUMMARY)

These are the verification results from Pacioli verification on IPFS.

Here is a model good practices based XBRL-based reporting system. (Initial draft)

All this builds up to being able to create real financial reports using XBRL.  Here is a 10-K financial report created by Microsoft to which I added additional rules: Auditchain Pacioli | XBRL Cloud Evidence Package.

Eventually, all of the above will be summarized, synthasized, organized, and then be available within one resource, Mastering XBRL-based Digital Financial Reporting. That resource will likely be redone by a professional writer eventually.  You might want to check this resources page from time-to-time.

Software: Auditchain Suite; Pesseract; Luca (General)

Knowledge Portal Prototype (Here is the vision)

By the way.  XBRL is useful for both financial information and nonfinancial information.  See Lipsum example.

PLATINUM EXAMPLES: Simpler and improved versions of GOLDEN examples.

Posted on Monday, April 4, 2022 at 07:55AM by Registered CommenterCharlie in | CommentsPost a Comment | References7 References | EmailEmail | PrintPrint