Digital Financial Reporting

The first iteration of what I call the "comprehensive example" is available on my web site. What the comprehensive example does is take all of the business use cases and puts them into one XBRL instance. The purpose of this is to test the interrelationships between the use cases and to provide something that looks enough like a financial statement so that it seems real, but is not as complex as a real financial statement so is easier to work with.

The comprehensive example puts all the issues of expressing information using an XBRL taxonomy and XBRL instance where you can see them. In its current form, you have to dig a bit because I have not provided a narrative which ties all the pieces together.  I have only provided the pieces themselves. But, should one roll up their sleeves and dig in, there is a lot to see and learn.

Here are the key points of this comprehensive example XBRL taxonomy and XBRL instance (all these are detailed on the overview page):

• Use case: This is a visualization of the use caseI am trying to express in XBRL.
• End result: This is the end result I was able to generated to meet the use case. This is what I call a "viewer" or a rendering of the exact same information auto-generated from only the XBRL taxonomy and XBRL instance.
• Metapatterns: The comprehensive example has come full circle. I used to create XBRL taxonomies by keying XBRL syntax into an XBRL application. That is the wrong way to work with XBRL. The right way is to add a business semantics layer above XBRL.  This makes generating XBRL easier for business users and it yields higher quality XBRL. The comprehensive example and business use cases proves the metapatterns. The metapatterns were derived from the business use cases and the comprehensive example. Basically, work with metapatterns, not XBRL. Generate the XBRL automatically from the metapatterns.

All the other things support the process of getting from the use case to the end result. The "other things" overcome all of the issues that I have run across. For example, the comprehensive example has 53 different information components.  I needed to put them into a sequence. I used an XBRL taxonomy definition linkbase to create an ordering of the components.  I call this the "flow" of the business report. You can see that flow expressed here. This is far better than ordering the extended links using numbers in the extended link description.  They are not all done yet, but I will have 100% of the computations in the XBRL instance verified (i.e. the data integrity is checked) using business rules.  See the results here and here. That is just a taste of what you can see on the overview page if you care to look.  Eventually I will create a narrative which connects things together better.

The most important thing the comprehensive example shows me is how to make XBRL work soundly and safely when leveraging XBRLs extensibility. The keys are being explicit, being consistent, and having a sound architecture.

These ideas are not the only way to tame the XBRL beast to get it to effectively and efficiently serve your needs. But, they are the best accumulation of techniques that I could put together based on what I have learned over the years about working with XBRL.

Check back for updates, I am still plunking away at this as time permits.

This is video introduction to HL7 (Health Level Seven). You may not care about HL7, but this iintroduction to HL7 can help you understand why XBRL is important.  HL7 and XBRL both help business systems interoperate with one another.

Meaningful interoperability between systems, how do you get there? Slides 4 through 6 explain three key things needed to achieve meaningful interoperability. The link on slide 6 takes you two a PDF which explains the three things needed for meaningful interoperability.

• Technical interoperability is concerned with the conveyance of payload. It neutralizes the effect of distance, is domain independent (OSI levels 1-6), and is fundamentally based on Information Theory - Shannon (1948).
• Semantic interoperability communicates meaning unambiguously, using Codes, Identifiers and Context. It is Domain-specific (OSI Level 7) and is needed to understand, interpret and use data.
• Process interoperability enables shared human understanding that is needed to coordinate work processes and enable business systems to interoperate. It is essential if interoperability is to provide any benefits in the work place.

The bottom line here is that business system interoperability means benefits to business in terms of efficiency.

Understanding the Three Levels of Interoperability

The first XBRL iPhone application has appeared (at least that I am aware of). The application, created by Brix for XBRL US, can be found on iTunes here. You can read the XBRL US press release here.

I installed the Brix Project XBRL application on my iPod Touch.  It was simple enough.  Go to the iTunes App store, search on XBRL, select the application, and install it.

The application certainly is no killer app which will change the world, but it does demonstrate some possibilities. If you are a business person, go try out the application and apply your imagination.

• You will realize that the SEC XBRL viewer is not the only way one can view an SEC XBRL or even an HTML filing. Clearly the iPhone application shows that being able to reconfigure the presentation of information is a desirable thing as different user interfaces have different characteristics.  For example, the screen real estate is different in a browser on your computer, on an iPhone, or on something like an iPad.
• The XBRL taxonomy impacts what you can do in terms of creating an interface.  Look at the US GAAP Taxonomy and look at the iPhone application interface. What is in the XBRL taxonomy and filer extension taxonomies impacts (a) what you can do with something like an iPhone app or (b) the effort one has to go through to reconfigure the US GAAP Taxonomy so that you can do what you desire when you build something like an iPhone application.
• So here you have data flowing from the SEC filer, to the SEC, out to your iPhone.  (I would be curious to know how long it takes to have a filing show up on an iPhone after it is filed...I will check on that.) How do you know the data is correct? This shows how important things like business rules are in making the information trustworthy enough to use.
• If XBRL is a global standard, seems to me that one should be able to "change a URL" and change the information the iPhone application shows from say the SEC XBRL filings to say maybe XBRL filings of some other regulator who has also implemented XBRL. It is not that easy today to do this, but that is the idea behind XBRL.
• Taking the last point even further, what if the iPhone application interfaced not with the SEC, but with all the regulators around the world.

Oh the possibilities...

Generic Information Feed Engine

XBRL is "behind the scenes" providing the standard data payload and agreed upon business semantics making this work.  We have a standard format for video (MPEG4), audio (MP3), pictures (JPEG), documents (PDF)....What is the standard format for business data which will make business information exchange work like YouTube or Flicker or iTunes or an iPhone?

I have always thought that this would be a fantastic idea and a great way to communicate the value of XBRL. You are probably familiar with a stock ticker. Years ago I had an application which showed New York Stock Exchange prices on my desktop with a 15 minute delay.  It must have cost the NYSE millions of dollars to stream that information out and a lot of people find that stock price information valuable.

But there is other information in the world other than stock prices.  What if any business could, for pennies (i.e. for far less than what the NYSE spent), make available a "ticker" of some sort to stream information to whomever they desired.  I used to work for a produce distributor.  They needed to know the price of lettuce in California, how much lettuce was in the fields of the 25 growers they worked for, the current price of lettuce which fluctuated between $2 per box and $30 per box, and other such inputs.  They did this to set their price, serve the growers and satisfy their customers.

That produce distributor managed all this with phone calls, faxes, guess work, etc.  I worked there as an accountant an build an interface which helped the buyers and sellers manage some of this information first in Microsoft Excel and then it was used so much that I converted it to Microsoft Access.  These were the days before the Web, but we did have PC Anyware and dial up connects from one computer to another.  These guys loved this system. It took a lot of different skills to weave all this together and it was held together with bailing wire and band aids.

I could build the same thing today, far cheaper, far more robustly using XBRL in the system. But what if I didn't have to do even that. What if I could go purchase or subscribe to a service where I simply plugged in an XBRL taxonomy, plugged in a URL to a repository of XBRL instance documents, put in a few configuration settings, and I could have all that literally for pennies.

What if there were a service similar to say YouTube or Flicker where you did not upload videos of photos, but rather you uploaded data feeds to some public or private set of business information? People do this today. But since that service does not exist (yet), they use Excel spreadsheets, email, and expensive human effort to fit all the pieces together. For example, a friend of mine is the financial officer of a university which exchanges benchmarking information with 25 other private universities.  Another friend is in sales at a big company which benchmarks their information against other companies.

What if there was an iPhone or iPad or web browser application where you could do all this? You set the URL to some publicly available or private spot on the internet and share the boatloads of information we share the applications were as easy to use a an iPhone of Flicker or iTunes or Picassa.

Perhaps that will be the second XBRL iPhone app.  What sort of application can you imagine?

Many people I talk to are surprised when I tell them that XBRL is not just for financial information, that it can be used for other business information, any information in fact. While there are pros and cons to using XBRL and it is not right for everything, its utility goes beyond financial reporting.

I talked about XBRL's sweet spot in another blog post, I will summarize that sweet spot here:

• Larger transactions which tend to change (i.e. such as a 50 or 100 page regulatory report with perhaps thousands of facts exchanged, as opposed to a small transaction with 10 data points)
• Zero tolerance for errors in the information (i.e. everything must tick and tie and if things don't add up, bad things happen)
• Information which needs to be reconfigured(i.e. not a form, although XBRL can be used to expressed what amounts to a form, it excels when that "form" needs some flexibility)
• Business people changing the metadata, no IT involvement required (i.e. XBRL has a good balance between power and ease of use)

No why are the examples I createmostly related to financial reporting? Well, a couple of reasons. First, I am a CPA so that is my domain of expertise. Second, I am a CPA and I want to help the financial reporting domain figure out XBRL in order to use it effectively within that domain. Third, it does have a lot of uptake in terms of using XBRL.

I do create non-financial reporting examples.  See the "State Fact Book Prototype" which I created.  Also, this may seem strange but have a look at it. Here is a non-financial reporting example.  Visualize this by looking at the PDF.  I am using placeholder text use for prototyping marketing information for the concepts expressed in the XBRL taxonomy and reported in the XBRL instance.  It still works.  No debits or credits, no balance sheets or income statements, not financial reporting related.

When you look at the business use cases forget about the specifics of what you see in the use cases. Just like mathematics is used in accounting and engineering and physics and medicine and whatever domain; those patterns of what I am expressing goes beyond financial reporting. Look at the examples in more general terms.  I thought about creating 100 non-financial reporting uses for XBRL, which I still may do one day.  For now, I am focused on financial reporting and figuring out how to best use XBRL in that environment.

I have reached a big milestone in updating the business reporting use cases which I am putting together. You can get to those from this index page which contains the use cases plus some other things relating to the use cases. This is a direct link to 31 business use cases.

Several points about these business use cases.

• You can download the complete set, see the download link on the page.
• Each use case has been validated by 4 different XBRL validators and all of those validators report no errors.  (The XBRL Formula stuff used is only validated by one validator.)
• I would consider these use cases "very safe" areas of XBRL.  This is because of the consistency in the validation across 4 different validators, each provides the results expected, XBRL extension works as expected, and all approaches used come from years of fiddling around with different approaches to articulating these use cases in XBRL. (Considers techniques use in the most current US GAAP taxonomy, IFRS taxonomy, COREP, etc.
• All the visual stuff in the taxonomy such as the "[Fact Group]", "[Member]", "[Measure-Concepts]", "[Roll Forward]", "[Roll up]" (and so forth) is only visual eye candy and is unnecessary.  Those things appended to the concepts and labels only helps one visualize the taxonomy given the lack of assistance provided by software these days.
• While I did provide a presentation linkbase, the presentation linkbase is not necessary.  Basically, the presentation linkbase can be autogenerated from the definition linkbase.
• The presentation, calculation, and definition linkbases are consistent.
• While I did use the substitutionGroups of the business reporting logical model schemaand doing so is very helpful in creating a consistent XBRL taxonomy, doing so is not necessary.
• While I did use the measures of the financial reporting logical model schema, I really did not have to because these taxonomies are only demos.  However, the technique of using those measures does enhance comparability across XBRL taxonomies if that is desired.
• These XBRL instances and XBRL taxonomies do follow the useful practices of the Financial Reporting Instance Standards (FRIS) and Financial Reporting Taxonomy Architecture (FRTA), they do not necessarily follow the useless syntactic constraints imposed by FRIS and FRTA.  On the other hand, the XBRL instances and XBRL taxonomies do follow a number of best practices which would be a good idea for something like FRIS or FRTA (or whatever replaces them) should make use of. So, don't expect that these comply with FRIS or FRTA validation.

I do intend to provide additional documentation which explains the subtle characteristics of these use cases which one can miss if they are not pointed out.  Not sure when. My next goal is to create a comprehensive example which tests these use cases by seeing how they interrelate with one another within one larger business report.