Digital Financial Reporting

There is this feature of XBRL which I refer to as "hypercube jumping". You can experience hypercube jumping, at least an initial instantiation of it, by using a software application which supports this feature such as the Firefox XBRL viewer add on, a properly created XBRL instance, and a properly modeled XBRL taxonomy. If you want to actually walk through this, this blog post will help you do that.

What I am starting to recognize that the term hypercube jumping is likely not the right term. Hypercubes are only a piece of the puzzle and in fact, you really don't even need explicit hypercubes at all but this works with the implied structures within XBRL as long as you model your meta data correctly.

Are you lost already?  Well, I probably won't help you grasp all this; the fact is I am trying to figure it all out myself.  A lot of people refer to the things I am talking about as "drill down" or "aggregation" of information.  But it seem to me that it goes way, way beyond that.

To help you visualize, consider the graphic below.  This is a tesseract. Look at this graphic and think about Excel pivot tables.

3D rotating tesseract (from Wikipedia)

Paper has only two dimensions, rows and columns. Add a third dimension to that and you get a cube. You can only view a three dimensional cube on a two dimensional surface by holding one of the dimensions static like what a slicer does in say an Excel pivot table or by repeating sets of rows and columns multiple times within a paper report. Now a computer screen is not limited to two dimensions so it can display three dimensions with no problem.

But what if you have four dimensions? Or heck, what about ten dimensions?

What does all this have to do with hypercube jumping or drilling down into data? Well, I am not totally sure but what I seem to see is this.  If you look at the graphic above, you will note that the object fits together, you don't have stray lines ending nowhere in space and things like that. What I am seeing more and more is that it is all about the data model.  If you get the data model correct, you can do all sorts of interesting things.

Imagine having a financial report which "looks" like the graphic above.  (Work with me here and use your imagination.) Imagine being able to pivot, slice, dice, drill down, drill across, drill side-to-side from one place in a financial report to another place in a report.  Imagine that your "report" is actually a set of financial reports for an entire industry sector and you can cross the bounds of the report or the entity because you are not limited by the physical bounds of paper or the limit of two dimensions which limits what paper can express.

Syntax is really not that important, as long as you can easily convert and move form one syntax to another. There have been never ending debates about things like the pros and cons of things like tuples and dimensions. During those debates a minority of people say that those things don't matter.  I am starting to grasp what they were talking about.

Any accountant or financial analyst can tell you that there is a rich set of relations contained within and between the many pieces which make up a financial report. Leveraging these relations will change the way we interact with this information.  The first step is articulating the many relations in a way that a computer can easily and properly grasp.  XBRL is one syntax for doing this. Proper data models is what enables things like hypercube jumping.

All this will be easier to grasp when more software exists to see these ideas in action.

Another construction crew has shown up in the ongoing project to build the last mile of finance: SAP. Well, they were actually on the project site before, but they seem to be bringing in additional heavy equipment. A couple of days ago it was announced that SAP is acquiring disclosure management solutions from cundus AG. It seems that SAP is doing this to better compete with Oracle's and IBM's offerings to the market.

So we have IBM, Oracle, and SAP in the game. These three companies can move some dirt! I wonder where the middle market software vendors are.  It will be interesting to see who ends up succeeding and who ends up as road kill.

This is a cool little widget that I found.  But if you look closer, it is even cooler! Click on the "View XBRL Filings" link on the top of the widget and it takes you to a nice little SEC XBRL filings viewer.  It is pretty basic, but it does demonstrate some of the potential of what can be achieved using XBRL.  Try the SEC XBRL Viewer out than come back and read the rest of the post.

The SEC XBRL Viewer looks like it is an implementation of the open source code the SEC made available. I could be wrong about this, but it seems to be the case. The viewer is pretty basic, but look really close at what is going on here.  The SEC XBRL information is being reused very effectively.  Others will come up with ideas. The sky is the limit here!

Personally, I would love to see a comparison tool similar to what the SEC had during the voluentary filing program, but better.

I was made aware of a free XBRL to spreadsheet converter.  You can get to information about that application here.

The application is an Excel spreadsheet with macros.  Unfortunately, the macros are password protected so you cannot get at the code. (If you want some code for Excel, I have a lot...send me an email and I can get it to you. I have even more Microsoft Access code should you need that.)

I have not spent much time fiddling with that application so I cannot speak to its utility.  Should you find this useful, please let me know. The good thing is that more and more software for XBRL is appearing.  I'm optimistic that we should be seeing more and more useful software.

Microsoft PowerPivot helps one see the possibilities which something like XBRL enables. PowerPivot is an Excel add in with gives users the flexibility they need but at the same time gives the IT department the control they need. This videohelps you get an understanding of PowerPivot. (Gemini was the initial name for PowerPivot.) This videoshows how and information mashup can be put together.

I have not tried PowerPivot yet, you need Office 2010 to use it. But now I am very motivated to upgrade and try this free Excel add in. Mr. Excel in the second video says this about PowerPivot:

"Greatest thing I have seen coming from Microsoft in 15 years."

Imagine a PowerPivot "database" (not sure what to call it) which combines information internal to your organization and information external to your organization working seamlessly together to help you manage some aspect of your business supply chain. I have heard this called "external analytics".  Your data set is connected to other data sets external to your organization.  Perhaps the SEC XBRL data set as an example of one publicly available standardized set of information.

Not interested in public company financial information?  That is not the point. While the SEC XBRL data set itself might not be useful to you, think of other data sets which could be useful.

There are four overarching trends which work together to make this sort of vision possible:

• The Internet. If we were not all connected together there would be less of a possibility to be able to exchange information because of the expense of doing so. Lots of people exchanged information before the Internet existed, now anyone can exchange information with anyone else for pennies. I am talking about the Internet here, not the Web. If you don't understand the difference, you definitely want to read about how the Web is dead.
• Model based reporting. Business intelligence (BI) applications are growing in popularity. One example of this is how BI applications are changing the last mile of finance. One of the core pieces of BI is use of the multidimensional model which provides flexibility.  You can use the same piece of information in different ways. The important piece here is not BI, it is the flexibility of the multidimensional model. This OLAP Council white paperhelps you understand why the multidimensional model is important.
• Structured, standard data formats. Unstructured information such as a word processing document or HTML file or PDF file makes reusing the information in those files impossible. But structured information can be put into a database and reusing it is quite easy. But you need your database to connect to someone else's databaes. So if one database is going to be connected to another database; what is the standard database format which you are going to use? Well, of course, it is your database format, right?  Well, others with different database formats would likely disagree. There is no standard database format. Nor should there be. But, you have to somehow link systems together and you need some syntax to do that. XML, RDF/OWL, XBRL, CSV, it really makes little difference.  As long as the format is understood, technically anything can be integrated.
• Semantic and process interoperability. In addition to the technical interoperability, you still need semantic interoperability and process interoperabilityto achieve business system to business system integration. An example of this is how I can use my Apple iMac and create a video in iMovie and then upload it to Google's YouTube.com.  Two different applications, two different companies, working together seamlessly.

All this sound mind-numbingly complicated to you?  Don't worry about it.  That is what technical people do, they make stuff like this work. What is important to understand is that fundamental changes are coming to business processes.  One example is financial reporting.

Don't be fooled into thinking that the SEC's little experiment with XBRL is a misguided regulatory mandate which does little more that add unnecessary costs to a process which works fine today. The SEC is being quite progressive, not something one might expect from a government agency. What the SEC is doing is only part of a larger global trend started by little regulators like the Dutch Association of Water Board as early as 2004 and bigger regulators like the Federal Deposit Insurance Corporation (FDIC), and others. These government regulators are only priming the pump.

While I do think PowerPivot has its short comings such as it requires you to have Excel (i.e. it is proprietary to one vendors software) and it cannot be used to create content, only report on content and it seems to be focused on numeric information (i.e. I have not seen it handle textual information); PowerPivot is a very nice piece of software which helps one see the possibilities.