Digital Financial Reporting

NFTs (non-fungible tokens) are all the rage these days; but understanding exactly what an NFT is can be challenging.  This article, 7 Things You Should Know about NFTs, is a good place to start learning about NFTs.  Another moving piece of the NFT puzzle is staking.  I am still trying to get my head around staking.

Understanding NFTs is easier when you understand the characteristics of an NFT.  This article, What Are NTFs and How Do They Work points out these characteristics: 

This video, Could Enjin SUPERCHARGE Gaming NFTs?! (at minute 6:50) points out three aspects of determining value of an asset: 

• Rarity: How scarce is it?
• Provenance: Where did it come from?
• Quality/Utility: How good is the asset or how good does the asset serve your specific needs?

Machine-readable metadata can be turned into an NFT.  What is an example of machine-readable metadata?  All the rules that I have created for US GAAP and IFRS can be turned into NFTs. Why? Because the rules are useful in verifying an XBRL-based financial report has been correctly created.

Here are high-level rules for US GAAP and IFRS that could be turned into NFTs. That is only the tip of a much bigger iceberg.

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ERC-1155 Token Standard

Next Generation NFT for Everyone (ENJIN)

Top 30 NFT Use Cases for Enterprises

I am trying to get my head around staking cryptocurrencies, proof of stake, etc.  Rewards are paid to stakers for participating in a network. You get some percentage reward for "staking" in a network.  Stakingrewards.com tracks, well, staking rewards.

These resources are helpful in understanding staking.

• Staking cryptocurrencies explained simply
• Staking crypto with examples

Open-edi Distributed Business Transaction Repository and REA seem to be very closely related to one another. Both seem to be tranactions related.

REA, Triple-Entry Accounting and Blockchain: Converging Paths to Shared Ledger Systems

The Efficiency of Single Truth: Triple-entry Accounting

Modano has some interesting consolodation software.  XBRL-based structured information can make things like this significantly easier. For a quick overview, watch this video.  To get a more detailed understanding, watch this video.

Have a look at these libraries to get a better feel.

This weekend I had a conversation with a brand new Accounting PhD graduate who made a statement something like,

"What is going on in accounting right now is a once in 500 year change."

I would completely agree.  In fact, I did not quite understand the comment when it was made back in 2001; but John Covaleski, a senior editor of Accounting Today, said,

"...XBRL is perhaps the most revolutionary change in financial reporting since the first general ledger." (Accounting Today, September 4-24, 2000, page 22)

This Forbes article, Triple-Entry Accounting and Blockchain: a Common Misconception, makes the following statement:

"blockchain will entirely disrupt accounting processes as we know them -- it’s only a matter of time"

The global consultancy firm Gartner classified XBRL as a transformational technology in 2010. Gartner defines transformational as something that "enables new ways of doing business across industries that will result in major shifts in industry dynamics. Major shifts mean lots of change and some winners and some losers.

Big, big changes.  This change will likely unfold over the next 30 years or so.  That is not as long as people might think.  Accounting is somewhere between 7,000 and 10,000 years old.  And the change did not start 20 years ago when XBRL appeared.  Many things are working together to enable this change.  In my view, there will be a burst of significant change relatively soon.

Within accounting I include accounting, reporting, auditing, and analysis.  This includes financial accounting, management accounting, and tax accounting.  The biggest things impacting this change in my view are: (in no particular order) 

• The Internet
• XBRL, RDF, and other structured formats/syntaxes
• International Financial Reporting Standards and US GAAP
• REA (Resources, Events, Agents) and OeDBTR
• Artificial Intelligence
• Knowledge Graphs and other machine-readable structured information
• Logic Programming such as Prolog and Google's new Logica Language
• Digital Distributed Ledgers
• Triple Entry Accounting
• Lean Six Sigma philosophies and techniques
• Graph Databases and Graph Query Language (GQL)
• Structured Query Language (SQL)
• Audit Failures
• Standards
• Computer

Machine-readable XBRL-based financial reports are here and supplement the previous version which was only readable by humans.  It will be interesting to watch other changes unfold.  If you thought the change between paper spreadsheets and electronic spreadsheets was big; this move to modern accounting will be even bigger.

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It's time for chartered accountants to save the world

Major long-term upgrade in accounting and audit