Digital Financial Reporting

The following is a list of resources for university professors who are educating the next generation of professional accountants; researchers trying to understand the impact of XBRL on accounting, reporting, auditing, and analysis; and others.

1. Artificial Intelligence and Knowledge Engineering in a Nutshell: Critically important background information that is necessary to absorb the information below.  If you don't understand this information, you most certainly will not understand the information provided below or why it is important.
2. Understanding Logical Systems: This is a simple explanation of a logical system.  (This is a more detailed and complete description of a logical system)
3. Seeing that an XBRL-based financial report is a logical system: Helps you see that a financial report is a type of logical system.
4. Self-guided Tour of an XBRL-based Financial Report: This exposes you to XBRL-based financial reports.
5. Sophisticated example of an XBRL-based report: This is a sophisticated and high-quality example of an XBRL-based financial reports. Lots of nuances and subtleties to consider and contemplate.
6. Case for XBRL-based General Purpose Financial Reporting: Outlines the business case for XBRL-based machine-readable financial reporting on one slide.
7. Proving Financial Reports are Properly Functioning Logical Systems: Explains how to prove that a logical system is properly functioning when variability exists within the system.
8. Auditing XBRL-based Financial Reports: Important information about how to audit XBRL-based financial information.
9. Standard Business Report Model (SBRM): Information about the forthcoming OMG standard which provides a logical conceptualization of a business report.  Note that a financial report is a specialization of a business report.
10. MINI Financial Reporting XBRL Taxonomy: This is a "mini" financial reporting XBRL taxonomy that is constructed using best practices.  Allows for variability.
11. Pesseract Software Application: Free (for the time being) software application for viewing, validating, and ultimately for creating XBRL-based financial reports.
12. Ten small XBRL taxonomies and instances: Ten very small example XBRL taxonomies and XBRL instances.
13. Intelligent XBRL-based Digital Financial Reporting: Best summary of all information about XBRL in one place.  (NOTE that this is in the process of being updated.)

I will continue to build this information out, organize it better, and generally make the information easier to use.  So, check back periodically for updates!

Here is the entire blog archive.

The document, Proving Financial Reports are Properly Functioning Logical Systems, walks you through a reliable, systematic approach to creating high-quality, high-resolution XBRL-based machine-readable general purpose and special purpose financial statements.

“An error does not become truth by reason of multiplied propagation, nor does truth become error because nobody sees it.  Truth stands, even if there be no public support.  It is self sustained.”

Mahatma Gandhi

With out a doubt, epic change is just around the corner.  Are you ready?

So why is this document important?

An excellent HL7 presentation helped me understand that you have to have three things to effectively exchange information: technical interoperability, semantic interoperability, and workflow interoperability. Interoperability is controlled using rules.

But what exactly are the rules that you need?  Technical interoperability of XBRL seemed to be working.  XBRL technical syntax had a conformance suite, everthing seemed fine there.  But how to you achieve semantic interoperability, exactly what rules are necessary.

I spent several years looking into OWL hoping that it could help me understand what was necessary.  During that experimentation I ran across something called Common Logic. While looking into common logic I ran across the Helsinki principles which stated:

• Any meaningful exchange of utterances depends upon the prior existence of an agreed set of semantic and syntactic rules
• The recipients of the utterances must use only these rules to interpret the received utterances, if it is to mean the same as that which was meant by the utterer

So, the Helsinki principles concur with what HL7 was saying; but I still could not figure out WHAT rules were necessary.

I ran across the ontology spectrum which helped me understand the power of different means of expressing information, the notion of ontology-like things which tuned that understanding, the components of an ontology, and then I started noticing patterns in ontology-like things.

That lead to a sound understand of the parts of a logical system and how to represent those parts. Then, an ontology engineering book that I read helped me understand how to prove that a logical system was properly functioning and the notions of consistency, precision, and completeness.

From there I started noticing patterns and started to understand that when you moved from LEFT to RIGHT in the ontology spectrum you get additional functionality.  But you have to control that functionality.  Basically, with flexibility comes responsibility.

And so, the categories or patterns of impediments documented in the PDF are exactly what I have been looking for.

What I will do is explain the increments as you move LEFT to RIGHT in the ontology spectrum and that will help you understand exactly what rules are necessary and why.  For example, if you only have a list of terms you don't need to concern yourself with associations. But, when you move from having a list to having a taxonomy and therefore having associations; you have to control the associations if people can move them around.

This is information for a little project that I have going on.

• SEC Filing Page
• XBRL Cloud Viewer
• XBRL Cloud Evidence Package (Download)
• XBRL Instance
• Model Structure Validation Result
• Fundamental Accounting Concept Relations Validation Result
• Disclosure Mechanics Validation Result
• Reporting Checklist Validation Result

More information later!

Contrast ExxonMobil's 10-K to Microsoft's 10-K which can be found here.

You can get to the ESMA ESEF Taxonomy here. ESMA (European Securities and Markets Authority) uses the ESEF (European Single Electronic Format).

Someone created free tools to help if you will use the ESEF taxonomy.

Interestingly, the ESEF taxnoomy has labels in 23 different languages!

Also, these XBRL formulas are worth checking out.

In a previous blog post I made the case for XBRL-based general purpose financial statements. In another blog post I called for a digital alternative for general purpose financial statements.

But XBRL is also appropriate for special purpose financial statements. And an internal financial statement is essentially a special purpose financial report.

I created a prototype special purpose financial statement.  This might seem like a simplistic example but it is not simplistic at all.  The reason I created this was to bridge the gap between a very simple example, a slightly more complicated example, and another slightly more complicated example; and a full financial report.

On the one hand, it is easy to create a "complete" and "precise" that is also provably "consistent" logical system that is small and explain that to someone.  On the other end of the spectrum is a complete report that is time consuming to create and hard to explain to someone.

My prototype tries to strike a balance between the two ends of the spectrum to make a point.