Digital Financial Reporting

Any significant change is hard. However, success is the most likely outcome for XBRL-based digital financial reporting.  While change does require effort, the majority of people committed to change do tend to succeed.

Certified Public Accountants should be active participants in the process of creating digital financial reporting, not passive bystanders.

But to participate, you need to get the proper background information.  If you don't, then there is a very high probability that you might not understand the change.

One big area of confusion relates to how XBRL-based financial reports will be audited.  Here is a summary of my thoughts related to auditing the meaning being conveyed by XBRL-based digital financial reports.  Make no mistake: ultimately, XBRL-based information will be audited.

I updated the documents Digitizing Financial Reports and Overview of Professional Accountant's Interests, Perspective, Position, and Risks.  The document can be very helpful in getting professional accountants to understand why they should be participating in and shaping the change to digital.  The documents help professional accountants understand and think about important issues related to going digital.

I created a video, How XBRL Works, which seems to be pretty popular for people who want to understand how XBRL works.  (The video has over 50,000 views; about 463 views per month.)

But while I explain how it works, you don't actually get your hands dirty and use XBRL, seeing for yourself how it actually works.

Well, here is something else that helps you understand how XBRL works using Excel.  The link is to a ZIP archive which contains an Excel spreadsheet.  The spreadsheet has some very straight forward macros.  What the macros do is extract information from the XBRL-based 10-Ks of 464 public companies that use interest-based revenues to report their financial information (i.e. banks).

To run the VBA code in the spreadsheet, all you need to do is click the one button in the upper left hand corner of the spreadsheet.  You do need to have Microsoft Internet Explorer installed on your computer, the VBA code uses the Microsoft XML parser to extract information from the XBRL-based reports.

There is a great deal one can learn from reverse-engineering the VBA code.  Also, if you notice the results of the information extracted and you ask yourself, "Why do some financial reports contain errors and others do not contain errors," you can learn even more.

If you are a CPA that understands how to write Excel VBA and you want to learn more about XBRL contact me.  I am always looking for people to collaborate with to create interesting software. Experimentation is a great way to get ready for the digital age of accounting, reporting, and auditing.

I have updated my description of the high-level conceptual model of an XBRL-based digital financial report.  You can get this updated information here, Introduction to Conceptual Model of a Digital Financial Report.

Why should you care about understanding this high-level conceptual model?  Anyone can create something that is complicated.  It takes hard work to create something that is simple.  The conceptual model makes things simpler.

If this higher-level conceptual model is implemented in software applications, it makes it possible to make software far more approachable by business professionals.  Not using some high-level conceptual model leads to hard to use software, less functional software, and less elegant software.

You don't have to use my conceptual model: if you don't like mine, create your own.

Ready for more detail?  Read PART 2 of Intelligent XBRL-based Digital Financial Reporting.  Really want to start getting your hands dirty? Here is the next layer of the conceptual model.

Why should you even care?  Because accounting, reporting, and auditing are going digital.