Digital Financial Reporting

Answer Set Programming (ASP) is a declarative logic problem solving approach based in stable model semantics.  It is tailored to modeling problems in the area of knowledge representation and reasoning (KRR). Frankly, most of this is over my head.  But, answer set programming seems like it is a step in the right direction.  Here are some resources:

• University of Vienna
• Knowledge Representation, Reasoning, and the Design of Intelligent Agents The Answer-Set Programming Approach
• Potassco
• Answer Set Programming Tutorial
• Online demo
• Clingo
• Answer Set Programming in Practice

It seems like answer set programming is similar to description logic.

Continuing on with my analysis of IFRS reporting styles I have created an additional temporary reporting style code for the income statement.  The reason I created this temporary code is that the ISXXXXX basically turns off all of the income statement tests until I can establish the pattern of the income statement that has this code.

What I figured out is that I can turn half of the income statement tests on if I simply start at the income statement line item "Income (loss) from continuing operations before tax".  I can then test 5 relations, easing into the final reporting style. The code I used was ISNATU0.

When I did created this code and the supporting Excel validator, I realized that almost all 406 IFRS filings have those 5 relations.  I have seen only ONE IFRS filing that breaks this pattern, reporting "income (loss) from equity method investments and joint ventures" within their tax provision essentially.

So what I did was put all 406 IFRS filings into one Excel spreadsheet validator and checked the filings consistency with those five rules of the ISNATU0 code.  What I found was this:

• 335 filings, or 83% of all filings, were consistent with all 5 of the income statement rules that I added.
• 70 filings, or 17% of all filings, were INCONSISTENT with one or more income statement rules.
• On a per test basis, 107 (5%) test were inconsistent with expectation and 1,923 (95%) were consistent with expectation.  (406 filings times 5 tests).
• Of the 107 inconsistencies, I confirmed that 25 were filer errors and documented those errors.  That means that actually only 82 are not confirmed to be consistent with expectations (i.e. there could be an error in my test or an error in the IFRS XBRL Taxonomy)

Here are the POSITIVE and NEGATIVE test results for this ISNATU0 set of filings.

I am continuing to piece together a complete financial reporting solution and explain my approach.  The most current iteration is this document, General Ledger Trial Balance to External Financial Report.

That document combines information from my first and second explanations. The ultimate goal is to create the framework for implementing a modern finance platform using 100% global standard XBRL technical syntax.

If you want to understand all this, I would recommend three documents:

• Computer Empathy: This document provides you with critical background information. If you are an accountant trying to understand all this using the historical financial reporting paradigm you will never understand. The key word here is "digital"; accounting, reporting, auditing, and analysis in a modern digital environment.
• Putting the Expertise into an XBRL-based Knowledge Based System for Creating Financial Reports:  I am not "paving the goat path" and replicating existing inefficiencies related to old-school paper-based reporting in XBRL-based digital financial reporting software.  We are choosing to take a different path. One type of practical knowledge is know-how; how to accomplish something. This document helps you understand how to build a modern finance platform.  The key word here is "patterns".  Good software engineers understand that patterns provide leverage.
• Blueprint for Creating Zero-defect XBRL-based Digital Financial Reports: This document helps you understand how machine-readable rules are used to keep quality ultra-high.  Quality will be better than the quality of current processes, procedures, techniques, and philosophies and with lower costs through process automation. The key phrase here is that "business rules prevent information anarchy."

Steven Covey, in his seminal book The Seven Habits of Highly Effective People, says "Begin with the end in mind." (Habit 2).  What is the end?  Well, these 5,734 US GAAP financial reports and these 406 IFRS financial reports are the end.

If you believe that accounting, reporting, auditing, and analysis will be done in an increasingly digital environment as contrast to the current old-school processes created for paper-based reporting; you may want to wade through the notes that I have been taking for the past 20 years: Intelligent XBRL-based Digital Financial Reporting.

Brand new to XBRL? How XBRL Works is a popular video that explains the basics.