Digital Financial Reporting

I am big on system theory.  A financial report is a man made logical system. There is nothing "natural" about a financial report.  It was created for a purpose.  A "digital" version of a general purpose financial report is an improved version of the "paper" or "e-paper" version.

The document, Special Theory of Machine-based Automated Communication of Semantic Information of Financial Statements, is my best attempt to explain what it takes to effectively automate the communication of financial information. (This 15 minute video provides an overview of the document. This video play list, Understanding the Financial Report Logical System, contains nine short videos that elaborate on the details.)

These five financial reporting scheme representations use that theory.

This framework is used to represent the models, structures, terms, associations, assertions, and facts that are used to represent information using that theory.

This working proof of concept software application leverages the theory, the framework, and the metadata of the five financial reporting scheme representations.

Artificial intelligence, structured information, distributed ledgers, and Lean Six Sigma are a match made in heaven and will have a significant impact on accounting, reporting, auditing, and analysis in a digital environment that will prevail during the Fourth Industrial Revolution. Lots of synergy!

Want to understand XBRL-based digital financial reporting? Here are six images that explain it.

There is a method to my madness.  As you might know from previous posts I am into systems theory and lean six sigma.  If you want to understand how I created my framework (i.e. analysis, synthesis, models, patterns) and method (i.e. systems theory, systems paradigm) I would encourage you to watch these excellent videos:

• Systems theory: A system is a cohesive conglomeration of interrelated and interdependent parts that is either natural or man-made.
• Systems thinking: 
• Systems paradigm: A paradigm is a model, perspective, or set of ideas that form a worldview underlying the theory and methodology of a particular domain.
• Patterns: A pattern is a systematic regularity in the world. A pattern is any form of correlation between the states of elements within a system. Patterns are structural prescriptions to which model artifacts are meant to conform.
• Pattern formation: 
• Graph theory (Network theory): 
• Synthesis and Analysis: 
• Synthesis: 
• Formal models: A model is an abstract, typically compact representation of some phenomenon.
• Logic: Thinking according to a set of consistent and coherence rules.
• Chain of reasoning:
• Process thinking: 
• Stocks and flows: (From a different channel)

Much more can be found at this YouTube channel, Systems Innovation.  I highly recommend it.  In fact, this playlist, Systems Theory Course, appears to be an excellent introduction.

I am not making this stuff up. What I am seeing is the synergy offered by artificial intelligence, structured information like XBRL, digital distributed ledgers, and Lean Six Sigma principles, philosophies, and techniques.  It is this "match made in heaven" that will enable effective automation of accounting, reporting, auditing, and analysis tasks and processes.

You might want to dust off that Lean Six Sigma Black Belt certification.

If you want to get your head around  this, check out my modern approach to creating a financial reporting scheme.

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The Long Game: Feedback Loops and Desiloed Systems By Design