Digital Financial Reporting

Vince Lombardi pointed out, “Practice does not make perfect. Only perfect practice makes perfect.”

Digital financial reporting will undoubtedly play some sort of role in financial reporting.  No one knows the exact role, but it will play a role. Recognize that mandated regulatory reporting using XBRL is NOT the only use of XBRL.  Regulators like the SEC and ESMA are making too many mistakes.

If you want to master XBRL-based digital financial reporting here is how you do it.

(NOTE! I have summarized all of these resources into one document, Mastering XBRL-based Digital Financial Reporting. I am also putting a lot of this information into a video playlist Mastering XBRL-based Digital Financial Reporting.)

First, have a look a the following logical systems each of which has been properly represented in XBRL.  The goal here is not to get into the details of XBRL at this point, rather the focus is to get the big picture and proper perspective as to what is going on.  These will provide you with the proper fundamental grounding: 

• Accounting Equation: Document | Files | Video | Video2 | Slides
• FASB's SFAC 6 Elements of Financial Statements: Document | Files | Video | Slides
• SFAC 6 Plus: Document | Files
• Common Elements of Financial Statement: Document | Files | Video | Slides
• Trial Balance: Document | Files | Video | Slides
• Journal: Document | Files | Video | Slides
• Proof Representation: Document | Files | Video | Slides
• Proof Representation 2: Files
• MINI Financial Reporting Scheme: Document | Files | Video | Slides
• XASB Financial Reporting Scheme: Document | Files | Video
• US GAAP Financial Reporting Scheme: Document | Files | Video (Working prototype)
• Not-for-profit (US GAAP) Financial Reporting Scheme: Document | Files | Video (Working prototype)
• IFRS Financial Reporting Scheme: Document | Files | Video (Working prototype)
• IPSAS Financial Reporting Scheme: Document | Files | Video (Working prototype)
• FRF for SMEs Financial Reporting Scheme: Document | Files | Video (Working prototype)
• Auditing XBRL-based Financial Reports: Document

NOTE: This is the most current MASTER version of the XBRL representations listed above.

Second, watch this 90 minute video play list: Understanding the Financial Report Logical System. This will help solidify your understanding of the financial report logical system and how it works.

Third, read the document Special Theory of Machine-based Automated Communication of Semantic Information of Financial Statements.  That will fill in any missing details from the first and second steps.

Fourth, read the document Proving Financial Reports are Properly Functioning.  That document helps you make the connection between the simple accounting equation and SFAC 6 logical systems and something like the Microsoft 10-K or any other financial report.

Five, read the document Artificial Intelligence and Knowledge Engineering in a Nutshell.  That document provides critically important background information that helps you truly understand the first four documents.

Six, work through Intelligent XBRL-based Digital Financial Reporting.  Explore these example XBRL-based reports.  Download the Pesseract working proof of concept software application.  Alternatively or in addition, watch the Pesseract video play lists. Here are more examples that might be useful to you.

Once you have a solid foundation: practice, practice, practice.

Market segmentation is the process of dividing a larger market that appears homogeneous into groups with distinct but similar needs or wants.  You then design products, pricing, and perception that match the preferences of each unique group.

Products that are used to create XBRL-based financial reports that are ultimately submitted to regulators such as the SEC or ESMA can allow errors because those regulators don't seem to care much about report quality.

However, when XBRL-based digital financial reporting is implemented within the enterprise, quality matters a lot.  No organization in their right mind, large or small, would ever implement digital financial reporting internally if the new digital approach is not somehow better, cheaper, or faster than the current approaches that they use.

Will accounting, reporting, auditing, and analysis go digital?

Well, that is up to software vendors. Can software vendors create software that is better, cheaper, and/or faster than current accounting, reporting, auditing, and analysis approaches.

Public/listed companies that reoprt to the SEC and ESMA are mandated to do so.  They have no choice; and so they are required to purchase something even if it does not work correctly.

Private companies do have a choice.

OK, so how do you create software that improves current accounting, reporting, auditing, and analysis approaches?  You do that by being clever, creative, and innovative.

My document Special Theory of Machine-based Automated Communication of Semantic Information of Financial Statements documents proof that XBRL-based digital reporting can work and how to do make it work.