Digital Financial Reporting

Plain Text Accounting, per their website, means doing accounting with plain text data formats and scriptable software.  There are three such systems behind this movement: Ledger, hledger, and Beancount.

All three of these software applications are command-line reporting tools that use a plain text data format (i.e. database) that do double-entry accounting.  Essentially, these applications are double-entry accounting "engines".  You can both INPUT and OUTPUT accounting transactions and the results from accounting transactions.

This is interesting.  What is even more interesting is that I can get 100% of the information into both the Ledger and the hledger accounting systems that I need for friction-free record-to-report.  Remember this prototype that related to record-to-report?  Well, I added this plain text accounting transactions format to my output from my database.  I was able to get BOTH the XBRL concept and the transaction grouping code into both Ledger and hledger.

What does this mean?  It means friction free accounting! 

• I was able to take this XBRL GL (or this XBRL dimensions, or this plain text accounting format)
• Turn that information into this fact table
• Turn the fact table into a human readable report (or this Inline XBRL version of the same information;or this unformatted version of Inline XBRL)
• Verify 100% of the mathematical computations. (this is a second validation; these are the roll ups)
• Verify the stucture of the disclosures in the report.
• Analysis of the report. (See the bottom where concepts within the "analysis:" namespace were added to the report)

The above is a little prototype.  This MINI prototype financial reporting scheme adds notes and policies.  This not-for-profit example is another larger prototype that is also more comprehensive.  I have numerous other prototypes.

Sure, those were all prototypes.  You know what.  I can do the same things for the Microsoft 10-K.

What I am seeing is a "fat free global ledger exchange format". What I am also seeing is zero friction in the tasks and processes related from getting information from the accounting information systems into an external financial report.  This includes a more efficient and therefore less costly audit process.

Pop an expert system on top of all this and a rules engine or reasoner to support the expert system and the accounting process is more efficient and more effective.

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GNUCash (free accounting software)

Ledger is described in it's user manual as "fat free accounting". Per the user manual:

Fat-free accounting

Ledger is an accounting tool with the moxie to exist. It provides no bells or whistles, and returns the user to the days before user interfaces were even a twinkling in their father’s CRT.

What it does offer is a double-entry accounting journal with all the flexibility and muscle of its modern day cousins, without any of the fat. Think of it as the Bran Muffin of accounting tools.

Ledger is open source.  The application has been ported to numerous other languages. Here is the Ledger discussion group.

What would be incredibly interesting would be to map XBRL concepts to the chart of accounts and to add the roll forward transaction code (mentioned in Introduction to the Fact Ledger) to the general journal.  That way, rather than bolting XBRL on to the end of a process, you can put the metadata into the accounting system and let it flow through the system, leveraging it throughout the entire process.

Another accounting system I ran across when investigating Ledger is hledger. There is also a web version called hledger-web. You can download hledger here. hledger is open source. I downloaded it and did this basic example in about 10 minutes.

And so I modified my accounting process automation prototype, adding the plain text format.  Now, my record-to-report process is complete, including the accounting system.  My Microsoft Access database generates the plain text output.  I can both import into and export from my database, generate a complete XBRL-based financial report.  I will create an updated video soon!

The train of progress is pulling out of the station.  Do you have your ticket?  Those who miss this train will certainly miss a huge opportunity.  If you miss the train you will highly likely put yourself and perhaps your organization at increased risk of becoming irrelevant.

In order to get a seat on the train of progress you will need to understand the twenty-first century technologies such as computer algorithms.  Some are completely overwhelmed by the perceived enormity of the tasks involved in this process.  But not everyone is overwhelmed.

The Logical Theory Describing Financial Report is a logical conceptualization of the mechanical, mathematical, structural, and logical aspects of general purpose and special purpose financial reports for the purpose of representing such reports digitally using XBRL and other technical syntaxes.

Ideas are a dime-a-dozen.  “XBRL-based reporting.”  “Smart Regulation.”  “Algorithmic regulation.”  Getting an idea to work effectively is significantly more challenging.  If you don’t understand why something like this theory is useful, you are highly-likely in the group of 81% of all business professionals that don’t really understand artificial intelligence.  If you don’t understand, you might want to consider figuring out where you can get tickets on that train of progress.  This might help you out.

Anyone who bothers to look can see that XBRL-based digital financial reporting can work effectively.  These ideas will inevitably be incorporated into the next generation of financial reporting applications in one way or another. It is just a matter of time.  Sure, there is a lot of pressure by incumbents to maintain the status quo.  Sure, incumbents will hang on for a time in last ditch efforts of self-preservation.  But the incumbents can only resist and they will copy the innovation of the disruptors. They will react.

Where will all this be in five years?  In ten years?

Toot!  Toot!