Digital Financial Reporting

"This problem can be summed up by saying that computers are dumb beasts.  Computers do not understand themselves, their programming or the intended interpretations of the representations that they manipulate.  This fact has a number of implications."

As Andrew D. Spear points out in his paper Ontology for the Twenty First Century: An Introduction with Recommendations, we are awash in a sea of information. This sea of information will only get bigger, and bigger, and bigger.

If business problem domains such as financial reporting express the information about that business domain in terms that are vague, ambiguous, contradictory and unclear; then the dumb beasts (computers) will not be very helpful to us humans.

Overcoming the quality problems within this sea of information is not unique to XBRL-based financial information provided to the SEC by public companies. 

The NPR story Sharing Patient Records Is Still A Digital Dilemma For Doctors points out a similar issue for electronic medical records. Mr. Spear's paper implies that the same problems exist in other domains in the sciences. Other problem domains, both business and science, likely have similar issues.

Business professionals need to understand knowledge engineering enough to be part of teams which create rigorous, clear, logical, coherent representations of business problem domains in machine-readable form.  Such representations are perhaps new to business professionals.  For example, the US GAAP XBRL Taxonomy which expresses parts of US GAAP used within a financial report are on the leading edge of business domains going digital.

But today many business professionals, such as accounting professionals, are having the wrong sorts of discussions.  Many accountants are so wed to the past 100 years of paper-based and electronic paper (i.e. HTML, PDF) based financial reporting which is document-centric and presentation oriented that they cannot see the real opportunities offered by thinking more data-centric and information-centric thoughts.

Don't be part of the herd making the mistake of bringing too much baggage from the past into the new digital oriented future.  Take a more balanced approach.  Take the time to understand what the technology can and cannot achieve.  Learn to employ new tools like a craftsman.

If you were around when electronic spreadsheetsreplaced paper-based spreadsheets, you had a glimpse of what is in store for financial reporting.  Per that NPR story about spreadsheets 400,000 accountants lost their jobs because of the switch to electronic spreadsheets.  On the other hand, 600,000 new jobs were created.  Better jobs.

The same thing will happen as we transition to digital financial reporting.  Remain relevant.  Take the time to learn about knowledge engineering because the best way to predict the future is to help create it.  Learn to create quality digital financial reports.  Learn to ask good questions of software vendors.

Tame the dumb beast, avoid the nonsense.  Stay afloat on the sea of information.