Digital Financial Reporting

There are nine specific identifiable situations which occur in XBRL-based financial reports which cause accounting logic, mathematical logic, structural logic, or other types of logical errors. The document Proving Accounting, Structural, Mathematical, and Other Logic of XBRL-based Financial Reports explains each of these situations and explains how to eliminate the situation.

Here is a summary of the nine situations:

1. Using an existing base taxonomy concept intended to represent one class of concept inadvertently to represent some other class of concept.
2. Lack of clarity of the meaning of extension concepts.
3. Unreported high-level subtotals.
4. Variability allowed for reporting high-level accounting relationships.
5. High-level financial report line item inconsistencies and contradictions.
6. Presentation relations model structure relations illogical.
7. Verification that each report fragment is created correctly.
8. Mathematical relations are not explained using machine-readable rules and then verified against that machine-readable explanation.
9. Verification that each report fragment that is required to be disclosure exists within the financial report.

All of these nine situations are observable in the thousands and thousands of XBRL-based financial reports that have been submitted to the U.S. Securities and Exchange Commission.  XBRL Cloud provides what the call the Edgar Dashboard which shows summaries for many of these situations.

It is highly likely that ESMA is going to repeat many of these same sorts of errors. While the ESMA has done some additional things such as added anchoring, they have not consciously engineered a system which eliminates each of these situations.  Therefore, they will experience errors and quality issues.

Consider something.  Let us turn all of this around.  Let us wonder what might happen if someone implemented XBRL-based financial reporting, they used an architecture similar to the SEC, they adjusted the SEC architecture to add the features articulated in the PDF that explains how to eliminate all of those situations/issues.  Perhaps they add a few additional best practices that have been proven over the past 10 years of submitting XBRL-based reports to the SEC.

What would you get?  Well, you would get a much better system that has higher quality XBRL-based reports. This video walks you through how software can leverage rules and use automated machine-based processes to (a) explain what "correct" looks like, verify that a report is consistent with that explanation, and (c) be used by those wishing to extract information from such report effectively and reliably.

This video playlist shows a working proof of concept that demonstates XBRL-based financial reporting does not need to be "technical" and "complex".  It actually can be simple and elegant.

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Financial Report Proof

Financial Report Proof Files (ZIP)

Financial Report Proof Video