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Theory of Business Events and Classic Transactions

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Years ago I posed a hypothesis that business events drive accounting transactions and that economic entities have patterns of business events which could be named and described in machine-readable terms.  After significant experimentation and testing between 2015 and about 2022, I have reached the conclusion that my hypothesis was correct and now I have my theory of business events. Here are many of the best details related to my testing, poking, and prodding and prototypes that I constructed to experiment with and test this hypothesis: Resources, Events, Agents (REA) Description The Joy of Accounting , PART 2, Classic Transactions (page 91) Algorithmic Contract Types Unified Standards (ACTUS) Sensemaking Accounting Basics Essence of Accounting MINI Financial Reporting Scheme (MINI) With Business Events and Classic Transactions Effective Automation of Record to Report Process Narrative for Iteration #4 Record-to-Report Iteration #6 Record-to-Report Iteration #7 Sensemaking is the p...
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Open Banking

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Open banking is coming to the United States.  Aeropay describes open banking as follows: "Open banking, also known as 'open bank data', is a financial model where consumer banking, transaction, and other financial data is opened for access to third-party providers (TPPs) via application programming interfaces (APIs)." Aeropay provides this graphic to explain open banking: FDX describes open banking as follows: "Open Banking allows consumers to better manage their financial lives. They have direct access to and can more securely share their data. For financial institutions, open banking enables safe data sharing across the ecosystem to enhance product offerings, streamline new customer onboarding, and improve the overall experience." And, "Open banking benefits consumers, small businesses, large corporations, capital markets, and wealth management." Additional Information: FDX Getting Started Guide to Open Banking MISMO Standards  (Mortgage indust...
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Declarative Accounting

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Traditional accounting systems are imperative in nature.  Effectively, what this means that you tell the accounting system what to do step-by-step. But what if an accounting system were declarative in nature?  Declarative accounting is a way of setting up accounting systems where you focus on what you want the system to do, rather than how the accounting system should do the work. You can understand the difference between imperative and declarative by, say, thinking of how a self driving car might work.  There are perhaps two approaches to giving instructions to a self driving car to, say, get to the airport: Using an imperative approach you're telling the car "Turn right at the next light, then go straight for two miles, then turn left..." You're giving step-by-step instructions to get from where you are to the airport. Using a declarative approach you're telling the car "Take me to the airport." The car figures out the best route, handles the turns, an...
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Could MiCA Regulatory Reporting be a Disruption Event?

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Per Anna Sciortino, Senior Policy officer at the European Single Market Authority (ESMA) in a post on LinkedIn , the Implementing Technical Standards on the Markets in Crypto Assets (MICA) white papers were adopted by the European Commission and published in the EU Official Journal.  That means, MICA crypto-assets white papers will need to be prepared using the Inline XBRL global standard based on a taxonomy ESMA is currently developing and on the templates included in the implementing regulation. This is a big win for the XBRL global standard. For more information, see: ( click here for other languages ) Official regulation in English   Blog Post about Markets in Crypto-assets (MiCA) How SBRM Enables Digital Asset White Paper Compliance Under the EU's MiCA Regulations Prototype MiCA white paper published by Pacioli.ai Introduction to the Markets in Crypto-Assets Regulation  (Watsonlaw) ESMA MiCA White Papers PoC As I understand it, MiCA is a new regulation that will im...
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Financial Statement Mechanics and Dynamics

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A general purpose financial statement is a logic system designed by humans. As far as I know, there has been no theory, formal or informal, published that describes the mechanical aspects and dynamics of a general purpose financial report. But in order to digitize a general purpose financial statement effectively, one does need a theory or theories to describe such mechanics and dynamics. Here are a series of what I would call a necessary set of "micro-theories" that describe the important mechanics and dynamics of a financial statement.  Note that this set of micro-theories relates to the statement itself, not the financial reporting rules of the financial reporting scheme that describes the specific information contained in that such financial statements.  These micro-theories help one understand my Seattle Method for creating XBRL-based financial statements. This set of eight micro-theories is a minimum bar for any general purpose financial statement. Theory of Physic...
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Theory of Physical Format Independence

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Years ago I posed a hypothesis that financial statement logic should be consistent no matter what the physical format used to provide that financial statement information.  After significant testing, between 2015 and about 2018, I have reached the conclusion that my hypothesis was correct and now I have my theory of physical format independence. Here are many of the best details related to my testing, poking, and prodding and prototypes that I constructed to test my hypothesis: Hitchhikers Guide to Metapatterns Neutral Format Templates  (2007 prototype) Neutral Format Tables (2007 prototype) Many Different Data Formats, Why XML? Sensemaking PROOF rendering (auto generated by computer) AASB 1060 rendering (auto generated by computer) Interactive Information Hypercube Sample Instance Proof (PDF) Interactive Information Hypercube (PDF, Prototype) Comprehensive Example (2013) A financial statement tells a story.  That story should be the same story whether the financial ...
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Theory of Mathematical Integrity

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Years ago I posed a hypothesis that financial statement had, or should have, mathematical integrity.  After significant testing, between 2015 and about 2018, I have reached the conclusion that my hypothesis was correct and now I have my theory of mathematical integrity. Here are many of the best details related to my testing, poking, and prodding and prototypes that I constructed to test my hypothesis: Gaining an Appreciation of XBRL's Power to Express Business Rules WIP Table Mathematical Computations WIP Table Mathematical Computations (XBRL Formula Testing Result) WIP Table Mathematical Computations XBRL Formula Linkbase Reference Implementation of XBRL-based Financial Report (2013) Understanding Articulation PROOF Articulation Microsoft Mathematical Assertions Mathematical Rules Appended to Microsoft 2017 10-K Fundamentally, much of a financial statement (but not all) comes from information that flows through a general ledger which follows the double entry bookkeeping mathemati...
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