XBRL-based Digital Financial Reporting

Accounts, auditors, and analysts are about to get a significant  productivity boost ; complements of XBRL . Hard to believe, right? That hard to use, complicated monstrosity the regulators force you to use. If you don't know what SKOS, XBRL, OIM, and SBRM are; you are way, way behind the curve. The purpose of this blog post is to think about US GAAP metadata.  United States Generally Accepted Accounting Principles (US GAAP) is the financial reporting framework used by public companies, private companies including small and medium sized organizations, not for profit organizations, and other such organizations. Like most, if not all financial reporting scheme; US GAAP is "grounded" in the fundamental accounting equation  which is the basis for double entry bookkeeping  (a.k.a. double entry accounting). Information for every financial related business event is recorded in the form of a balanced financial transaction similar to the financial transaction shown below (...

To effectively understand an XBRL-based digital report , you need to understand how to decompose and compose such a digital report.  In this article I am going to focus on decomposition . Decomposition is simply about taking the one big piece that is the report model and report and breaking that larger "whole" into physical, logical, and functional "parts". I am going to use a financial statement as an example, but these same ideas relate to reports at all levels of granularity including transaction level granularity, what I call the " mezzanine level " or working paper level granularity, financial statement level granularity, or financial analysis model level of granularity.  So, the explanation of the decomposition and composition of a financial statement also works for the other levels of granularity. As I have pointed out, a financial statement is a knowledge graph . What I mean by this is that whether the financial statement is on a clay tablet, o...

Semantics is the study of meaning ; the meaning behind the words we use. Semantics enable explainability and automation at scale. Semantics is a core enabler of communication. In his book, Inhabiting Babel , the author Nicholas Figay makes the following statement in an author's note on page 5: (emphasis is mine) " Drawing from work in systems engineering, modeling, interoperability, and ontologies, this book seeks to show that meaning is always mediated, situated, and carried by human collectives . Models, graphs, and algorithms do not eliminate this mediation; they displace it and sometimes render it invisible ." * * * So what precisely does that phrase mean? " Meaning is always mediated, situated, and carried by human collectives ."  That sentence is making three tightly linked claims about how meaning actually works in the real world. Breaking that one phrase down into those three claims, for clarity, you get: “ Meaning is mediated ” Meaning never arrives raw...

Inhabiting Babel, A Manifesto for Responsible Meaning Engineering is a book written by Nicolas Figay . This book is very practical and easy for a motivated business professional to read. For me, this book has both tempered my expectations as to what is possible and also reassured me of the real possibilities that exist if you do the required work. Accountants and auditors tend to be on the conservative side of the spectrum.  Me included. I am  actually rather conservative in terms of what technology might bring to the table for accounting, reporting, audit, and analysis. I have learned how to "cut the cards" when dealing with sales people and software vendors. What this book does is bring the wisdom from the experiences of an expert in system interoperability, enterprise architectures, and complex systems to helps motivated business professionals and technical professionals that truly want to understand artificial intelligence, cutting through the rhetoric and hype. This boo...

KROG holds itself out to be a universal framework for rules and authorization and describes itself, "KROG is a universal mathematical framework that brings clarity, transparency, and determinism to any rule-based system. Whether you're building AI authorization, smart contracts, business workflows, or governance protocols, KROG provides a rigorous foundation based on deontic modal logic."  KROG is built on four pillars: Knowledge, Rights, Obligations, Governance. The Seattle Method , also a framework , has this notion of a virtuous cycle . That virtuous cycle has four steps: Define, Create, Verify, Extract. What seems to be going on is that KROG and the Seattle Method are looking at the same situation from different perspectives.  What KROG and the Seattle Method both seem to seek is that trustworthy virtuous cycle; that feedback loop.  Both KROG and the Seattle Method agree that governance is key to achieving that virtuous cycle. Both KROG and the Seattle Method seem ...

The Simple Knowledge Organization System (SKOS) is a standard way to describe concepts and the relationships between those concepts so computers and humans can understand and share knowledge consistently. SKOS is a lightweight semantic vocabulary for building controlled vocabularies, taxonomies, thesauri, and classification schemes. SKOS is a standard specification for constructing knowledge organization systems. Home Page SKOS Specification (W3C Recommendation) SKOS Primer SKOS provides four essential building blocks to construct a knowledge organization system: (a) Define Concepts; (b) Group Concepts (a.k.a. Types, Classes); (c) Define Labels; (d) Connect Concepts. Concepts are the things you want to organize.  Labels are the different ways you want to be able to refer to those Concepts. For example, you might have a "preferred label", and "alternative label", and maybe other such labels. Relationships and associations, how concepts are connected, might be ...