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First Time Capability in 7,000 Years of Accounting

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For the first time ever in about 7,000 years of accounting, a financial statement can be exchanged between two parties and portions of the information within that statement can be effectively understood by a machine.  Today, both humans and to some extent machines can understand financial statements and work with that information. As Denise Schmandt-Bessersat in her video on the origin of writing , between 5,000 and 10,000 years ago farmers in Mesopotamia, where agriculture was born, used physical object to count crops and animals . The distinction between types of crops or animals was made by using different types and shapes of objects pressed into clay.  It was around that time, in about 3200 BC, around 5,000 years ago, the first spreadsheet was invented. Below you see an example, a Cuneiform tablet with seal impressions: administrative account of barley distribution with cylinder seal impression of a male figure, hunting dogs, and boars : These farmers replaced the pressing of obje
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Digital Financial Reporting Proficiency

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Proficiency is the capability, skill, and knowledge that you might have for doing something.  Proficiency is a progression.  There are general levels of proficiency: literacy, fluency, mastery. Given that the IFRS Foundation is now talking about “ digital financial reporting ”; one could conclude that the era of XBRL-based digital financial reporting is here .  The FASB talks about digital business reporting and XBRL . In the document, Digital Financial Reporting: Facilitating digital comparability and analysis of financial reports ; in the section "What is needed to realise the benefits of digital financial reporting?" the IFRS Foundation provides four points for users of financial reports to realize the full benefits of XBRL-based reporting: be a complete and accurate representation of reported information; be structured in a digitally comparable format;  be publicly available at the same time as reported information; and be centrally accessible in an easy-to-use format. In
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Regulatory Harmonization; Algorithmic Regulation

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Regulation is information. For example, a public company submitting an XBRL-based report to the U.S. Securities and Exchange Commission (SEC) is an information exchange from the public company to the SEC.  The SEC then makes that information available to the public to make use of. That information is a machine-readable digital signal published by the reporting public company.  That XBRL-based information sends a digital signal to the SEC and to those in the public markets that want to use that publicly available information. That digital signal sends a machine-readable message that can also be used to generate a human-readable signal (HTML, PDF).   What message are you sending in your digital signal? A lot of public companies are making mistakes in their machine-readable digital signal.  For example, my personal measurements clearly show that the relations between high-level financial concepts in those messages have mistakes . I am able to extract information from those XBRL-based repo
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Understandability

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In their article, Implementing the FDTA: From Data Sharing to Meaning Sharing , the authors Dean Ritz and Timothy Randle, do an excellent job explaining the notion of machine understandability.  The graphic below from page 24 of the document and explained on page 23 breaks down the notion of "understandability" into four levels: Presentation sharing Data sharing Meaning sharing Knowledge sharing with machine understanding Being able to differentiate each of these levels is very important to understand the notion of machine understandability. Understanding or comprehending information is a step in a process.  The second step is analyzing or accessing the information.  Finally, a conclusion can be reached or a decision can be made.  Each of these levels is explained in the sections below. Presentation sharing Presentation sharing involves the sharing of a digital document using some standard format like PDF, HTML, Excel,  OpenDoc such that the document stored on one computer sy
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Knowledge Representation and Reasoning (KRR)

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Knowledge representation and reasoning (KRR) is about converting information from an area of knowledge into machine understandable form and then enabling a machine such as a computer using software to process that information in a manner that is as good as a human could have performed that task/process or even better than a human could have performed that task/process. For example, some task or process currently performed by humans that, if measured, would achieve a sigma level of 3 which is a defect rate of 6.7% (about 67,000 defects per million opportunities) would be improved and would achieve a sigma level of 6 which is a defect rate of 0.00034% (about 4 defects per million opportunities). You are hearing me right, defects go from a whopping 67,000 down to 4.  Think I am joking or on drugs?  The Federal Deposit Insurance Corporation (FDIC) call report collection system went from 18,000 defects (reporting errors) down to 0 defects when it modernized their call report system to ma
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Framework for Thinking about Artificial Intelligence

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I read something that gave me an idea.  Imagine a framework for thinking about artificial intelligence somewhat, as an analogy, similar to the notion of the legal framework.  The legal framework refers to the system of laws, regulations, and principles that govern our society. It provides a structure within which individuals, organizations, and governments operate; defining their rights, responsibilities, and obligations.  For example, summarizing the law in very high level terms. "The law"  is a set of rules that a community agrees upon. These rules help keep things fair and orderly, creating a virtuous cycle as contrast to a viscous cycle . Here’s how it works: Customs and Rules : Customs : People in a community follow certain practices and traditions. Rules : These practices become rules that everyone agrees to follow. Binding and Authority : When everyone accepts these rules, they become binding—like a promise. An authority (like a government) ensures that people follow
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Common Logic

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Common Logic (CL), an ISO/IEC standard , is a logic framework intended for information exchange and transmission.  The ISO documentation describes common logic thus: " Common Logic is a logic framework intended for information exchange and transmission. The framework allows for a variety of different syntactic forms, called dialects, all translatable by a semantics-preserving transformation to a common XML-based syntax ." What common logic enables is explained by the graphic below from Introduction to Common Logic : It seems that common logic is trying to achieve at a lower level of abstraction what I am trying to achieve with something like the Seattle Method and the forthcoming OMG  Standard Business Report Model (SBRM). What common logic does provide the semantics of a logic based system.  What DATALOG does is provide the implementation of that logic based system.  DATALOG is a subset of PROLOG.  ISO also has a PROLOG standard . Together, the ISO Common Logic standard
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