XBRL-based Digital Financial Reporting

Let's face it.  Most people don't yet grasp the transformational changes that are unfolding in financial accounting, reporting, auditing, and analysis.  To do so, you need the right combination of skills and experience. Getting that skill and experience is not an insurmountable endeavor.  You simply have to gain the skill and/or get the experience. As Malcom Gladwell pointed out, it takes about 10,000 hours to master something.  But, "Practice does not make perfect," as is often said.  Perfect practice makes perfect.  If you practice the wrong things you could become an expert in the wrong area. I have consolidated what I personally believe to be the important moving pieces of the puzzle into related to The Great Transmutation of financial accounting, reporting, auditing, and analysis into the document Evolution of a System - Framework for Predicting Changes to Financial Accounting, Reporting, Auditing, and Analysis . The universal technology of accountability is tr

A critically important skill that some accountants are going to need to have is the capability to represent information digitally.  The world of financial accounting, reporting, auditing, and analysis is rapidly transitioning to digital . Think about something.  How is all this "digital" stuff going to play out?  A Wardley Map is a sketch of a system.  This video, Wardley Mapping in 90 Seconds points out the following: "A Wardley Map is a sketch.  Usually of a business, market, or any other kind of work system.  It is a design, maybe a blueprint.  It might be right, it might be wrong.  But it is something we can discuss and refine together on paper to make sure everything we do in reality is as purposeful as it can be. These designs will inevitably be put to the test by the forces of capitalism.  No one is exempt; not even governments or non-profits.  So, to help us cope, we acknowledge this fact up front by arranging our blueprint by evolutionally stage; from the uncha

I very well could be wrong, but I believe that I am going to turn accounting on its ear as is said.  I have been trying to figure this out since about 2002 and a meeting I had in Singapore. You may or may not have seen the following graphic in SFAC 6 which was published by the FASB: ( see here on page 21 ) What the diagram shows are the categories of "all transactions and other events and circumstances that affect a business enterprise during a period".  The graphic then breaks down those transactions, events, and circumstances into categories. The categories relate to the 10 elements of a financial report that SFAC 6 defines: Assets, Liabilities, Equity, Comprehensive Income, Investments by Owners, Distributions to Owners, Revenues, Gains, Expenses, Losses. And this graphic below is from the table of contents of the book The Joy of Accounting which is described by it's authors Peter Frampton and Mark Robilliard as "game-changing". So, I don't know whether

“Paper is just an object that information has been sprayed onto in the past.” Ted Nelson Think about something.  What if someone desired to use XBRL-based reporting but they are not mandated to report to some regulator like the SEC, FDIC, or ESMA; then what "profile" of XBRL would they use? What if there was a "general profile" for working with XBRL that could, say, be used internally within a business for consolidation, internally for cost accounting, for creating benchmarking systems, for sharing information with peer organizations, and other such use cases. Well, the Seattle Method is such an application profile for general XBRL-based reporting that does not need to meet some arbitrary regulator reporting regime.  While the Seattle Method cannot be called an industry de facto standard (yet); the Seattle Method inspired the creation of the Standard Business Report Model ( SBRM ) by OMG.  The Standard Business Report Model is a logical conceptualization of a busin

The average accountant is, well..., average.  Precision is the difference between a professional and a dilettante. The Decision Lab article, Why can we not perceive our own abilities? , points out the phenomenon by which those least competent in a certain subject area overestimate their skills the most and that those most competent in a subject area to think less of their own talents.  This phenomenon is referred to as The Dunning-Kruger effect. Another way of understanding this notion that the average accountant is average is by considering the normal distribution . This is also often called the " bell shaped curve ".  Normal distributions or bell shaped curves are very common in nature.  While the actual shape of the bell shaped curve can vary based on the variability or standard deviation around the mean; the shapes tend to be in the form of a "bell" shaped pattern: This version of a graphic of a normal distribution helps one understand that about 50% of people

As explained in the book The Great Upheaval , the world is in the midst of a “great upheaval” where the world is transitioning from an analog, industrial economy to a digital, knowledge economy.  My take on this great upheaval as it relates to financial accounting, reporting, auditing, and analysis is summarized in The Great Transmutation . The article, An Economic Case for Transparency in Private Equity , which is an abridged version of the academic paper, An Economic Case forTransparency in Private Equity: Data Science, Interest Alignment and Organic Finance ,   points out that XBRL offers the opportunity to create a Universal Digital Financial Reporting Framework . I agree. Imagine if there were one standard "financial report framework" that was used globally, it provided a technical format/syntax, a logical conceptualization of a financial report, and other such things.  The Seattle Method is my version of that framewor

This is a second take on a prior blog post, Understanding the Power of Classification . The Greek philosopher Aristotle (384-322 B.C.) first came up with the idea of classifying plants and animals by type, essentially creating the notion of a hierarchy or taxonomy.  The idea was to group types of plants and animals according to their similarities thus forming something that looked like a "tree" with which most people are familiar.  People tend to understand the notion of a "tree", but people tend to be less familiar with the notion of what is known as a " graph ". A tree, or hierarchy of things, is actually a type of graph.  You can differentiate the notion of a tree and the notion of a graphs in your mind as follows:  A "tree" has, well, only ONE TREE.  A graph can have many trees. Classification is about organizing knowledge.  Categorization is a synonym of classification.  The only thing better than classifications is standard classifications