Knowledge Graph System for Financial Reporting

The graphic below is an improved version of a similar graphic that was inspired by a graphic in a paper published by the IEEE related to electronic health records (see here).

As The Great Transmutation of Financial Accounting, Reporting, Auditing, and Analysis points out; the world is transitioning from older approaches to some newer more modern approaches for the universal technology of accountability.  We are not yet were we are going to be, but the status quo is definitely doomed and there is no going back.  The flywheel is turning faster and faster.  No one, not even me, understands exactly how all this will unfold.  But there is one thing that is certain: change is inevitable.

This graphic explains my personal opinion about how the future might work.  It is based on my 20+ years of trying to figure this out.  I was not distracted by things like the mandated use of XBRL by regulators.  I took a different path.  I embraced the complexity and tried to understand the complexity and then simplify the system that accountants would use.  I wanted to avoid creating a kludge, rather to create something that was elegant; burring complexity deep within software, hiding it from users.

This is my view of how a knowledge graph system for financial reporting will work and more importantly why I think it will work that way.  First, you have to understand that a financial report is, and always has been, a knowledge graph.  In the past, that financial report knowledge graph was only readable by humans. Going forward, that financial report knowledge graph will be still be readable by humans; but it will also be readable by a machine in the form of a software application.  This transformation is less about artificial intelligence (AI); it is more about a transformation caused by HUMANS effectively harnessing the power of AI.  Transformation = AI + HI. The transformation will be a lot of work, most people will get it wrong, but a few will get it right and then everyone will copy those who got it right and then improve things even more.  Where things end up will be a system similar to the graphic below (here is a link to get a better view)


This is an explanation of the moving pieces of the puzzle as I see it:
  • Financial reporting schemes will be represented using things less like the current XBRL taxonomies and more like ontologies (1) plus sets of rules (2) that are necessary for controlling the system and keeping information quality high, around the level six sigma which is 99.99966% correct. This will be achieved using proven good practices based techniques (3) such as the Seattle Method and the Standard Business Report Model (SBRM).
  • It is the standard logical conceptualization of a financial report (6) that is provided by the Seattle Method and/or SBRM that enables the use of radically simplified terminology and the creation of radically simplified logical schemas that (a) makes the system simple enough for business professionals to make use to and relate to and (b) the quality level is very high.
  • (4) Arelle (open source) and other XBRL processors; (4) Luca; (4) General Luca; (4) Pacioli
  • (5) Accounting, Reporting, Auditing, Analysis (benchmarking)
  • (8) Pacioli type-subtype associations
  • (12) Pacioli; (12) XBRL Cloud Evidence Package; (12) Pesseract
  • (11) Comparisons; (11) Comparing DOW 30; (11) Comparing Fortune 100
  • (10) Modern (Semantic) Spreadsheets; (10) Modern Working Trial Balance; (10) Semantic Accounting and Auditing Working Papers and Schedules; (10) Constructing Financial Analysis Models
  • (9) Pesseract and (9) Luca; (9) Showcase of Reports
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