XBRL-based Digital Financial Reporting

The Markets in Crypto Assets (MiCA) is a comprehensive regulatory framework proposed by the European Union (EU) to govern the issuance and provision of services related to crypto assets. MiCA is part of the European Commission’s Digital Finance Strategy and due to take effect beginning in June 2024. Here are the MiCA regulations  in English. ( Here are the regulations in each of the official languages of the EU .)  The regulations cover crypto asset issuers, crypto asset offerors, e-money tokens, and asset-referenced tokens. Any company offering crypto assets within the block of 27 nations that make up the European Union will be subject to these regulations. The regulations require that a "whitepaper" be published by any company offering crypto assets to the public within the European Union.  The whitepaper is somewhat like a "management discussion and analysis" and does include financial information. Inline XBRL (iXBRL) format will be used for MiCA whitepapers. Th

Many people have been complaining about the quality of XBRL-based digital financial statements submitted to the SEC for many years. XBRL US even formed a Data Quality Committee to address quality issues. ESEF XBRL-based financial statements submitted to the ESMA are now being scrutinized and seen to also contain quality issues.  See this report which looks at ESEF report quality by audit firm and this ESEF observatory . Myself and a handful of others ( like XBRLogic ) have been measuring the quality of XBRL-based financial statements that have been submitted to the SEC for a number of years.  I have personally looked at the high-level fundamental relationships between financial concepts and their relations between 2013 and 2018 . What I saw was many mistakes, improvements over time, but my last measurement showed that about 90% of reports were free from these high-level mistakes, but that means that about 10% of reports had some sort of error. Here is a summary of my last measurement

There are many definitions/descriptions of ‘ontology’ .  One good definition/description of an ontology is provided by the National Library of Medicine on this web page Understanding Ontologies which is:  Ontology: “formal, explicit specification of a shared conceptualization.”   There are many forms that a shared conceptualization might take.  That same article provides this continuum of representation alternatives : I call the above continuum of representation alternatives "ontology like things".  My personal working definition/description of an ontology like thing  which I believe is practical and understandable is the following: An ontology like thing is a formal, explicit specification of an intended shared conceptualization in logic for an area of knowledge to achieve some specific set of goals/objectives . The precise definition of the word ontology and which term you use to describe that representation is less important than the intent of the representation.  The wa

Model-based financial reporting is the future of financial reporting in my view. It just makes a whole lot of sense. Twinfox.ai is looking at model-based reporting correctly in my view.  Have a look and decide for yourself. My thinking goes like this.  Accountancy (meaning accounting, reporting, auditing, and analysis; financial, tax, managerial) currently involves a lot of "dirty-work" related to moving information around.  Often software applications are too inflexible and don't let accountants do their work.  But Excel can be to flexible to solving the problems that need solving.  In between software applications and Excel a new class of software will emerge.  That new class of software will be model-based, semantic-oriented, standards-based, and easy for business professionals to make effective use of. Accountancy will not be the only profession to benefit from such tools; but accountancy will be early in the evolution.  Other professionals such as the law and medic

Both the Financial Accounting Standards Board (FASB) for United States Generally Accepted Accounting Principles (US GAAP) and the International Accounting Standards Board (IASB) for International Financial Reporting Standards (IFRS) publish conceptual frameworks. US GAAP Concept Statements IFRS Conceptual Framework The FASB and IASB both say they publish the conceptual frameworks to help them write financial reporting and accounting standards and to help the public better understand the standards that are written. But the thing is, the conceptual frameworks provided by the FASB and IASB are (a) not very practical or useful to everyday accountants, (b) not organized to be practical, (c) are not consistently described between US GAAP and IFRS, and (d) are not completely specified. Further, the conceptual frameworks are written in "books" effectively as contrast to being created in the form of a UML model or ontology or theory. One example of something missing from both the US G

As I have previously pointed out ; proficiency is the capability, skill, and knowledge that you might have for doing something. There are general levels of proficiency: literacy, fluency, mastery.  Proficiency is a progression. Pedagogy is the art, science, and practice of teaching. Teachers can help one navigate from novice to literacy to fluency and ultimately to mastery. The graphic below ( from this web site ) shows the progression this way: Digital proficiency is the capability to understand the change between "realspace" and "cyberspace".  One key benefit of digital proficiency is that it helps you understand the true limitations of technology. What one needs to understand can change as the tools that become available to the learner changes. Digital proficiency at this point in time is not about things like learning to code or being able to read the XBRL technical specification. In my view, the first step to digital proficiency is digital literacy and the ab

Accounting can be tedious.  An accounting oracle machine can do a lot of the dirty work performed by accounts, freeing up for performing higher value add. Here is a working prototype of an accounting oracle machine . This accounting oracle machine might seem like a toy.  This is no toy. There is already software that can leverage this accounting oracle machine.  Currently, this is overly focused on financial reporting; but that will expand.  It seems that the accounting oracle machine is an information product or a knowledge product . Additional Information : Modern Accountancy Informatics for Accountancy Digital First Mindset Digital Proficiency Global Standards based Accounting and Reporting Oracle Machine Prototype 4 Types of Financial Statements: What They Are and Why They’re Important Fundamental Accounting Concepts (US GAAP, IFRS) HyperCard Java DOCS Prototype3 Prototype2 : (this is a work in progress...don't jump to any conclusions; think brainstorming.  These might be rep

There is a difference between having digital proficiency and having a digital mindset .  You can have digital proficiency and not have a digital mindset.  But it is really hard to have a digital mindset and not have digital proficiency. A digital mindset is, per the article reference above, "a set of attitudes and behaviors that enable people and organizations to see how data, algorithms, and AI open up new possibilities and to chart a path for success in an increasingly technology-intensive world." For starters, right now; most people are just hanging out and waiting for the future to arrive.  As is said, "The best way to predict the future is to create it."  I can tell you from first hand experience that being directly involved helps you understand what the future is probably going to be like. Clearly something is up. I call what is happening " the great transmutation ".  Others call it " the great upheaval ".  Still others refer to what is g

Inspired by the Framework for Legal Reasoning explained in the book Legal Informatics that is based on the paper ANGELIC II: An Improved Methodology for Representing Legal Domain Knowledge ; I am going to create a Framework for Financial Reasoning  using those techniques and see what I can get that system to do. Systematic computational analysis of general purpose financial reports is a tool needed to work with such reports in the information age. I am going to use the XBRL technical syntax to represent the rules. I am going to use the certainty factor model used by domains like medicine and legal.  This, from the link above, explains the certainty factor model: The certainty-factor (CF) model is a method for managing uncertainty in rule-based systems for medicine and other domains that included the assumptions that faults or hypotheses were mutually exclusive and exhaustive, and pieces of evidence were conditionally independent, given each fault or hypothesis. What this seems to do

A general purpose financial statement has a formal structure that varies only slightly from industry to industry, country to country, and therefore from reporting economic entity to reporting economic entity. This regularity is by design. The trend is toward even more standardization.  Examples of that standardization include International Financial Reporting Standards (IFRS), United States Generally Accepted Accounting Principles (US GAAP), and the Extensible Business Reporting Language ( XBRL ). In fact, general purpose financial statements are so formal and predictable as to be literally mechanical. Over the past 50 years, these general purpose financial statements have grown in size and complexity. And yet, the general mechanism to construct and analyzed has not changed that much for these important artifacts of the global capital markets. The general purpose financial statement is a designed system; it has been created by humans for a purpose. The global capital markets use the ge