XBRL-based Digital Financial Reporting

We have entered the "agentic era"; the era of the agent or intelligent software agent . Others refer to this as the "algorithmic economy".  Maybe think many very intelligent  microservices  exchanging information with each other and can work globally. In an interview with BG2, Microsoft CEO Satya Nadella predicts that (paraphrasing) SaaS (software as a service) is dead and that AI agents will replace all software. The entire interview is the first link in "Additional Information" below.  These three videos provide a focused look at this statement: LinkedIn post including short video AI Insights Explorer video  (Microsoft CEO Predicts: "AI Agents Will Replace ALL Software") Microsoft CEO's Shocking Prediction: "Agents will replace ALL software" Here is my personal interpretation of what Satya Nadella is saying and what it means.  First, Nadella says that we are "on the brink of a monumental shift".  I agree with that statem...

Ontologies improve communications.  Ontologies are effectively agreements. Ontologies that are subject-independent are called upper-level or top-level ontologies, and they attempt to define entities and associations between entities that are shared by all areas of knowledge. To our knowledge, no framework is available yet to determine the goodness of an ontology.  However, many criteria have been proposed.  A widely accepted set of criteria is the one discussed in Gruber (1993): clarity, coherence, extendibility, minimal encoding bias,   and   minimal   ontological   commitment.   First   and   foremost,   ontologies   should emphasize the characteristics of clarity and coherence. Clarity implies that definitions are context independent, and coherence  requires   consistency of the definitions. The graphic below was provide on LinkedIn by Andre Gioia  and provide...

Classification is about organizing things into types . 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.  One well known classification...

Over the next year, I am going to create a Master Class in Representing Financial Statement Logic Using XBRL . I now have the tools I need to create that class effectively.  I am able to separate the XBRL related "stuff" from the representation of financial statement information "stuff" because I have the proper tools. I also have a boatload of examples that I have created that enable me to communicate important subtleties and nuances that, before now, you would need years of experience using XBRL to grasp.  Now understanding these important subtleties and nuances is trivial. Here is my raw material which is basically financial statement logic represented using many different approaches using XBRL: (Note that I am using these to test and debug software so there are some issues with these representations currently, but those will go away eventually as the software is tuned.) PROOF-Master : This is the baseline . This has pretty much all the logical complexity that an...

The European Single Market Authority  (ESMA) is an independent European Union (EU) authority whose purpose is to improve investor protection and promote stable, orderly financial markets. As part of that mission, the ESMA collects financial information from regulated companies.  The European Parliament mandates that this information be provided in electronic form using regulatory technical standards (RTS).   To this end, the ESMA developed the European Single Electronic Format (ESEF). That ESEF format is described in the ESEF Reporting Manual . That reporting manual specifies, among other things, that the reports submitted to the ESMA be prepared using Inline XBRL. Inline XBRL is a global standard technical format published by XBRL International. Inline XBRL is composed of two pieces or you might think of them as "layers".  One layer is HTML which is used to present the information so that humans can read that information.  Embedded within that first laye...

Years ago I posed a hypothesis that accounting and audit working papers and schedules could be represented using XBRL and/or RDF in machine readable form and turning those working papers from "documents" into "databases".  After significant experimentation and testing between 2015 and about 2022, I have reached the conclusion that my hypothesis was correct and now I have my theory of Semantic Accounting and Audit Working Paper Archetypes. Here are many of the best details related to my testing, poking, and prodding and prototypes that I constructed to experiment with and test this hypothesis: Case for Sematic Oriented Accounting and Audit Working Papers Special Purpose Logic Spreadsheets for Accountants Semantic Accounting and Auditing Working Papers Modern Spreadsheets AICPA Audit Data Standards Exposure Draft on Target ISO Audit Data Services Introducing the Fact Ledger Deductive Spreadsheet Using logic programming for theory representation and scientific inferenc...

Years ago I posed a hypothesis that business events drive accounting transactions and that economic entities have patterns of business events which could be named and described in machine-readable terms.  After significant experimentation and testing between 2015 and about 2022, I have reached the conclusion that my hypothesis was correct and now I have my theory of business events. Here are many of the best details related to my testing, poking, and prodding and prototypes that I constructed to experiment with and test this hypothesis: Resources, Events, Agents (REA) Description The Joy of Accounting , PART 2, Classic Transactions (page 91) Algorithmic Contract Types Unified Standards (ACTUS) Sensemaking Accounting Basics Essence of Accounting MINI Financial Reporting Scheme (MINI) With Business Events and Classic Transactions Effective Automation of Record to Report Process Narrative for Iteration #4 Record-to-Report Iteration #6 Record-to-Report Iteration #7 Sensemaking is the p...

Open banking is coming to the United States.  Aeropay describes open banking as follows: "Open banking, also known as 'open bank data', is a financial model where consumer banking, transaction, and other financial data is opened for access to third-party providers (TPPs) via application programming interfaces (APIs)." Aeropay provides this graphic to explain open banking: FDX describes open banking as follows: "Open Banking allows consumers to better manage their financial lives. They have direct access to and can more securely share their data. For financial institutions, open banking enables safe data sharing across the ecosystem to enhance product offerings, streamline new customer onboarding, and improve the overall experience." And, "Open banking benefits consumers, small businesses, large corporations, capital markets, and wealth management." Additional Information: FDX Getting Started Guide to Open Banking MISMO Standards  (Mortgage indust...

Traditional accounting systems are imperative in nature.  Effectively, what this means that you tell the accounting system what to do step-by-step. But what if an accounting system were declarative in nature?  Declarative accounting is a way of setting up accounting systems where you focus on what you want the system to do, rather than how the accounting system should do the work. You can understand the difference between imperative and declarative by, say, thinking of how a self driving car might work.  There are perhaps two approaches to giving instructions to a self driving car to, say, get to the airport: Using an imperative approach you're telling the car "Turn right at the next light, then go straight for two miles, then turn left..." You're giving step-by-step instructions to get from where you are to the airport. Using a declarative approach you're telling the car "Take me to the airport." The car figures out the best route, handles the turns, an...

Per Anna Sciortino, Senior Policy officer at the European Single Market Authority (ESMA) in a post on LinkedIn , the Implementing Technical Standards on the Markets in Crypto Assets (MICA) white papers were adopted by the European Commission and published in the EU Official Journal.  That means, MICA crypto-assets white papers will need to be prepared using the Inline XBRL global standard based on a taxonomy ESMA is currently developing and on the templates included in the implementing regulation. This is a big win for the XBRL global standard. For more information, see: ( click here for other languages ) Official regulation in English   Blog Post about Markets in Crypto-assets (MiCA) How SBRM Enables Digital Asset White Paper Compliance Under the EU's MiCA Regulations Prototype MiCA white paper published by Pacioli.ai Introduction to the Markets in Crypto-Assets Regulation  (Watsonlaw) ESMA MiCA White Papers PoC As I understand it, MiCA is a new regulation that will im...

A general purpose financial statement is a logic system designed by humans. As far as I know, there has been no theory, formal or informal, published that describes the mechanical aspects and dynamics of a general purpose financial report. But in order to digitize a general purpose financial statement effectively, one does need a theory or theories to describe such mechanics and dynamics. Here are a series of what I would call a necessary set of "micro-theories" that describe the important mechanics and dynamics of a financial statement.  Note that this set of micro-theories relates to the statement itself, not the financial reporting rules of the financial reporting scheme that describes the specific information contained in that such financial statements.  These micro-theories help one understand my Seattle Method for creating XBRL-based financial statements. This set of eight micro-theories is a minimum bar for any general purpose financial statement. These micro-theo...

Years ago I posed a hypothesis that financial statement logic should be consistent no matter what the physical format used to provide that financial statement information.  After significant testing, between 2015 and about 2018, I have reached the conclusion that my hypothesis was correct and now I have my theory of physical format independence. Here are many of the best details related to my testing, poking, and prodding and prototypes that I constructed to test my hypothesis: Hitchhikers Guide to Metapatterns Neutral Format Templates  (2007 prototype) Neutral Format Tables (2007 prototype) Many Different Data Formats, Why XML? Sensemaking PROOF rendering (auto generated by computer) AASB 1060 rendering (auto generated by computer) Interactive Information Hypercube Sample Instance Proof (PDF) Interactive Information Hypercube (PDF, Prototype) Comprehensive Example (2013) A financial statement tells a story.  That story should be the same story whether the financial ...

Years ago I posed a hypothesis that financial statement had, or should have, mathematical integrity.  After significant testing, between 2015 and about 2018, I have reached the conclusion that my hypothesis was correct and now I have my theory of mathematical integrity. Here are many of the best details related to my testing, poking, and prodding and prototypes that I constructed to test my hypothesis: Gaining an Appreciation of XBRL's Power to Express Business Rules WIP Table Mathematical Computations WIP Table Mathematical Computations (XBRL Formula Testing Result) WIP Table Mathematical Computations XBRL Formula Linkbase Reference Implementation of XBRL-based Financial Report (2013) Understanding Articulation PROOF Articulation Microsoft Mathematical Assertions Mathematical Rules Appended to Microsoft 2017 10-K Fundamentally, much of a financial statement (but not all) comes from information that flows through a general ledger which follows the double entry bookkeeping mathemati...

Years ago I posed a hypothesis that financial statement disclosures had logical patterns of reportability.  After significant testing, between 2015 and about 2018, I have reached the conclusion that my hypothesis was correct and now I have my theory of reportability. Here are many of the best details related to my testing, poking, and prodding and prototypes that I constructed to test my hypothesis: Reporting Checklist (XBRL Cloud) Agenda Improved Reporting Checklist, Natural Language Rules Reporting Checklist Prototype Automating Accounting and Reporting Checklist So, I have said that a financial report contains disclosures . But when specifically is a particular disclosure required to be provided?  Some times,  disclosures are always required.  For example, a balance sheet, income statement, cash flow statement, statement of changes in equity tend to always be required (per an analysis of 6,751 actual financial reports that were provided to the SEC by public compa...

Years ago I posed a hypothesis that financial statement line items had logical types and parts.  After significant testing, between 2015 and about 2018, I have reached the conclusion that my hypothesis was correct and now I have my theory of types and parts. It is worth mentioning that others us different terminology to describe the same sorts of things as what I call "types and parts".  Those other terms include "wider-narrower" relations, "general-special" relations, "class-subclass" relations, "has-part" relations, "whole-part" relations, "part-of" relations, "broader-narrower" relations.  Also used to discuss types and  parts is the notion of "anchoring". Here are many of the best details related to my testing, poking, and prodding and prototypes that I constructed to test my hypothesis: US GAAP Types and Parts IFRS Types and Parts US GAAP Classes Common Elements of Financial Statement (Four S...