XBRL-based Digital Financial Reporting

Modern accountancy will be spinning up over the coming years.  The transition will take time and no one knows exactly how it will turn out; but the change is inevitable .  By accountancy I mean the professional practice of accounting, reporting, auditing, and analysis.  This includes financial accounting, management (cost) accounting, and tax accounting. While no one knows exactly how this change to modern accountancy will turn out, there are plenty of clues that can help you make an educated guess. Here is my list of things that will change: (To effectively understand this list, you need digital literacy . Don't make the mistake of using your old mental map to try and understand.) Accountancy will become less tedious.    Today, accounting can be quite tedious.  Tomorrow, many of the tediousness will be reduced by the creation of improved, smarter tools. Reduced reliance on Excel, more use of semantic spreadsheets.   Excel is a great tool, except...

While the universal technology of accountability is based on medieval traditions, like everything else it is subject to change. Modern accountancy is inevitable. In my view it is also imminent. I have put together a mind map to help me think about and explain what I mean by "modern accountancy".  By "accountancy" I mean accounting, reporting, auditing, and analysis; external compliance reporting, tax accounting, internal management and cost accounting.  All of it. Here is that mind map . (Start at the blue hexagon.) Maybe you would agree that accountancy will undergo change.  Keep in mind that real space and cyberspace (i.e. the internet) do not operate in the same manner.  The territory has changed.  Because the territory has changed, a new map of the world is necessary.  Using old mental maps to understand the future will not work effectively. Imagine it.  Freedom from drudgery. Freedom from the toil of tedious, repetitive, mundane, monotonous task...

These two presentations by Giancarlo Guizzardi are incredibly helpful in upskilling your digital proficiency.   Philosophical Foundations for Ontology-Driven Conceptual Modeling (part 1) Philosophical Foundations for Ontology-Driven Conceptual Modeling (part 2) Guizzardi published a book, Ontological Foundations For Structural Conceptual Models .  The stated objective of the book/thesis was, "The main objective of this thesis is to contribute to the theory of Conceptual Modeling by proposing ontological foundations for structural conceptual models." On slide 47 of the first presentation, Guizzardi mentions " Carving up Reality ".  That is exactly what is done when you digitize something.  To digitize something effectively , you have to have a special set of skills PLUS you need talent, skills, and expertise in the area of knowledge or field that you are "carving up" to make digital.  This is part of digital proficiency . Personally, I am helping to digiti...

Modern accountancy is both inevitable and imminent. However, it is not predetermined. Instead, modern accountancy will be shaped by the decisions made in the coming years. By making informed choices, we can avoid and prevent undesirable outcomes concerning the needs of business professionals such as accountants, auditors, and analysts. This information contributes to helping you making those informed choices. That is my current best synthesis of my work from the past 26 years. That overview and the few connected pages, about 10 pages, is the best that I can put together at this point in time.  Perhaps you can do better. Traditional spreadsheets like Excel have served accountants well for the past 44+ years.  And traditional spreadsheets will continue to serve professional accountants for years to come for certain specific tasks and processes.  But given the increased volume and complexity of information new tools are necessary and because of technologies such as struct...

As I explain in this prior blog post about complexity ; a kludge is an engineering/computer science term that defines what is best described as a workaround or quick-and-dirty solution that is typically clumsy, inelegant, inefficient, difficult to extend and hard to maintain; but it gets the job done. The nautical term for a kludge is jury rig. By contrast, elegance is beauty that shows unusual effectiveness, grace, and simplicity. Actions have consequences.  No action, inaction, is a type of action. While a new paradigm of accountancy is very likely inevitable;  Things like " starting at the end of the chain " and " semantic fragmentation " and the " integration hairball " that now exists were problems in the past and have resulted in many, too many, accountants being what amounts to " data janitors " and " transaction chasers "; they don't need to be problems going forward. But what modern accountancy will look like, while pretty ...

It is time to rethink the design of financial statements. Clay tablets worked well and they had a good run which ended many years ago when the clay tablets were replaced by papyrus and then ultimately paper.  Paper had a good run also but paper financial statements were ultimately replaced by what amounted to an electronic version of that paper; PDF, HTML, and such. We can do better.  Today's demands call for more modern accounting tools . Idealized design  (a.k.a. greenfield project ) is the notion of designing a system without imposing constraints of prior work.  This technique may, or may not, work for rethinking the financial statement. Idealized design might be a harder path in the short term, but taking this approach has very positive long term ramifications. Here are a number of ideas that I would throw at the wall if I were in charge of rethinking the financial statement to make such tools modern: Digital first : The first thing that I would do is abandon the...

In my blog post, Big Idea for 2025: Semantic Accounting and Audit Working Papers , I mentioned the idea of what amounts to modern accounting and audit tools. This is a part of the " fundamental reorientation of the state of affairs " for and the " new physics " of accountancy. To help me think about this idea, communicate this idea to other accountants, but more importantly to help move the OMG's Standard Business Report Model (SBRM) and XBRL International's update to the Open Information Model (OIM) in the appropriate direction; I have created an updated semi-working prototype of such semantic accounting and audit working papers . The easiest way to see the very basics of what is going on is to use this basic viewer . The following is a summary of the significant additions for this iteration: Putting representations for the transaction level , the mezzanine level , and the financial statement together in one "document". Built out an increased a...

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 ...

Logical English (LE) is a controlled natural language which is written in English sentences and those sentences can be translated into logic programming languages such as Prolog , Datalog , or Answer Set Programming .  Note that logic programming can be effectively converted to other programming approaches . Now, imagine a dialect of Logical English specific to Accountancy.  Accountancy has it's on jargon.  Accounting is the language of business .  Basically, the Logical English Dialect for Accountancy would be (a) a more restricted set of Logical English and (b) supplemented with additional specific terms necessary to work effectively in the area of knowledge called accountancy.  This language and terminology is aligned with ISO/IEC Accounting and Economic Ontology , XBRL International's Open Information Model (OIM), OMG's Standard Business Report Model (SBRM), and my Seattle Method . All of this is coordinated and the atomic design methodology is used to ...

There are now three converging logical conceptualizations of business information: XBRL International's Open Information Model (OIM) The Seattle Method which is based on XBRL and focused on achieving very high quality financial report information Object Management Group's (OMG) Standard Business Report Model (SBRM) which provides a logical conceptualization of a business report in RDF/OWL/SHACL. XBRL has been around since 2000 but never defined the business report model particularly well.  I tried to get such a logical conceptualization documented since about 2008.  I created my first logical conceptualization of a financial report, a specialization of the more general business report starting, in about 2012 which evolved to what I now call my Seattle Method.  OMG came up with the idea of the Standard Business Report Model (SBRM) in about December 2018 at a Financial Information Business Ontology (FIBO) meeting where I did a presentation on XBRL. OMG describes SBRM su...

In the United States, the Single Audit is an annual standard audit that any entity that receives over $750,000 in federal funds, federal grants, or federal awards for its operations must comply with. The single audit was established by an act of congress, the Single Audit Act of 1984 .  The objective of this single audit is to make sure taxpayer money provided to states, cities, universities, not-for-profit organizations, Indian Tribes, and others which receive federal assistance is properly spent. These single audits are typically performed by an independent certified public accountant (CPA). Each single audit report, which is a financial statement, is submitted to the Federal Audit Clearinghouse along with information which supports the single audit report. When I was with Price Waterhouse as an auditor I performed single audits.  Each year the U.S. Federal Government provides around $400 billion to these non-federal agencies. It seems like the funding level to require an ...

Semantic fragmentation occurs when information that should be connected is not connected. It occurs when business professionals use inconsistent terms to describe the same thing, inconsistent descriptions of things , or connections which should be made have not been made, etc. Semantic fragmentation contributes to the integration hairball of most business enterprises large and small. Artificial intelligence will not work well in such an environment. Metadata helps to solve this semantic fragmentation problem. Semantic metadata helps to solve this problem even more.  It improves semantic hygiene . It solves the " data janitor " problem. It reduces the threat of inaccuracy . It provides unprecedented clarity . Metadata and semantic metadata work in the background.  But they supercharge software systems and will enable new ways of performing work . Metadata and semantic metadata enable new ways to interact with information. You can get richer answers to your questions faster....