Perhaps the most important thing to recognize is that XBRL-based digital financial reports are structured and not unstructured like older financial report formats. More precicely, XBRL-based digital financial reports are structured for meaning rather than presentation. This short 6 minute video, walks you through this important piece of the puzzle:
Semantics is the meaning behind what you said. The focus here is meaning. Semantics is concerned with meaning. This short video about the Semantic Web helps you understand important things about meaning:
"Begin with the end in mind," is HABIT 2 of Stephen R. Covey's, The Seven Habits of Highly Effective People. Think of digital financial reporting in this way as you look at the very basic query below. What exactly does it take to represent information in a form in one business system so that it can be safely, reliably, predictably, repeatably reusable within another business system? A company creating the information uses one system; the analyst using the information uses a different business system.
Information can be related to other information. For example, one well understood relation in a financial report is the accounting equation, "Assets = Liabilities and Equity". If you go back the comparison of reporting entities, you can see that the balance sheet balances for every economic entity. But how does a machine understand that the balance sheet balances? The answer is machine readable business rules. In that query notice that there is a red "X" in the relation between assets, current assets, and noncurrent assets. If you get your calculator out and foot those numbers, you will see that the information does not add up. I will get into what is going on in another blog post.
The accounting equation is a business rule. Business rules are a key to the meaningful exchange of business information from one system to another system. A business rule is simply an expression of some business requirement. If you represent a business rule in terms that a machine such as a computer can make use of, the machine can help you make sure that business rule is satisfied. Remember the issue with the Virgin Airlines relation between assets, current assets, and noncurrent assets that I mentioned. The relation does not foot. Consider how well a machine such as a computer do with making use of that information?
Clearly "Assets = Liabilities and Equity" is a pretty basic relation, not a very complex business rule. That relation was chosen to be a starting point. Clearly, there are many, many other relations within a financial report. The screen shot below shows just one schedule of information. That simple schedule has about 104 facts that can be tested using machine-readable business rules. See this blog post which walks you through a more sophistocated example. See this crash cource in fundamental accounting concepts which walks you through other basic fundamental accounting relations which exist in financial reports.
Here is a summary of the most important information that you should keep in mind when thinking about digital financial reports: