The Financial Report Semantics and Dynamics Theory is an expository paper which explains the semantics and dynamics of a financial report. The theory is a resource for software vendors, accountants, internal auditors, external auditors, regulators, financial analysts, and other business professionals working with semantic, structured, model based digital financial reports which leverage the XBRL medium.

A theory is a tool for understanding, explaining, and making predictions about a given subject matter. A theory describes absolutes. A theory describes the world and tries to describe the principles by which the world operates. A theory can be right or a theory can be wrong; but it has one intent: to discover the essence of some subject matter.

The Financial Report Semantics and Dynamics Theory is NOT a theory of financial reporting; the FASB, IASB, and others establish frameworks for financial reporting. This theory in no way proposes anything related to the profession of financial reporting. This theory explains the semantics and dynamics of a financial report. This theory explains the report itself.

The Financial Report Semantics and Dynamics Theory contains the following:

  • Axioms, or self-evident principles, which are hard to dispute
  • Theorems, or deductions from the axioms, which must be true if the axioms are true
  • Ethics, or world view, which summarizes observations, experience, introspection, and intuition
  • A proof (partial proof at this time, more proofs are encouraged) which uses 8,098 SEC XBRL financial filings to test this theory

This theory was pieced together by its authors, Charles Hoffman and Raynier van Egmond, based on many years of experience working to create the XBRL global standard, using the XBRL global standard, and building software to support the use of the XBRL global standard.