Formation of Financial Reporting in the Conditions of Digital Economy

Journal of Environmental Treatment Techniques

2019, Special Issue on Environment, Management and Economy, Pages: 1125-1129

J. Environ. Treat. Tech.

ISSN: 2309-1185

Journal web link: http://www.jett.dormaj.com

Formation of Financial Reporting in the

Conditions of Digital Economy

Lidiya I. Kulikova, Rinaz Z. Mukhametzyanov^*

Kazan Federal University, Institute of Management, Economics and Finance, Kazan, Russia

Received: 13/09/2019

Accepted: 22/11/2019

Published: 20/12/2019

Abstract

This study is devoted to the study of the development of accounting and the formation of financial reporting in the conditions of

digital economy. The development of digital technologies is generating changes in all areas of life by simplifying it, on the one hand,

and by creating new challenges for future changes in a particular area, on the other hand. These changes apply to accounting and

reporting, which leads to a review of existing approaches. In this article, we highlighted the main directions of development of

accounting and reporting in the context of digitalization of the economy with a detailed disclosure of the features of each direction.

Not only the requirements for the disclosure of information in reports, but also the technologies for accounting and information

processing, accounting facilities, and data presentation format are changing under the influence of the fourth industrial revolution.

The functions of an accountant do not remain without attention, which are expanding in the direction of the obligations of the

financial director in the digital economy. Changes in the quality of the content of financial reporting pose a risk of disclosure of

confidential information, which in turn requires limitation of information by user category. Compliance with all these parameters of

changes shall lead to the formation of financial reporting of a new format, which will meet modern requirements and possibly the

future.

Keywords: Digital economy, Financial reporting, Digital technology, Digital assets

connection with which modern researchers are faced with the

Introduction

task of creating an optimal accounting system and forming

financial reporting on its basis (1). Our task in this study is to

determine the main development directions for the

accounting and reporting in the digital economy, following

which will lead to the formation of financial reporting of a

qualitatively new format with increasing user needs.

In the past few years, the main trend in the global

economy, including Russia, is the development of the digital

economy, which is presupposed by widespread introduction

of information, digital technologies into our daily life that

automate many processes. The state focus on digitalization of

the economy affects the entire system of information support

for the socio-economic processes, changes the system of

accounting and reporting, sets the trend in the scientific

community (conferences, forums, scientific publications),

where they actively discuss the development of

phenomenon under the conditions of "digital economy",

digitalization of the economy”, “development of blockchain

technologies”, “application of neural networks and artificial

intelligence”.

Cloud computing, big data analysis, artificial intelligence

technologies, high automation have become an adversary of

the traditional business model of accounting and reporting

and influenced their future. The development of the digital

economy necessitates a review of conceptual, methodological

and substantive approaches to accounting and reporting, in

2 Methods

To conduct our study, we analyzed the financial reporting

of a number of Russian companies, studied the main trends in

the development of accounting and reporting (including in the

area of regulatory reform), investigated modern digital

technologies in terms of their application for accounting and

financial reporting, analyzed scientific publications on the

subject of domestic and foreign scientists.

“

Before proceeding to the study of the development of

accounting and reporting in the digital economy, we decided

to assess the current state of the current financial reporting

system in Russia to identify the main shortcomings. Our

observations (including those on the financial reporting of a

number of companies) showed that they can be conditionally

divided into three groups (Fig. 1), which indicates the limited

potential for using these reports to make informed

management decisions (2).

Corresponding Author: Rinaz Z. Mukhametzyanov, Kazan

Federal University.

Email: rinaz-mukhametzyanov@rambler.ru.

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Journal of Environmental Treatment Techniques

2019, Special Issue on Environment, Management and Economy, Pages: 1125-1129

Figure 1: Current weaknesses in modern financial reporting

Analysis of the main trends in the development of

accounting and reporting, the possibilities of applying

modern technologies for accounting and financial reporting,

allowed classifying the ongoing changes in the system of

accounting and reporting in the context of digitalization of

the economy. In our opinion, the main trends in the

development of accounting and reporting in the context of the

implementation of the digital economy program can be

divided into 5 interdependent areas:

of digital technologies is also called the fourth industrial

revolution (Industry 4.0) (3). Of course, these technologies

have a significant impact on the accounting and reporting

system. The development of technologies for accounting and

information processing can be conditionally divided into 2

groups:

a) those that have already found wide application in

accounting and reporting

- cloud technologies. The

development of these technologies allows providing instant

access to financial information at any time from anywhere in

the world on-line, send official financial reporting to

regulatory authorities, conduct correspondence with them,

check counterparties for negative factors, etc.;

b) those that have not yet found widespread use, but will

be able to greatly modify the future of accounting and

reporting - blockchain technology, neural networks, etc. It is

assumed that the use of neural networks (artificial

intelligence) will make the collection and registration of facts

of economic life, control and reconciliation a machine work,

and blockchain technologies will protect companies from

falsification and destruction of data through the use of a

single register for storing transaction records and simplify the

preparation of reports for regulatory authorities.

making changes to the technologies for accounting and

information processing;

expansion of accounting facilities;

development of electronic document management;

making changes to the format for the presentation of

accounting data in the reporting;

expansion of the functions and roles of an accountant.

In the next section, we will take a closer look at each of

the identified areas.

Results and Discussion

.1 Making changes to the technologies for accounting and

information processing

The introduction of information technologies in our life is

happening exponentially. The modern period of development

It is assumed that the use of digital technologies will

make a major breakthrough in the formation of financial

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Journal of Environmental Treatment Techniques

2019, Special Issue on Environment, Management and Economy, Pages: 1125-1129

reporting online, bridging the time gap between the reflection

of the facts of economic life in accounting and the reflection

of these data in the items of the financial reporting.

use of electronic document management will increase not

only the efficiency of work, but also give instant access to

them, increase the mobility of employees, and reduce

company's costs by saving paper and cartridges. But the main

advantage in electronic document management is the

simplification of the formation of financial statements by

storing primary data in a single information space.

.2 Expansion of accounting facilities

In the context of the development of the digital economy,

accounting objects are also undergoing changes, which is

associated with an increase in the number of indicators

characterizing various aspects of business and modern trends

in the global economy (4). Currently, there is an active

discussion in the scientific community on the possible

recognition in accounting of digital assets - tokens and

cryptocurrencies. Today, some authors attribute digital

financial assets to intangible assets, while others - to financial

investments, stocks, cash. Our study showed that neither the

Russian accounting system, nor the international accounting

standards regulate the accounting of tokens and

cryptocurrencies today. Professor L.A. Tchaikovskaya and S.

Enus proved (5) that the American accounting standards do

not regulate the accounting of cryptocurrencies and tokens,

which indicates the relevance of the study in this area.

3.4 Making changes to the format for the presentation of

accounting data in the reporting

There is also a change in the presentation format of

accounting and reporting data under the influence of digital

technology. Despite the versatility of areas in accounting and

reporting (creative, intellectual, actuarial, environmental,

strategic, social, financial, managerial, statistical, tax), the

external and internal accounting data are converging and

presenting their data in a single integrated reporting, which is

due to the many repeated indicators in reporting with all its

diversity (financial, tax, statistical, strategic, etc.) and the lack

of time for the formation of various kinds of reporting and for

different user groups (6, 10).

Currently, the national standards of individual countries

Japan, Canada, Germany, Australia, Great Britain, Norway,

Sweden, Belarus, Israel, Bulgaria) provide for transactions

with cryptocurrency and tokens as taxation objects and are

recognized as objects in accounting.

The main problem of the existing financial reporting is

the gap between reflection of the fact of economic life and

the formation of financial reporting. According to some

scientists, the solution to this problem may be the

interconnection of accounting accounts with the items of

financial reporting, while others indicate the need to create a

single information space that would allow reflecting the facts

of economic life directly in the reporting items. An important

role in the implementation of such a single information space

for accounting and the preparation of financial reporting shall

play the ongoing project of XBRL reporting format (7, 11).

This reporting format will allow the report creator generating

data only 1 time with all the facts (if necessary, it can also be

modified) and transmit to the user, who can form the

necessary reporting format based on these data. The main

goal of this program is to provide users with access to

detailed, transparent and at the same time reliable reporting.

Reporting generated in XBRL format will allow receiving

data in the desired format with possible hyperlinks when

processing the data.

If at present, due to limited technical capabilities and

time, the business entity generates a compulsory copy of the

financial reporting both to the tax authority and to its

investors, owners, statistical agencies and other users (as a

result of which it is uninformative for many users, not

relevant, etc.), then in the context of the development of the

digital economy, within the framework of applying the

XBRL reporting format, it will be possible to generate

accounting data for users with the desired and necessary form

of reporting, having previously set up a set of indicators for

each group of interested parties in the reporting program. On

the one hand, this allows complying with the confidentiality

of information, on the other hand, it eliminates redundancy of

indicators for some groups of users, and for others - it ensures

information content (8,12,15-17).

(

.3 Development of electronic document management

system

Electronic document management is gaining popularity in

modern conditions, many different companies are moving to

electronic document management instead of paper. If the

electronic document management is associated with the

exchange of documents between structural units in

commercial organizations (the most common electronic

document management programs: “Optima Workflow”,

“

BOSS-Referent”, “Delo”, “Documentum”, “Euphrat-

Document Management”), then it is also used for interaction

with other institutions in government institutions (mainly the

document management automation system - DMAS - is

used). Currently, electronic document management is actively

implemented by the Central Bank of the Russian Federation,

which uses it to interact with supervised organizations

through "personal accounts", which allows exchanging

documents, letters, as well as accepting reports from these

organizations. It is assumed that this exchange channel can

also be extended to commercial organizations with an aim of

developing electronic document circulation between

contractors and regulatory authorities by establishing

communications on the organization's INN (Taxpayer

Identitifcation Number). Using the company's INN as the

main parameter when searching for counterparty through

personal accounts" will allow identifying the client and not

being mistaken in sending data.

In our opinion, the development of digital economy shall

contribute to the digitization of all accounting documents,

including primary documents, by special encoding of the

details fields, which will allow the organization automatically

recognizing the primary document upon receipt from the

counterparty and transferring it to the accounting system. The

Another, quite a lot of interesting format and one of the

promising areas of information disclosure in financial

reporting is the development of 3D format reporting. Our

study in this direction showed the practical absence of

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Journal of Environmental Treatment Techniques

2019, Special Issue on Environment, Management and Economy, Pages: 1125-1129

scientific publications on this topic, which allows making a

conclusion that the development of this format has begun. In

some form, 3D reporting is used by large public companies in

the preparation of annual financial reporting using active

hyperlinks to reporting items; when clicking on them, the

user is automatically redirected to the reporting page, which

provides explanatory information on this item.

In our understanding, the “3D reporting format” involves

the synthesis of information reflected in financial reporting in

primary documents and other data sources by applying an

active hyperlink to each reporting item to detail and disclose

the clarifying parameters, including non-financial

information. This reporting format allows simplifying the

procedure for analyzing financial reporting due to the wide

development of analytics and seeing the confirming primary

documents for each accounting object by the users. The

proposed detailing of information can be divided into main

are ready to play openly, whether the world is ready to

business without cheating?

Conclusions

The implementation of the digital economy in connection

with the rapid development of digital, information technology

causes a change in all spheres of human life, including

accounting and reporting system. The use of such

technologies encourages the revision of traditional accounting

and reporting models and leads to the need to change this

system in several areas at once, following which in the future

will lead to the full implementation of the digital economy.

Acknowledgements

The work is performed according to the Russian

Government Program of Competitive Growth of Kazan

Federal University.

(

accounting date, supplier data, status of settlements with the

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