The REA Accounting And Economic Ontology –Its Use In ISO .
The REA Accounting andEconomic Ontology – Its Use inISO 15944-4 and ItsDevelopment as a LiteraryWarrantbyWilliam E McCarthyMichigan State University
REA Overview REA Resource-Event-Agent REA started off as a semantic accounting model in The AccountingReview (top accounting research journal) In the enterprise (within the firm), it has been used as the basis fornewer types of ERP systems (Workday and others). In the collaboration sphere, it has been used in ISO 15944-4 (Open-edi)as an economic and accounting ontology. We are currently summarizing and integrating the REA work in aresearch monograph commissioned by the American AccountingAssociation (coauthors are Guido Geerts and Graham Gal). We are striving to establish the AAA monograph as a literary warrantfor the accounting domain (thanks for suggestion from Simon Spero). "In general, the warrant of a classification system can be thought of asthe authority a classification invokes first to justify and subsequentlyto verify decisions about what classes/concepts to include in the system,in what order classes/concepts should appear in the schedules, whatunits classes/concepts are divided into, how far subdivision shouldproceed, how much and where synthesis is available, whether citationorder are static or variable and similar questions.Clare Beghtol (1986)2
Enterprise Economic ActivitiesPrincipal“ transactionalmemory external tothe parties of theexchange”Economic storytelling Economic storytellingof interoperablewith semantic models ofcommunitiesof firmsvalue creation by ndumJournal.computerfiles andGeneralLedgerA/ Rec .Sales Ledger.oooAgrarian AgeMercantile AgeFinancialReportingViewOtherViews lstatementsIndustrial AgeEnterprise SystemsAgeSemantic WebAge3
Collaboration Perspective: Trading Partner vs. IndependentEnterprise #1Independent view ofInter-enterpriseeventsBusinessProcessEnterprise #2BusinessProcessBusinessProcessTrading Partner view ofInter-enterprise events(upstream vendors anddownstream ocessEnterprise ted arrows represent flow of goods, services, and cash betweendifferent companies; solid arrows represent flows within companiesDifferent Views of Business Collaboration(ISO 15944-4)This figure is Japan expertcontribution to 15944-4,4
In philosophy and computer science, an ontology is a formalrepresentation of a set of concepts within a domain and therelationships between those concepts. It is used to reason about theproperties of that domain, and may be used to define the ypifiyspecifyspecifyAgent Event EventAgent5
Key REA ontological primitive Economic ResourceEconomicResourceSomething that isscarce and has utility,and is under thecontrol of anenterprise (1982 paper& Ijiri)6
R)Right ofWaySubtypes (possible) for ECONOMIC RESOURCE (ISO 15944-4)7
Economic Agent(ISO ubtypes of Person (15944-4)8
icAgent(Person)controlEconomicResourcePerson and Economic Resource as the Basis forExchange (ISO 15944-4)9
onEconomicAgent(Person)dualityNormative primitives of a transactionontology10
Once upon a time atthe cookie store 11
Cookie-Monster (the customer) and Elmo(the entrepreneur) meet in the (real orvirtual) marketplace, thus setting thestage for an Economic Exchange12
Cookie-Monster and Elmo engage in aSHIPMENT (transfer of Cookie Inventory)13
Cookie-Monster and Elmo engage in aPAYMENT (transfer of Cash)14
Economic ResourceEconomic AgentfromParticipatestock-flowEconomic EventEconomic AgenttoParticipatedualityEconomic AgenttoParticipateEconomic Eventstock-flowEconomic AgentfromParticipateEconomic ResourceModeling requited transactions15
EconomicAgentTypetypifyparticipationAdding TypesEconomicAgent16
ng Commitments17
fyEconomicAgent EconomicEvent ticipateduality1. Green – “What has occurred” – REA, duality, stockflow {inflow, outflow},participate {from, to} {inside, outside}2. Yellow – What could be or should be – TYPES, typify, policy3. Purple – What is planned or scheduled – COMMITMENTS, specify, fulfill,reciprocal, triggers18
Business Process Network(entrepreneur script for creating sentrepreneuranalysisExchange (buy) ProcessesConversion (make) Processes- giveeventtakeeventuseevent on-NegotiationActualization-Post-actualization phasesinside/outside participate1-to-1, 1-to-n, n-to1, m-to-n ost-actualization phasesinside only participaten-to-1 dualities (meronym)19
ionparticipatesClass Model for ISO 15944-4 (Open-edi Ontology)Mediatedtransaction20
Collaboration SpaceValue ExchangeBuyerSellerThird PartySource: ISO 15944-421
icCommitmentspecifiesspecifiesEconomicEvent TypeEconomicAgent itymaterializesEconomicClaim22
micCommitment specifiesEconomicEvent TypeEconomicAgent TypetypifyfulfillstypifyEconomic rializedsettledISO 15944-4 -- Business Objects with States(ebXML source)23
Granularity Hierarchyfor REA BusinessProcess Models (figuredone by Cheryl Dunn)24
Cashpayout Cashpayment raw materials paymentpurchaselabor logisticaloperationlaboracquirepaymentfacilities, services& technologylabordelivered raw ctureoperationpayment serviceacquireshipmentmanufacturejobsalelaborSales empoperationdeliveredmanufactured goodsadvertisecampaignpaymentproduct services25
Enterprise S1(Supplier)Object EnterpriseEnterprise ashBusinessProcessEnterprise S2(Supplier)BusinessProcessfinished goodscashEnterprise C2(Customer)REA Modeling at the Value System (Supply Chain) level -- Trading Partner View26
Planning: In the Planning Phase, both the buyer and seller are engaged in activities to decide whataction to take for acquiring or selling a good, service, and/or right. Identification: The Identification Phase pertains to all those actions or events whereby data isinterchanged among potential buyers and sellers in order to establish a one-to-one linkage. Negotiation: The Negotiation Phase pertains to all those actions and events involving the exchange ofinformation following the Identification Phase where a potential buyer and seller have (1) identified thenature of good(s) and/or service(s) to be provided; and, (2) identified each other at a level of certainty.The process of negotiation is directed at achieving an explicit, mutually understood, and agreed upongoal of a business collaboration and associated terms and conditions. This may include such things asthe detailed specification of the good, service, and/or right, quantity, pricing, after sales servicing,delivery requirements, financing, use of agents and/or third parties, etc. Actualization: The Actualization Phase pertains to all activities or events necessary for the execution ofthe results of the negotiation for an actual business transaction. Normally the seller produces orassembles the goods, starts providing the services, prepares and completes the delivery of good,service, and/or right, etc., to the buyer as agreed according to the terms and conditions agreed upon atthe termination of the Negotiation Phase. Likewise, the buyer begins the transfer of acceptableequivalent value, usually in money, to the seller providing the good, service, and/or right. Post-Actualization: The Post-Actualization Phase includes all of the activities or events and associatedexchanges of information that occur between the buyer and the seller after the agreed upon good,service, and/or right is deemed to have been delivered. These can be activities pertaining to warrantycoverage, service after sales, post-sales financing such as monthly payments or other financialarrangements, consumer complaint handling and redress or some general post-actualizationrelationships between buyer and seller.SOURCE: ISO FDIS 15944-1 – Operational Aspects of Open-edi for implementation27Figure 21 -- ISO Open-edi Phases of a Business Transaction
workflowBusinessProcessPhasesBusinessEventValue cipateEconomicAgentdualityREA Class Model of DifferentGranularity Levels28
REA Overview REA Resource-Event-Agent REA started off as a semantic accounting model in The AccountingReview (top accounting research journal) In the enterprise (within the firm), it has been used as the basis fornewer types of ERP systems (Workday and others). In the collaboration sphere, it has been used in ISO 15944-4 (Open-edi)as an economic and accounting ontology. We are currently summarizing and integrating the REA work in aresearch monograph commissioned by the American AccountingAssociation (coauthors are Guido Geerts and Graham Gal). We are striving to establish the AAA monograph as a literary warrantfor the accounting domain (thanks for suggestion from Simon Spero). "In general, the warrant of a classification system can be thought of asthe authority a classification invokes first to justify and subsequentlyto verify decisions about what classes/concepts to include in the system,in what order classes/concepts should appear in the schedules, whatunits classes/concepts are divided into, how far subdivision shouldproceed, how much and where synthesis is available, whether citationorder are static or variable and similar questions.Clare Beghtol (1986)29
XBRL transaction-level processes (ISO 15944-4) XBRL transfers & transformations, types, commitments, business events, etc.traditionalfinancialstatementsCOMPANY AGeneral LedgerTaxonomy:COMPANY BBusinessServiceInterface(BSI) AccRec (B) – xxSales -- xx COGS – yyInventory – yy Cash -- xxAccRec (B) – xxEnterprise System forCompany raditionalfinancialstatementsGeneral LedgerTaxonomy: Purchases – xxAccPay (A) – xx AccPay (A) -- xxCash–xxCollaborationMessaging Post-ActualizationEnterprise System forCompany B30
-MONSTER31
cookiewas shippedELMOCOOKIE MONSTER31
REA Overview REA Resource-Event-Agent REA started off as a semantic accounting model in The Accounting Review (top accounting research journal) In the enterprise (within the firm), it has been used as the basis for newer types of ERP systems (Workday and others). In the collaboration sphere, it has been used in ISO 15944-4 (Open-edi) as an economic and accounting ontology.
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Integrating REA with some SAP ERP processes may require variants of REA master data records, such as REA articles or REA packaging. This document illustrates a showcase, in which REA variants are used to handle batches in ERP. Similar scenarios might entail what-if simulations, varia
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