Some documents record information as a literature book, for example, the Odyssey by Homer. There are other documents capable of creating social entities, for example, a financial document, which one, enforced by law (also a document), can transform one person or corporation into a debtor or a creditor. In the present paper, we start to investigate the ontological aspects of financial documents, particularly the balance sheet, as part of an ongoing project for an accounting and corporative ontology. To reach our goals, we first contextualize financial documents and explain what a balance sheet is. Then, we advance a meaning for money and its value in the ontological sense, thus suggesting a place for it within Basic Formal Ontology (BFO) framework. Then, we also address issues concerning parts of documents to explain what the accounts in a balance sheet represent in reality. Finally, we provide a first attempt of an axiomatization in OWL for the issues discussed so far. We hope that the initiative can contribute so that studies in social ontology increasingly acquire a realistic character.
Any person or modern corporation needs to create, manipulate and keep several kinds of financial documents during their life span. In the case of corporations, such a need arises from the commitment with partners and shareholders in controlling business for for-profit purposes. Also, from obligations to pay taxes to government agencies like the Federal Revenue Service.
Within the various financial documents of this kind that one can number, the balance sheet is a vital one. By using a balance sheet, accountants can answer questions about whether or not a business is thriving. In addition, it is a mandatory document for the majority of corporations in order to meet obligations regarding taxes.
As a whole, the balance sheet has the primary purpose of revealing the corporation's financial situation, a sort of picture of it on a specific date. The balance sheet comprises main blocks: assets, liabilities, and stockholders' equity (Figure 1). The assets block (Figure 1, left side) represents the rights of a corporation, in different degrees of liquidity, the most liquid on the top. The liabilities block (Figure 1, right side) represents obligations according to demand degrees; in other words, what should be paid first comes on the top.
Many of these accounts – regarding assets or liabilities – represent the monetary values of entities in the real world that compose a corporation. However, what does it mean to say that something has a monetary value? In this paper, we investigate an alternative answer for this question in approaching the balance sheet. Taking the balance sheet as a normative document, we focus on how its "parts" – the accounts themselves – can also represent entities other than those provided by the whole document. The remaining paper is organized as follows: Section 2 introduces basic notions about the meaning of money. Section 3 approaches documents and their parts, while Section 4 examines what kind of financial document a "balance sheet" is. Finally, Section 5 presents a preliminary axiomatization of the investigations developed in prior sections.
Among the social acts that compose reality, a relevant kind is the act of promising [
The importance of such a simple situation is made clear by the proposal of the so-called speech acts
[
Ancient human societies had no resources like money. Negotiations were made in terms of exchange. For example, if John had a cow and Mary had apples, they could negotiate their items in an exchange process in which John provided some milk and received apples in return. One issue here is to identify how many units of milk correspond to how many apples. Another issue is that both John and Mary could desire other products and not always they would be able to find someone that possessed the desirable item while also interested in milk or apples. The solution was creating an exchange mechanism to trade products corresponding to a unique and widely accepted entity. Using a mechanism like this, John and Mary would have more options to obtain other desirable things, still offering milk and apples.
The mechanism, nowadays evident to us, consists in the use of money for trade. In this introductory
essay, we define money as something that someone receives in return for providing an item, which can
also be used to acquire other different and desirable items. In basic terms, any specific item can be
assessed – cheap or expensive – according to its usefulness within a community. An item like this
acquires a value, in other words, a combination of debt discharging and purchasing power [
Applying the exchange value to the current monetary system, one can delineate a debit and credit
relation between a debtor and a creditor. The importance of understanding properties and relations like
these resides in their contribution to the functioning of money. It is also important to stress that what
supports money is not physical entities like in chemistry or biology. Ultimately, what support money
and other social entities are people who have powers and functions assigned by society, both by verbal
orders and through documents [
Money and its value are entities recorded when one writes their economic qualities that are useful
for society. When focusing our attention on a record like this – for example, a title of a house and not
on the house itself – we are entering the realm of the social ontology where money lives [
The record that governs all economic assets in a corporation is the balance sheet; a document used to control and pay taxes. As we have already mentioned (Section 1), this document has two main blocks representing the rights and obligations of a corporation. These main blocks, in turn, are divided into other small blocks; for example, the assets block is divided into the following sub-blocks: i) current assets, ii) investments, plant & equipment; iii) intangible assets; iv) other assets. In dividing each of these sub-blocks, again and again, one reaches the minor portion of information within a balance sheet: the account. For example, the first account of current assets block for rights is called cash and cash equivalents, the second is called short-term investments, and so forth (Figure 1). The same happens with the liabilities block, using different accounts for obligations, divided into small parts.
The accounts contained in balance sheets record the value of different rights and obligations held by
the corporation. One can think about accounts like "components" of the balance sheet: an account is a
component of a balance sheet in the social world in the same way that a hand is part of the human body
in the natural world. To adequately address wholes and their parts, one generally takes advantage of the
theories of mereology [
Another approach to understanding a document and its components is to consider them as kinds of
human artifacts [
Efforts to understand documents can be found in Information Artifact Ontology (IAO)2 and in Document Acts Ontology (D-Acts)3, the ontologies of the OBO Foundry4 specialized in documents. IAO has a class called document, a sibling of document part, both subclasses of information content entity. Examples of document part – for example, abstract, sections, authors list, and result, to mention a few – reveal that IAO privileges scientific papers as documents. These subclasses for document parts – although relevant for IAO in the scope of Biomedical research – represent only informal parts related to scientific content. There is no way to represent financial accounts and their values, as in the case of the balance sheet.
D-acts ontology reuses IAO maintaining the same document "parts" and providing other classes that can be useful to address a balance sheet and its accounts. We approach the alternatives provided by IAO and D-acts when investigating the place of balance sheets in an ontology (Section 3).
Finally, another option to be used is Granular Partitions Theory (GPT) based on partitions, which
are defined as cognitive mechanisms employed by people to label, classify, and catalog other people's
activities [
According to Theory A, the partitions created by people divide reality into units and sub-units (or cells and sub-cells). If two units of a partition overlap, then one is a subunit of another. A unit is defined by its position within the partition and by the relationships it maintains with other units. Units can further be nested within one another as constituent subunits. On the other hand, Theory B connects partitions to reality, for example, the relationship between the "partition fruit" and fruit in reality. In other words, Theory B has two directions: it projects partitions onto reality and locates real objects in the partition. Projection is a successful relationship if the object on which a unit is projected is also located in that unit. For example, the architectural design of a building is first produced by the architect's mind, and then, reality will match the design through the construction of the building.
Thus, relationships of projection and localization and GTP as a theory are helpful resources for the present essay. They are applied here to explain the relationships between accounts within a balance sheet and between accounts and reality. Using Theory A, we consider the balance sheet as the maximum 2 Available on the internet on: <http://purl.obolibrary.org/obo/iao.owl >. Access: June 07, 2021. 3 Available on the internet on: <http://purl.obolibrary.org/obo/iao/d-acts.owl>. Access: June 07, 2021. 4 Available on the internet on: <http://www.obofoundry.org/>. Access: June 07, 2021. unit, having "assets" and "liabilities" as sub-units (Figure 2). Besides, the sub-units just mentioned having by themselves balance sheet accounts as sub-units. For example, on the left side (Figure 3), the accounts named cash and cash equivalent and short term investments are sub-units of assets, in addition to be minimum units as well. On the right side (Figure 2), short-term loans payable and the current portion of long-term debt are sub-units of liabilities. Ther are examples of minimum units.
Theory A provides a connection among accounts and blocks and accounts, which matters for future papers. Theory B is relevant for this essay since it can connect entities in the world to accounts in a balance sheet. Nevertheless, using theory B, one can say that any account – short-term investments and inventory – is a minimum unit. Items like this project onto the entity we called exchange value (see Section 2). While the short-term investments account projects partitions onto cash values, the inventory account projects partition onto the value of material assets in the real world, for example, machines and industrial plants. On the other hand, these very same values of cash and inventory are located in accounts, which are themselves partitions.
To find room for balance sheets within the BFO framework, we examine two ontologies mentioned
above specialized in documents. We also employ another mechanism, the illocutionary logic, a theory
that analyses English verbs and their effects within the scope of the speech acts theory [
As we have already mentioned, D-acts reuse IAO's kinds of documents. Thus, in both ontologies,
one can find only one class able to subsume a balance sheet, namely, the IAO's directive information
entity (DIE). A DIE is defined as "an information content entity whose concretizations indicate to their
bearer how to realize them in a process."5 The definition for directives in Searle's view is not so
different from the IAO's DIE, namely: "the primitive for the directive is 'direct,' a verb that means an
attempt to get the hearer to do something as specified, with the alternative of refusal" [
Looking for a place for a balance sheet in IAO, we examined the definitions under IAO's DIE6:
Action specification, Conditional specification, Objective specification, Plan specification. The verb
used in IAO's definition of DIE is "to indicate": "An information content entity whose concretizations
indicate to their bearer how to realize them in a process" (IAO, 2021). This is not one of the
5 Available on the internet on: <http://purl.obolibrary.org/obo/iao.owl >. Access: June 07, 2021.
6 Available on the internet on: <http://purl.obolibrary.org/obo/iao.owl >. Access: June 07, 2021.
illocutionary verbs listed by Searle's account, which are ordered according to what is called point7, in
direct, request, ask, urge, tell, require, demand, command, order, forbid, prohibit, enjoin, permit,
suggest, insist, warn, advise, recommend, beg, supplicate, entreat, beseech, implore, pray [
Informally comparing, the verb "indicate" in the IAO's definition might correspond to the verbs "advise" or "recommend" in Searle's list. We believe that IAO's subclasses of a DIE lack the deontic aspect required if one considers a balance sheet as a mandatory document capable of generating obligations in the form of taxes. Thus, D-acts ontology is required here since it contains a family of "roles" under the deontic role class, which might fulfill the need for rights and obligations.
The impossibility of some distinctions between deontic concepts to clarify philosophical concepts
is well-known [
So, we created another class under IAO's DIE – we called mandatory specification – to
accommodate the balance sheet and other standard financial documents that one might need to
represent. In general lines, the taxonomy can be as bellow.
7 Point means what the speaker intends to do when he performs an act, see Searle and Vanderveken [
A draft of the schema proposed is presented in Figure 4. More details are provided in the next section on the axiomatization (Section 5). From here, we adopt as a notation that classes are written in bold, properties in italics, and both follow the W3C's camel-case style.
So far, we have provided an informal account of a representation for financial documents and their parts. In this section, we formulate the first axiomatization of such representations using OWL constructs in a notation based on Manchester Syntax plus natural language definitions. At this point, we combine the notions presented for money, value, and exchange value, and others (Section 2) to reach the formal account. For the sake of clarity, we rename the exchange value used before (Section 3 and 4) for exchange monetary value. To identify the origin of the reused entities, we use the correspondent namespaces and the fictitious "fin:" to entities created here. Finally, the majority of relations used comes from Relations Ontology (RO)8.
Superclass Definition
iao:InformationContentEntity An account is an information content entity that denotes an exchange monetary process and projects onto some entity in the real world.
fin:projectsOnto some bfo:Entity and iao:denotes some (fin:ExchangingMonetaryProcess) Example of use The short-term loans payable account (of a balance sheet) denotes a monetary exchange process of discharging debts that refer to some asset; the short-term investments account (of a balance sheet) denotes a monetary exchange process of receiving rights that refer to some asset Observation The "denotes" relationship is a sub-property of "is about" (in IAO), which has an information content entity as domain and no range.
Definition A monetary exchange process is the planned process that realizes the role of the debtor or creditor.
Example of use GM sold cars to US public administration in a process where the corporation is the creditor, and the public administration is the debtor.
Definition Receiving a right is a monetary exchange process that realizes the role of the creditor.
Example of use GM is receiving rights from the US administration in a monetary exchange process of selling cars as expected. 8 Available on the internet on: < http://www.obofoundry.org/ontology/ro.html>. Access: June 07, 2021.
Superclass fin: monetary exchange process Definition Discharging debt is a monetary exchange process that realizes the role of the debtor.
Example of use Netflix is paying debts regarding federal taxes to the US administration in the process specified by Federal Revenue Service.
Definition A deontic role that inheres in an agent A, that mutually depends on the existence of a duty holder role borne by agent B, and that specifies B is doing or abstaining from C or providing or surrendering C to A.
Example of use Claimant roles can be discharged by one act of fulfilling a duty (e.g., when I pay back $5 owed to a friend), or they can remain intact and require ongoing adhering to a duty.
Observations The fields "Definition" and "Example of use" came from IAO9.
Definition A deontic role that inheres in an agent A, that mutually depends on the existence of a claimant role borne by agent B, and that specifies A doing or abstaining from some action C, or providing or surrendering C to B.
Example of use Observations
The fields "Definition" and "Example of use" came from IAO10.
Definition Document for payment is a mandatory specification that has a currency, a value, and involves a duty holder role.
and fin:hasCurrency some iao:Symbol and fin:hasExchangeValue exactly “x” xsd:decimal
Example of use GM has an invoice to receive values referred to cars sold to Google.
Definition Document for payment is a mandatory specification with a currency, a value and involves claimant role.
and fin:hasCurrency some iao:Symbol and fin:hasExchangeValue exactly “x” xsd:decimal
Example of use Google has an invoice to pay values referred to cars bought from GM. 9 Available on the internet on: <http://purl.obolibrary.org/obo/IAO_0021013>. Access July 7 2021 10 Available on the internet on: <http://purl.obolibrary.org/obo/IAO_0021016>. Access July 7 2021
The "document for payment" and "document for receipting" are equivalent classes. We could call it "invoice": on the claimant's side, it works as a way of receiving and on the side of the duty holder as a way of paying.
Definition A mandatory specification is a directive information entity that specifies what must happen when a monetary exchange process occurs.
Example of use John has an invoice in his hands specifying what he must pay because of the exchange monetary processes hold with eBay.
Definition A balance sheet is a mandatory specification that has accounts and records the exchange processes that occurred in a corporation.
and fin:hasComponent fin:Accounts and fin:records some fin:ExchangeMonetaryProcess and obi:isSpecifiedInputOf iao:DeonticDocumentAct Example of use The balance sheet of Ford Motor Company specifies that the corporation must pay some value to shareholders.
Observations The deontic document act of which the balance sheet is the input can be an exchange process regarding a tax, a tribute, or a fee.
Super property iao:hasMeasurementValue Equivalent
Range xsd:string Characteristics Example of use A "document for payment" or a "document for receipting" has a currency, for example, dollar, Deutsche mark, or franc.
Observations There is no unit for monetary values in Units of Measurement Ontology (UO), the ontology responsible by units in the OBO scope.
Datatype property – fin:hasExchangeValue
Super property iao:hasMeasurementValue Equivalent
Range xsd:decimal Characteristics Example of use An asset of the corporation has an exchange value of 10,000 dollars; a receipt has an exchange value of 1,000 dollars regarding a health service.
Super property owl:topObjectProperty Equivalent
Characteristics Example of use
A balance sheet has the "land account" and "equipment account" (Figure 1) as components.
We use this relationship from Relations Ontology (RO) since it has no range or domain. However, the natural language definition leads to believe that it is not suitable for the situation here: it is not possible to "disassemble" a balance sheet in accounts in the real world. See the original in RO11 Object property – fin:projectsOnto
Super property owl:topObjectProperty Equivalent
Characteristics inverse of isProjectionOf Example of use In an earthmoving company XYZ, the "equipment account" (Figure 1) projects onto a Caterpillar tractor in the real world.
Object property – fin:isProjectionOf
Super property owl:topObjectProperty Equivalent
Characteristics inverse of fin:projectsOnto Example of use In any company, the cash and cash equivalents kept in the vault are projected onto the "cash account" (Figure 1).
Observations In GPT, the relations are "projection onto" and "located in," but we do not use the second term because it exists in RO with another sense.
In this article, we provided a preliminary effort to the financial documents for corporative domains.
Indeed, this approach is not exactly a novelty since works exist on the theme – see, for example, an
extensive reference by Sartor [
We believe that more research is justified in the scope of financial documents and both documents and their components. This conviction relies on the fact that the investigated entities are pervasive, and parts of document alone, as accounts of a balance sheet, can represent material and social entities. It is worth mentioning that several different financial statements adopted by accounting can be used in the scheme proposed here.
As we mentioned, the approach is preliminary, and much still needs to be done. For example, one
might say that the requirement to be considered money presented before is necessary but not sufficient.
Indeed, several things that are not money could fit the description proposed, such as diamonds, gold,
and cryptocurrencies. For the sake of conclusion, we list limitations observed in writing the paper,
which is not well-defined yet, left to be dealt with in future works:
• In the scope of GPT, what are the relations between cell and sub-cell in a balance sheet?
• Some relationships employed here are not part of RO (the reference for relationships in BFO),
for example, those used to represent GPT and those with the namespace "fin:";
• Deontic distinctions proposed by [
• We believe that the hasComponent relationship should have a broader range and domain, but
we limited it to our purposes here;
• We should add an instantiation of the ontology to explain modeling decisions better;
• Improvements in the literature review are required since there are many good references to be
investigated, for example, theoretical [