![](bg2.png)
ambiguously on all possible financial situations for a
wide variety of audiences is enormous in scope and
extremely difficult, and therefore exhibit ambiguities
and inconsistencies (Adamides, 2008; FASB, 2009).
There are also a lack of semantic tools and formal
techniques that could assist standard setters in elim-
inating inconsistencies and ambiguities.
Since 2004, a collaborative initiative between the
FASB and IASB aims to jointly issue financial ac-
counting standards and a common conceptual frame-
work because of the acknowledged need for inter-
national unification and a sound foundation for fu-
ture financial accounting standards that are principles-
based, internally consistent and internationally con-
verged (FASB, 2010; Booth, 2003; FASAC, 2004).
This paper reports on an investigation into the use
of ontologies as a mechanism to detect and manage
ambiguities and inconsistencies. We argue that the
creation of a formal ontology could be a starting point
to develop an unambiguous conceptual framework for
financial accounting standards.Ontologies and their
associated technologies made an appearance within
Computer Science during the past ten to fifteen years
mainly due to advances in reasoning and modeling
technologies (Wolstencroft et al., 2005; Hahn and
Schulz, 2007). A formal and widely used definition
is that of Gr
¨
uber who defines an ontology as a formal
specification of a conceptualisation (Gr
¨
uber, 1993).
An ontology formally describes a domain model in a
way that attaches meaning to the terms (concepts) and
relations between these concepts used for describing
the domain.
Ontologies allow for the construction of complex
and consistent conceptual models, but more signif-
icantly, ontologies can assist with the unambiguous
formalisation of the terminology of a domain, en-
abling not only people, but also computers to un-
derstand, share and reason using knowledge. Exam-
ples where ontologies were applied for standardisa-
tion with substantial benefit in the recent past include
the Gene Ontology (GO) (GO, 2011) and Snomed CT
(IHTSDO, 2011). In both these examples formal on-
tology technologies were used with great benefit to
create an unambiguous and consistent terminology of
a domain of discourse, which lead to further benefits
such as information integration across sub-disciplines
in the domain.
The construction and maintenance of formal on-
tologies is possible due to the availability of on-
tology languages such as the class of logics called
description logics or DLs, equipped with a well-
defined semantics and powerful reasoning tools
(Baader et al., 2003). The W3C’s Web Ontology
Language (OWL) standard is based on a family of
expressive Description Logics (W3C, 2006; McGuin-
ness and van Harmelen, 2004). One of the conse-
quences of the standardisation of OWL by die W3C
is the development of several tools and reasoners that
support the OWL standard such as Prot
´
eg
´
e 4 and
SWOOP (Protege, 2011; SWOOP, 2009), Fact++ and
Pellet (Fact++, 2009; Pellet, 2009)
1
.
This paper is concerned with the question of how
formal ontology construction using available tools
could assist in dealing with and eliminating incon-
sistencies and ambiguities within and between dif-
ferent financial accounting standards. Definitions are
used as foundations in any standardisation effort and
should, especially in an environment such as account-
ing where data should be interpreted correctly by any-
one accessing the data, not be inconsistent or am-
biguous. The first step in our research was to deter-
mine whether formal ontology technologies could be
used to formalise the accounting conceptual frame-
work definitions that has to guide the setting of stan-
dards.
3 ONTOLOGY CONSTRUCTION
The approach followed was roughly based on an on-
tology engineering methodology as defined by both
Horridge (2009) and Noy (2000) . We used Prot
´
eg
´
e 4
to develop an OWL 2.0 ontology for the basic defini-
tions of the core elements necessary in the conceptual
framework (Protege, 2011). Problems encountered,
modeling decisions as well as our solutions are dis-
cussed in detail in a report available at http://url-to-
be-provided. In this paper we depict the formal defin-
tions in DL notation in Table 1.
For the purpose of this paper we consider the defi-
nitions of the elements directly related to the measure-
ment of financial position as defined in the Concep-
tual Framework Document Chapter 4 (IASB, 2011).
The elements directly related to the measurement of
financial position are assets, liabilities and equity.
These are defined as follow:
(a) An asset is a resource controlled by the entity as
a result of past events and from which future eco-
nomic benefits are expected to flow to the entity.
(b) A liability is a present obligation of the entity
arising from past events, the settlement of which
is expected to result in an outflow from the entity
of resources embodying economic benefits.
(c) Equity is the residual interest in the assets of the
entity after deducting all its liabilities.
1
A summary of a substantial num-
ber of DL reasoners can be found at
http://www.cs.man.ac.uk/∼sattler/reasoners.html
KEOD 2011 - International Conference on Knowledge Engineering and Ontology Development
420