Project FIRE

The basis for FIRE - Financial Information Retrieval Ecosystem - is the rather extensive financial information, much of it digitalized, that companies in Sweden and other countries are obliged to submit. Information concerning employees’ salaries and benefits, and employer’s contributions are reported on a monthly basis. Input and output VAT shall also be reported monthly as a rule (although there are exceptions). Shops and similar businesses are obliged to use electronic cash registers and it is compulsory to send electronic invoices to public authorities. These are just a couple of examples and there seems to be no end to the digitalization trend in sight. For example, annual reports can now be submitted to the Swedish Companies Registration Office entirely in digital form.

In the light of the extent of digitalization and the cloud based handling of financial information, we aim to evaluate a model where the obligation to keep records, including the obligation to draw up annual reports, is replaced by a system obliging companies (and perhaps other actors like banks etc.) to submit even more extensive information to an “information hub”. This model is based on the stakeholders (banks, investors, authorities) having access to relatively unprocessed financial information that they process themselves. It would be particularly interesting to examine whether the FIRE model could work in real time, in other words that companies would book invoice information immediately in conjunction with invoicing.

Another reason for looking into whether FIRE may replace EFR (External Financial Reports) is that the latter model contains certain weaknesses. One fundamental problem is that annual reports to a large extent focus on historic events. In Sweden, an annual report might refer to a point in time 1 ½ years prior to publication. Hence, the information might already be outdated when it becomes available to the general public. A further problem is the number of different types of information that must be covered in one and the same EFR. Certain stakeholders do not want companies to be overvalued while others do not wish to see them undervalued. Conflicts of interest in this context can be illustrated using a comparison of investors who already own shares in a company with investors who are thinking about investing in the same company. In addition, the regulations concerning drawing up an ERF are complex and it is all too easy to cook the books. There are thus several factors that speak in favour of evaluating whether there might be an alternative way of submitting, processing and using information. An evaluation of how FIRE might be used to prevent or at least reduce the loss of tax revenue, financial crime and companies from being used for criminal activities as well as to see how FIRE relates to the UN sustainability goals (Agenda 2030) is included in the project.