A global view and policy insights on XBRL implementation

Posted on February 25, 2022 by Editor

There’s a tremendous amount for readers to get their teeth into in a report out this week from CPA Australia and the University of Adelaide, titled ‘Digital corporate reporting: Global experiences from the G20 and implications for policy formulation,’ by Prof Indrit Troshani and Dr Nick Rowbottom. It analyses digital reporting projects – both capital market- and company registrar-focused – implementing XBRL across G20 nations and other jurisdictions considered of interest, discussing adoption experiences and challenges, considerations for policymakers, and the opportunities offered by digitisation.

“Advances in information technology have radically changed the manner in which corporate information is communicated to users,” write the authors. “Structuring and digitising corporate reporting information [using XBRL] offers potentially significant benefits for key stakeholders across the business information supply chain.” In their comparative review of XBRL implementations, they consider issues such as tagging practices and the balance of flexibility and comparability in the use of extensions; data quality and the use of automated validation checks; and approaches to assurance.

In identifying key considerations for policy formulation, the authors highlight the voluntary versus mandatory question, observing that “voluntary approaches seem more effective when linked to a common expectation that a mandate will be forthcoming in the future. This approach provides a means for companies to generate capacity, skills and organisational knowledge in a voluntary ‘learning’ period before a mandate takes effect.” Without the prospect of a future requirement firms have generally lacked the incentive to invest in XBRL adoption, but on a positive note “as digital XBRL-based filing becomes a norm in major capital markets, knowledge, experiences and software will ease the transition period for those firms subject to future mandates.” Other reflections for policymakers include the choice of XBRL format and approaches to taxonomy development.

The report also offers some really useful explanations of what XBRL is and how digital tagging works, which may come in handy for relative newcomers to digital reporting.

Overall, this strikes us as a thorough and worthwhile overview of the state of play on XBRL implementation in financial reporting, with a slant towards the G20 and other Asian jurisdictions. Let us know what you think, and what you would add! From the Australian perspective, where voluntary disclosures have failed to find traction, CPA Australia draws on the report to urge the government to make digital financial reporting mandatory for listed companies, asserting that “companies, investors, regulators and capital markets will reap the benefits.”

Read more here (download) and here.

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