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XBRL and the Qualitative Characteristics of Useful Financial Statement Information

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XBRL and the Qualitative Characteristics of Useful Financial Statement Information XBRL and the Qualitative Characteristics of Useful Financial Statement Information Accounting Master's thesis Klaus-Johan Lindfors 2012 Department of Accounting Aalto University School of Economics AALTO UNIVERSITY SCHOOL OF ECONOMICS ABSTRACT Research in Accounting April 20th, 2012 Klaus-Johan Lindfors XBRL AND THE QUALITATIVE CHARATERISTICS OF USEFUL FINANCIAL STATEMENT INFORMATION Purpose of the Thesis The purpose of the thesis is to explore, identify, describe and evaluate technological and accounting issues and problems and their potential solutions that are related to the eXtensible Business Reporting Language (XBRL), together with providing some further research ideas. Research Methods and Data The thesis is conducted as a literature review of scientific journal articles and working papers. XBRL has emerged as a solution to many so-called “wicked” problems related to financial reporting in the Internet, a field where little theoretical understanding can a priori be taken for granted, and where pragmatic problem-solving procedures are needed to develop a solution that can be adopted for general use. The review follows the phases of a constructive Design Research process. Technological and accounting issues are discussed and evaluated at each phase, with the qualitative characteristics of useful financial statement information, relevance and faithful representation as the two fundamental qualitative characteristics and comparability and understandability as the most pertinent of the enhancing qualitative characteristics, used as the main accounting evaluation criteria. Results The results indicate that there still remain many types of significant technical deficiencies in the first officially filed XBRL financial statements. Moreover, XBRL seems to bring in new types of deficiencies, which jeopardize the faithful representation objective of financial statements. Consequently, new types of assurance assertions and procedures are being developed. The flexibility of both accounting standards and XBRL taxonomies seem to lead to severe interoperability and accounting comparability problems, which might be mitigated by for instance adopting strictly template-based accounting standards. Tentative results indicate that XBRL does enhance the usefulness of financial statements by making them more understandable to users, thereby helping them make better investment decisions. The mandatory adoption of XBRL seems to have affected market information conditions in many countries somewhat, but it has not been established yet that XBRL would be affecting the content or relevance of the financial statement information itself. XBRL is viewed by many constituencies as an enabling technology in a longer-term shift from a paper-based to electronic financial reporting paradigm. At present, however, XBRL can be viewed as a regulator-driven infrastructure project, and affordable end-user software will probably be needed for its adoption and acceptance among the investing public. Europe and Finland are lagging behind in introducing XBRL, which may actually help in the end by enabling learning from the mistakes of others. Key Words XBRL, harmonization and standardization, interoperability, comparability, interactivity, understandability, faithful representation, relevance, Design Research i AALTO-YLIOPISTON KAUPPAKORKEAKOULU TIIVISTELMÄ Laskentatoimen tutkielma 20.4.2012 Klaus-Johan Lindfors XBRL JA HYÖDYLLISEN TILINPÄÄTÖSINFORMAATION LAATUOMINAISUUDET Tutkimuksen tavoitteet Tutkimuksen tavoitteena on kartoittaa, tunnistaa, kuvata ja arvioida XBRL-kieleen (engl. eXtensible Business Reporting Language) liittyviä teknologian ja laskentatoimen alojen näkökohtia ja ongelmia ja niiden mahdollisia ratkaisuja, sekä esittää ajatuksia jatkotutkimuksia varten. Tutkimusmenetelmät ja aineisto Tutkimus toteutetaan kirjallisuuskatsauksena, jossa tarkastellaan pääasiassa tieteellisiä artikkeleita ja työpapereita. XBRL-kieli on muodostunut yritysten Internet-raportointiin liittyvien monien niin kutsuttujen ”häijyjen” ongelmien ratkaisutavaksi, jollaisissa ennalta määrättyjen teoreettisten ratkaisumallien olemassaoloa ei voida pitää itsestään selvänä, vaan tarvitaan käytännönläheisiä ongelmanratkaisumenetelmiä. Tutkielmassa noudatetaan konstruktiivisen Design Research -prosessin vaiheita, joissa kussakin tarkastellaan ja arvioidaan sekä teknologisia että laskentatointa koskevia XBRL-kieleen liittyviä näkökohtia. Laskentatoimen osalta arviointiperusteina käytetään hyödyllisen tilinpäätösinformaation laatuominaisuuksia, tärkeimpinä merkityksellisyys ja todenmukainen esittäminen, joita puolestaan tukevat vertailukelpoisuus ja ymmärrettävyys. Tulokset Tutkimusten mukaan ensimmäisissä virallisissa XBRL-tilinpäätöksissä näyttää olevan vielä monenlaisia huomattaviakin teknisiä virheitä. XBRL-kieli näyttää synnyttävän myös uudentyyppisiä puutteita, jotka vaarantavat tilinpäätöstietojen todenmukaisen esittämisen. XBRL-kielisiä tilinpäätöksiä varten ollaankin kehittämässä uudentyyppisiä varmennettavia väittämiä ja menetelmiä. Tilinpäätösstandardien ja XBRL-taksonomioiden joustavuus näyttää johtavan vakaviin yhteentoimivuus- ja vertailukelpoisuusongelmiin, joita voitaisiin ehkä lievittää ottamalla käyttöön tiukan mallipohjaisia tilinpäätösstandardeja. XBRL-kieli näyttää alustavasti auttavan käyttäjiä ymmärtämään tilinpäätöksiä parantaen näin heidän tekemiensä sijoituspäätösten laatua. XBRL-kielen pakollinen käyttöönotto on joissakin maissa vaikuttanut arvopaperimarkkinoiden epäsymmetriseen informaatioon hieman, mutta sen ei vielä ole osoitettu vaikuttaneen itse tilinpäätösinformaation sisältöön tai merkityksellisyyteen. Monet merkittävät tahot pitävät kuitenkin XBRL-kieltä teknologiana, joka pitkällä aikavälillä mahdollistaa siirtymisen paperipohjaisesta elektroniseen tilinpäätösraportointiparadigmaan. Vielä nykyisin XBRL-kieltä voidaan kuitenkin pitää markkinavalvojien vetämänä infrastruktuurihankkeena, ja sen tuleminen laajojen sijoittajaryhmien hyväksymäksi edellyttää todennäköisesti edullisten, loppukäyttäjille suunnattujen ohjelmistojen tuloa markkinoille. Eurooppa ja Suomi ovat jäljessä XBRL- kielen käyttöönotossa, mutta tämä voi lopulta auttaa oppimaan muualla tehdyistä virheistä. Avainsanat XBRL-kieli, harmonisointi ja standardointi, yhteentoimivuus, vertailukelpoisuus, vuorovaikutteisuus, ymmärrettävyys, todenmukainen esittäminen, merkityksellisyys, Design Research ii XBRL AND THE QUALITATIVE CHARATERISTICS OF USEFUL FINANCIAL STATEMENT INFORMATION XBRL AND THE QUALITATIVE CHARATERISTICS OF USEFUL FINANCIAL STATEMENT INFORMATION ......................................................................................... iii TABLE OF CONTENTS .................................................................................................... iii LIST OF TABLES AND LIST OF FIGURES: .................................................................... v 1. INTRODUCTION ........................................................................................................ 1 2. BACKGROUND, PROBLEMS AND METHOD ........................................................ 6 2.1 Background. ...................................................................................................... 6 2.1.1 Financial Reporting and the Internet .......................................................... 6 2.1.2 Benefits Sought From Financial Statement Interoperability ..................... 9 2.2 Problematic Issues............................................................................................ 10 2.2.1 Problematic Technological Issues .............................................................. 10 2.2.2 Problematic Accounting Issues .................................................................. 10 2.3 Design Research Method ................................................................................. 13 3. SUGGESTIONS FOR SOLUTIONS ......................................................................... 17 3.1 Solutions Developed for Technological Problems ........................................ 17 3.1.1 Solutions to the Resource Discovery Problem .......................................... 17 3.1.2 Solutions to the Attribute Recognition Problem – Machine Interpretation vs. XBRL .............................................................................. 18 3.1.3 XBRL - the Artifact for Solving the Attribute Recognition Problem ....... 21 3.2 Developments in Accounting Related to Interoperability and XBRL .......... 33 3.2.1 About the Developments in Accounting ......................................................... 33 3.2.2 Developments Regarding Fundamental Financial Statement Quality Characteristics ............................................................................................. 34 3.2.3 Developments Regarding Comparability .................................................. 37 3.2.4 Developments Regarding Understandability ............................................ 40 4. EVALUATION OF XBRL AS THE SOLUTION ...................................................... 43 4.1 Technological Evaluation ................................................................................. 43 4.1.1 About Studies on the Technological Aspects of XBRL ............................. 43 4.1.2 Studies on the Technical Quality of XBRL Filings .................................... 44 4.1.3 Studies Analyzing the Fit between XBRL and Reporting Practices of Companies.................................................................................................... 47 4.1.4
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