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Extensible Business Reporting Language (XBRL)

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The Extensible Business Reporting Language (XBRL) was started in 1998 by Charlie Hoffman to transform business reporting. The American Institute of Certified Public Accountants (AICPA) provided support by funding Hoffman's initiative. Hoffman collaborated with other individuals to develop a plan for XML-based financial statements and called it extensible financial reporting markup language (XFRML) in 1999. The name was later changed from XFRML to XBRL to accommodate other aspects of the business other than financial reporting. The first taxonomy development for commercial and industrial companies (CI taxonomy) was launched in October 1999, with the first held XBRL having 12 committee members. In 2001, Morgan Stanley became the first firm to use the XBRL to tag its financial information, and Microsoft became the first technology firm to report its financial statements in XBRL in 2002. Microsoft, PWC, and NASDAQ launched the XBRL pilot project in July 2002. By April 2003, the XBRL committee had gained approximately 170 members. According to Beerbaum and Puaschunder (2019), the overall objective of XBRL was to provide transparency. This was achieved through electronic communication of financial information and providing a common format for reporting.

The United Kingdom utilizes XBRL through three different taxonomies. The financial reporting council taxonomy is used for accounting, the corporation computational taxonomy is used for computing taxes, and the detailed profit and loss taxonomy is used for profit and loss computations. The UK-based XBRL for company reporting is referred to as Inline XBRL (Sir, 2018). It contains human-readable reports in HTML and XBRL tags for computer-readable reports. Japan was among the first Asian countries to adopt XBRL. Japan adopted XBRL to attract more foreign investors to the Japanese money market. The government made XBRL mandatory for all listed companies in the country. XBRL is considered to aid financial reporting and shape a better structure for security regulators, especially the Tokyo Stock Exchange (TSE). Japan is also using XBRL in statutory disclosure systems. This shows that different countries use XBRL in different ways.

The Securities and Exchange Commission signed a mandate for all public companies to file interactive data with the SEC in 2009 during the Obama administration. The SEC invested in making changes to the initial EDGAR database that only provided electronic filing for companies and adopted XBRL before implementing the interactive data mandate (Ilias, 2017). SEC utilizes XBRL, which makes company information available in XBRL format. XBRL has enabled SEC to ensure executive compensation information is available for the largest 500 public firms in the United States. It also utilizes XBRL in stock options backdating probes. SEC initiated reforms in credit ratings that required rating agencies to ensure mutual funds provided a summary of risks and returns in XBRL format (Sir, 2018). Another reform requires all public corporations to make financial information available in XBRL. The EDGAR was upgraded to accommodate and support the 2021 U.S. GAAP taxonomy and the 2021 SEC taxonomy. Issues caused by the adoption and implementation of XBRL include hampered data due to third-party XBRL service providers and the use of taxonomy extensions.

In conclusion, XBRL was initiated by Charlie Hoffman and supported by AICPA with the main objective of transforming financial reporting by creating transparency and a common reporting format. Many countries have adopted XBRL, including the US, Japan, and the U.K., which use XBRL in different forms of taxonomies. SEC also adopted XBRL, advocated for more adoption, and introduced the Interactive data filing mandate for all public companies.

References

Beerbaum, D., & Puaschunder, J. M. (2019). Towards an XBRL-enabled Sustainability Taxonomy–A behavioral accounting approach. Journal of Applied Research in the Digital Economy (JADE). http://journalofappliedresearch.com/index.php/JADE/article/view/7

Ilias, A. (2017). The Practitioner's Expectation of Real-Time Reporting: Case of the eXtensible Business Reporting Language (XBRL). Global Business & Management Research, 9(3). http://www.gbmrjournal.com/pdf/vol.%209%20no.%203/V9N3-1.pdf

Sir, E. (2018). Inline XBRL New Emerging Technology. Global Journal of Management And Business Research. https://journalofbusiness.org/index.php/GJMBR/article/view/2423