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Dunne, Helliar, Lymer and Mousa, 2009

Executive summary

eXtensible Business Reporting Language (XBRL) has been designed for the digital communication and representation of financial data to allow users throughout the world to access timely, accurate and relevant financial information from world-wide business organisations. An XBRL International Steering Committee oversees the development of XBRL, covering various jurisdictions and generally accepted accounting principle (GAAP) regimes, including the International Accounting Standards Board's International Financial Reporting Standards (IFRS). For each GAAP there is a separate XBRL taxonomy , or list of rules, about how particular items of data are represented in a set of financial statements. Organisations implementing XBRL adopt the relevant taxonomy in their reporting systems and map it onto their accounts.

At the completion of a reporting cycle, companies have a range of processes that summarise their financial activities to produce a set of financial statements. In an XBRL reporting framework, each item in these documents is tagged using the appropriate taxonomy. The outputs created from these tagging exercises are known as instance documents . These instance documents are not in themselves user friendly (eg not designed to be easily human-readable) and, therefore, they are then rendered into a conventional format which is more familiar to users. Unlike other documents that have not been through this process, the rendered documents are then digitally enhanced so that it is easier for stakeholders, both internal and external to an organisation, to use the information in spreadsheets or any other XBRL-enabled software without the need to re-key data or spend time trying to access relevant information.

Thus, a major benefit claimed for XBRL is the ease with which usable information can be obtained from companies as part of a reporting process. The use of the taxonomies to underpin the reports means that the XBRL information garnered from any company will be comparable to the XBRL information from any other company around the world that is using the same taxonomy. The potential benefits to external users could therefore be enormous. Further, if companies begin to adopt XBRL at the internal, transaction, level, the benefits to companies themselves may also be significant, as head offices and subsidiaries across the globe can access data faster, quicker, cheaper and more reliably.

Despite the potential benefits that the XBRL developer community claim will result from its use, few organisations have consciously adopted XBRL, in practice, in the UK to date. This study seeks to understand why there is resistance to adopting XBRL, and how the business case for the adoption of XBRL can be made more visible. In particular, the objectives of this study are to:

• examine general Internet use and the extent of digital reporting
• assess how widespread the knowledge of XBRL is currently within business
• explore the real (rather than claimed) practical benefits of XBRL
• investigate the reasons why XBRL is not being adopted
• examine the audit and assurance ramifications of XBRL
• assess government and regulators' actions with regard to XBRL, and
• explore what training and education has been undertaken by the business community.

In addressing these objectives, the study examines the views of four UK-based stakeholder groups on the adoption of XBRL in organisations. These stakeholders represent some of the key players in the adoption of XBRL in companies:

• business practitioners
• auditors
• tax practitioners, and
• users of financial information.

Questionnaires were sent to each of the four stakeholder groups to ascertain their views on the seven research objectives.

The findings show that, although Internet use and basic forms of digital reporting are very common, with most people having knowledge of PDF and HTML documents, very few practitioners know anything about XBRL. The few that have knowledge of XBRL agree that the reporting technology could be very useful both in enhancing the integrity and reliability of data and speeding up processing times. The major obstacle appears to be the time and effort needed to learn about, and apply, XBRL; practitioners consider that they do not have time in their schedules or resources within their organisations to undertake to learn and implement the technology. Thus, the business case for XBRL has not been made. Software is now available that makes it easy to render XBRL documents into a usable format and spreadsheets are now available with XBRL facilities. These developments have not, however, been deemed adequate encouragement to a more general take-up of the technology.

Our evidence suggests some support in principle for checking that the correct taxonomies have been uploaded and that the tagging of data transactions has been completed in an accurate manner. Nonetheless, there was only limited support in principle for external auditors to carry out this checking, with respondents to the surveys being fairly blasé about this aspect of assurance at this stage of XBRL's development. Thus, the importance of ensuring the reliability and demonstrating the integrity of XBRL taxonomies and tagging does not appear to be currently of great concern to the business community.

Practitioners' views on the role of government and regulators in mandating XBRL use were fairly mixed, despite the fact that most of the agitation for XBRL comes from these sources. This is particularly interesting in the light not only of the Security and Exchange Commission's recent mandating of the use of XBRL for large company filings in the US, but also its use by Companies House and proposed use by Her Majesty's Revenue and Customs (HMRC) for business and company tax filings in the UK. It would appear from the present results that, in general, UK businesses would prefer to decide voluntarily if and when to adopt XBRL, rather than being forced to use the technology by a regulator. There was also concern that companies currently do not have the IT expertise to be able to implement XBRL, despite the recent development of software that is now making this task far easier.

Overall, there is considerable lack of knowledge of XBRL within UK business. Some respondents in the study noted that they had never heard of XBRL until the questionnaire hit their desk but, gratifyingly, they at least took the time to google XBRL to find out a bit more about it!

From these findings the final chapter of this report makes some policy recommendations.

• The business case for organisations to adopt XBRL needs to be made more visible. HMRC, Companies House, professional bodies such as ACCA, and IT specialists should publicise the business case for XBRL more widely.
• The provision of ‘hands-on', user-focused sessions that highlight the interoperability and flexibility of XBRL should be provided by key constituencies such as ACCA. Much of the current publicity is oriented towards technical and IT matters rather than business needs.
• Accountancy practices should set up XBRL specialist teams to advise clients about adopting XBRL.
• The XBRL Consortium in the UK should be enabled to be more proactive in working with key stakeholders to exploit XBRL's benefits.
• Companies should formally review their policies on digital reporting disclosures, and engage with stakeholders about their information requirements.
• The International Auditing and Assurance Standards Board (IAASB) should complete its XBRL project, and issue an ISA as soon as is feasible, to provide guidance on what auditors should be required to do for XBRL filings to give users confidence in the data.
• The FRC should introduce guidelines for the verification of taxonomies and the tagging of data items in the UK , in conjunction with the XBRL-UK Consortium and with the XBRL International Steering Committee as the international overseer of XBRL developments globally.
• The XBRL-UK Consortium should seek wider engagement with the user community.
• Analysts, fund managers and other institutional investors should be made aware of XBRL through their professional bodies, such as the Securities and Investment Institute, National Association of Pension Funds, and the Association of Investment Trust Companies.
• Individuals should assess their CPD requirements and, where necessary, attend courses and keep up to date with XBRL developments.
• IT specialists should develop better rendering tools to make XBRL more useful to businesses and external users of financial information.

In summary, the business case for XBRL needs to be made more effectively than is currently the case. XBRL has the potential to be extremely beneficial to numerous stakeholders, but the full range of possibilities can be realised only when a critical mass of businesses and stakeholders engage with the process and endeavour to move to an XBRL reporting environment. Although the XBRL community may have the technical abilities to develop solutions for widespread benefit, the lack of resources being targeted towards this key step in business reporting is limiting the speed of its application in practice. This is now particularly the case in Europe , for reasons quite apart from the technical ones. The recent direct support by the Securities and Exchange Commission (SEC) for XBRL in the US may leave European financial markets behind now, because they will not be able to take advantage of the opportunities that could be provided by regulatory support for the next generation of financial reporting technology.

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