A review of the study on the impacts of the Extensible Business Reporting Language (XBRL)

eXtensible business reporting language (XBRL) is an electronic tool with the acceptable global standard for the electronic financial data to communicate and to be compiled, analyzed and shared among the stakeholders. The implementation of XBRL brings some benefits and impacts to all of the users of financial reports. This study aims to identify the research trends on the impact of XBRL and issues related to it. Forty-six articles related to the impact of XBRL was extracted from the Scopus database and Google Scholar. The result from the study found that a study regarding the XBRL impact has shown slightly increase until 2014 but has not grown much since then. There are a few perspectives that have been discovered to investigates on how XBRL affected certain users of the financial reports. This study will give a general picture of the current research on the impact of XBRL, the trend, and future direction of the research related to the XBRL

The Quality of XBRL Structured Financial Statements: An Empirical Examination of Custom Tags

In 2009 the US Securities and Exchange Commission (SEC) adopted the eXtensible Business Reporting Language (XBRL) system to improve the process by which financial statements can be used. Interactive financial data filed with the SEC using XBRL provides easily readable and comparable financial data, thereby improving transparency and efficiency in the corporate market. SEC rules permit companies to use custom tags in their financial reports in cases when an appropriate element cannot be found in the Financial Accounting Standards Board (FASB) standard XBRL taxonomy. The inordinate use of custom tags may result in a reduction of financial report quality by diminishing the comparability and usability of filings by investors and analysts. Using XBRL-based empirical data from 2015 to 2017 fiscal years, this paper explores the inordinate use of custom tags. Do high uses of custom tags result from the complexity of a company’s operational structure or are they used deliberately by managers attempting to manipulate their financial disclosures? I find that the use of custom tags is positively related to variables indicating the lower quality of financial reports

Homogenization and comparability of financial information through XBRL

RESUMEN: Los constantes cambios del mercado han creado la necesidad de aplicar sistemas de información financieros más confiables y comparables, de manera que el lenguaje de los negocios sea cada vez más generalizado. El XBRL como lenguaje estándar permite que los reportes contables y financieros de una entidad sean leídos y entendidos en cualquier lugar del mundo, de manera que guarden simetría y den transparencia frente a la información que se reporta. Este trabajo realiza un estudio comparativo entre los países con mayores fuentes de experiencia en la aplicación de la herramienta XBRL y el caso colombiano, con el objetivo de reflejar las ventajas y desventajas que conlleva la implementación de esta herramienta. Se evidencia que la herramienta se ha ido constituyendo más en un proceso de verificación de información para los organismos de control que en un lenguaje estándar para disminuir la asimetría y la transparencia en las revelaciones.ABSTARCT: Constant changes in the market have created the need of applying more reliable accounting information systems, in a way that the business language becomes increasingly generalized. XBRL as a standard language provides the possibility that the accounting and financial reports be read and understood in anywhere in the world, so that they have symmetry and are transparent in the reported information. A comparative study is carried out in this work, between the countries the most experienced in the application of this tool XBRL, and the Colombian case, the last with the aim of reflecting the advantage and disadvantages involved in the implementation of this tool. Finally, it is evidenced that the tool has been constituted more as a verification process for control bodies than as a standard language to decrease the asymmetry and transparency in the revelations

Impact of XBRL adoption on financial reporting quality: a global evidence

Purpose: In this paper, we examine the effect of XBRL adoption on financial reporting quality at the country-level (developing and developed countries). Design/methodology: We use data from 98 developed and developing countries between 2005-2018. We collected data from various sources such as the World Economic Forum, World Development Indicators, World Governance Indicators and XBRL website. Finding: Our results show that XBRL is associated with an increased financial reporting quality. However, the relationship is stronger in developing countries than in developed countries. We also find that the results remain the same after accounting for years of XBRL experience and the effect of accounting globalisation. The results are consistent with the assumption that XBRL formatted financial statements improve information efficiency through increased searching efficiency, quality of display, and comparability. Our results are robust to alternative econometric modifications such as controlling for country, year effects and endogeneity. Implications: Our results can potentially assist the XBRL promoters and regulators in expeditiously assessing the benefits of XBRL and advocating its adoption by many countries. Our findings offer more motivations for regulators around the world to mandate this new filing standard format. Originality: This study contributes to the literature by providing empirical evidence on the consequences of XBRL at the country-level. The present study provides evidence on an important question of whether the XBRL, new information technology in the accounting field, can play a useful role in improving financial reporting

Transformação digital do reporte financeiro: o caso Mota-Engil

O presente relatório completa a fase final do Mestrado em Finanças Empresariais, no Instituto Superior de Contabilidade e Administração do Porto (ISCAP) e tem como intuito descrever as várias atividades desenvolvidas no decorrer do estágio curricular, na entidade Mota-Engil Global, com início no dia 2 de novembro de 2022 e o seu término no dia 12 de maio de 2023. Num cenário de crescente globalização da economia e de uma maior complexidade associada ao ambiente empresarial, surge a necessidade de adoção e utilização de padrões internacionais de divulgação da informação nos reportes financeiros das empresas, com vista à normalização e harmonização contabilística e à satisfação de necessidades e interesses comuns. No entanto, apesar da normalização contabilística suportada na União Europeia pelo Regulamento (CE) n.º 1606/2002, o aparecimento do European Single Eletronic Format (ESEF) e a consequente obrigação das empresas cotadas apresentarem o seu reporte financeiro na linguagem XBRL (eXtensible Business Reporting Language), constatou-se a existência de reduzida investigação associada ao tema e, por isso, é importante e pertinente perceber, para além do funcionamento da linguagem, como tem sido a sua evolução histórica e a importância da sua implementação em Portugal. Este foi um dos tópicos centrais do estágio e essa experiência é apresentada neste relatório.This report completes the final phase of the Master's Degree in Business Finance, at the Instituto Superior de Contabilidade e Administração do Porto (ISCAP) and aims to describe the various activities developed during the curricular internship, at the entity Mota-Engil Global, starting in November 2, 2022 and ends on May 12, 2023. In a scenario of increasing globalization of the economy and greater complexity associated with the business environment, there is a need to adopt and use international standards for the disclosure of information in companies' financial reports, with a view to standardizing and harmonizing accounting and meeting needs and common interests. However, despite the accounting standardization supported in the European Union by Regulation (CE) n.º 1606/2002, the appearance of the European Single Electronic Format (ESEF) and the consequent obligation for listed companies to present their financial reports in XBRL (eXtensible Business Reporting Language), it was found that there is little research associated with the topic and, therefore, it is important and pertinent to understand, in addition to the functioning of the language, how its historical evolution has been and the importance of its implementation in Portugal. This was one of the central topics of the internship and this experience is presented in this report

Empirical investigations into corporate reporting in Europe: A financial market perspective on determinants and consequences of sustainability and digital reporting

This paper-based dissertation comprises five essays dealing with corporate sustainability and digital reporting and is structured in six chapters. The first chapter is the introduction and provides an overview of the structure and aims of the dissertation, lays out the contribution of the work, and introduces the five manuscripts. The second chapter, respectively the first manuscript, deals with the consequences of mandatory sustainability reporting in Europe. Specifically, the study deals with the question whether Directive 2014/95/EU has achieved its objectives of increasing reporting quantity and quality. In the third chapter, the sustainability reports of the largest European firms are analyzed using computer-aided text analysis. This study investigates whether and how external assurance of sustainability reports is beneficial from the viewpoint of report transparency, which is proxied by reporting scope, optimism, and readability. In the fourth chapter, the role of corporate sustainability in the context of M&A transactions is examined, precisely whether sustainability influences the premia paid in M&A transactions. The fifth and the sixth chapters center around the voluntary usage of online financial reporting (OFR) in Europe. While the fifth chapter is concerned with the usage and empirical determinants of OFR, the analysis in the sixth chapter examines the impact of OFR on the financial market, specifically on analyst following and stock liquidity

Silence in Market Reaction to Annual Reports

Research problem - The literature suggests that the market either does not react or reacts with a delay to the content of annual reports, concerning notion given their importance for investment decisions due to the value relevance of the information they convey. According to the Efficient Market Hypothesis, the market should exhibit a prompt reaction to their release. Rationale - This study aims to uncover the underlying reasons for investors' lack of response to annual report filings. It predicts that the reaction depends, among other factors, on the release of preliminary disclosures of financial results, the method of distribution of annual reports and the length of an annual disclosure. The study examines the market reaction to FTSE100 companies' annual reports from 2006 to 2016. It also considers investor response to preliminary statements of annual. Specifically, it investigates whether investors react more promptly to preliminary disclosures compared to the more detailed annual reports, and how the absence of such preliminary reports might shift attention and reaction time to the information content of annual reports. Furthermore, the study examines changes in the market reaction associated with the shift from a paper-based submission system to the electronic National Storage Mechanism (NSM). This comparison aims to assess whether technological advancements in the dissemination method of corporate disclosure have improved market efficiency and accelerated investors’ response time. Lastly, the study investigates the effect of report length on the market, specifically looking at whether the market reacts differently to lengthier reports compared to those that are more concise. Research methods - To test the efficiency of market reactions, the researcher employs a short-run event study methodology to assess the impact of filings of annual reports on companies’ returns. The study determines whether the filing events captured abnormal returns compared to what would be expected if no filings occurred. If such abnormal returns are observed, it is concluded that the event impacted the companies' returns and that the market reacted efficiently to these filings. The event study, applied to all five enquiries, is followed by further tests on the impact of lengthy reporting on the market reaction using regression analysis. This additional analysis allows for the validation of findings by accounting for time, industry trends, and companies' specific characteristics. The model is tested for potential statistical issues, including non-stationarity, heteroscedasticity, multicollinearity and endogeneity, to ensure the reliability and consistency of the coefficient estimates. Main results - The study's results are mixed. It reveals no immediate abnormal reaction to the information content of annual reports. In contrast, the market shows a strong response to preliminary statements of annual reports. Additionally, contrary to the prediction, there is no evidence of the market responding to the content of annual reports in the absence of preliminary statements. Regarding dissemination methods, an abnormal price change is noted, but only in the first year following the National Storage Mechanism (NSM) adoption. Lastly, the study finds evidence supporting the impact of reporting length; investors tend to discount lengthy annual reports while reacting positively to more succinct ones. Conclusion - The study’s findings challenge the Efficient Market Hypothesis by showing a lack of market reactions to the information content of annual reports. This suggests that policies should emphasise the importance of report readability and simplicity to prompt quicker and more efficient investor responses. Specifically, the market tends to react negatively to lengthy reports, while succinct reports cause a positive response, indicating a policy need for guiding companies towards more concise reporting, including setting standards for report length. In the final section, the study points out the potential of artificial intelligence AI and machine learning in improving market efficiency by condensing reports, processing complex information effectively and analysing underlying sentiments and patterns in financial reporting, which can be important for detecting anomalies or obfuscation. This can aid in developing more informed and timely trading strategies, especially when the market underreacts or reacts with a delay to new information. Overall, the study advocates for policy changes that promote report clarity, technological advancement for better access to corporate disclosures and the use of AI to enhance market efficiency and investor protection