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Accounting Assignment: Use Of XBRL In Digital Reporting


Digital Reporting: Implications for accounting standard setters, practitioners and researchers
XBRL is “the open international standard for digital business reporting, managed by a global not for profit consortium, XBRL International. XBRL is used around the world, in more than 50 countries. Millions of XBRL documents are created every year, replacing older, paper-based reports with more useful, more effective and more accurate digital versions.

XBRL provides a language in which reporting terms can be authoritatively defined. Those terms can then be used to uniquely represent the contents of financial statements or other kinds of compliance, performance and business reports. XBRL let reporting information move between organisations rapidly, accurately and digitally”.

Professor Ann Tarca, IASB Board member recently gave a speech on digital reporting, and implications for accounting standard setters, practitioners and researchers. Details of her discussion can be accessed at

Go through the above case scenario and prepare a detailed report on accounting assignment addressing the following points:

  1. Review Tarca’s (2020) discussion paper and briefly explain what inline XBRL (iXBRL) technology is and how XBRL is used in digital reporting in the US, Europe, and Australia.
  2. According to Tarca (2020), what factors limit the adoption of digital financial reporting?
  3. In light of Tarca’s discussion and relevant literature (see attached reading list), discuss the costs and benefits of digital financial reporting for financial information users.
  4. Should digital financial reporting be adopted by all companies around the world? Discuss factors that influence the adoption (or not adoption) of digital financial reporting in the context of either Institutional Theory or Positive Accounting Theory.


1. According to the investigation carried on this accounting assignment, Inline XBRL (iXBRL) is a structure of technological XBRL, which allows the creation of a readable document for human beings and also displays the tagging that is embedded in the financial statements (XBRL, 2017). Thus, iXBRL takes the function of XBRL and put it in a format that is more visually appealing and accessible for the users. In addition to that, iXBRL incorporates the tags of XBRL into financial statements that are formatted by HTML instead of filing a separate instance document of XBRL. Overall, iXBRL or inline XBRL is an open standard that enables a solitary document to provide both machine-readable and human-readable structured data. Therefore, iXBRL potentially benefits investors and various other participants in the market that decreases the time and cost required for preparing and submitting information to the relevant commission.

In the US, tagging of XBRL is used that is based on US GAAP taxonomy, which has been developed by FASB (Financial Accounting Standards Board). Since 2009, the SEC (Security Exchange Commission) has made financial statements tagging mandatory that was primarily in a intentional program, and then it became mandatory for all the listed companies under SEC registrants (IFRS, 2020). In the initial phase, there was a tagging of primary financial statements along with footnotes’ block tagging, but at the present there is an existence of comprehensive tagging to the notes.

In Europe, ESMA (European Securities Market Authority) has mandated the use of ESEF (European Single Electronic Format) based on which all the firms listed on the regulated market of EU to organize an iXBRL filing from January 1, 2020 (IFRS, 2020). In addition to that, there is a requirement of the tagging for the financial statements that have been consolidated and have been prepared by using the standards of IFRS.

In Australia, the APRA (Australian Prudential Regulation Authority) has made it mandatory for all banks to provide digital reports. In addition to that, ASIC (Australian Securities and Investments Commission) requires the lodgement of PDF reports along with permission to use XBRL and iXBRL (IFRS, 2020).

2. According to Tarca (2020), the main factor that limits the adoption of digital financial reporting is the lack of updated systems on behalf of the analysts, and the reason behind analysts not updating their system is the non-production of digital financial reports by entities (IFRS, 2020). In addition to that, the investors are not emphasizing on the use of tagged financial statements, and this is a major drawback that is limiting the digital financial reporting's usage. There is a lack of understanding among the investors regarding the use of digital financial reporting that can potentially justify the preparers of financial data of using tagged data along with having the tagged data audited. Feedbacks from analysts and investors have indicated that despite some investors accessing tagged data from the website of SEC or feeds of data, there have been several negative views about the quality and usability of data (US SEC, 2018).

The factor of low demand from investors in terms of making tagged data mandatory for regulators is another major concern that is limiting the use of digital financial reporting. The analysts are hesitating to update their system, which is an ultimate requirement in terms of digital financial reporting as the aspect of tagged data requires a highly capable system. The aspect of tagged data can potentially help the providers of the database, but the facility of tagged data is not accessible for every company around the world, and some aggregators are required to carry on with their existing processes of data collection along with its validation. Overall, the data providers have not been able to provide value-adding activities for their clients, and this, to a large extent, has limited the adoption of digital financial reporting.

3. The cost of digital financial reporting for financial users is indicated by the fact that researchers have claimed reduction of processing information costs based on the mandatory XBRL adoption that also reduces the synchronicity of stock prices by facilitating the acquisition of company-specific information by investors. There is a tendency among investors to process less footnote information as firms sometimes have lesser benefits of disclosure, and thus less incentive is provided on the basis of detailed information. XBRL possesses tremendous potential to decrease both integration and acquisition costs by making it mandatory to provide a unique setting that can help in overcoming identification issues related to processing costs without any changes in the requirements of disclosure (IFRS, 2020). The SEC also argues that digital financial reporting reduced the processing costs for investors by eliminating the need for compilation and manual search of financial amounts. In addition to that, it also enables easier comparison across firms by highlighting the contextual information regarding data items. The main strength of digital financial reporting is the ability of staggering implementation that it provides regarding the design-control for time-specific and firm-specific effects. The major reason for using digital financial reporting by financial users is to generate easier financial information for the investors to analyze, and lower processing costs can increase investors' attention or attention of similar groups such as regulators, media, and analysts. This fact can be proven by the financial users who do not want to use digital financial reporting as they are not able to change the firm’s disclosure upon adoption of XBRL (Shan and Troshani, 2014). Overall, the relation between the processing cost of investors and disclosure of firms is less for those firms that have more sophisticated stakeholders with lowered processing costs. Since managers adjust their style of disclosure based upon investor processing costs, so the cost of digital financial reporting can be considered reasonable for financial users.

There are several benefits of using digital financial reporting for financial users as there is reportedly a tremendously positive relationship between mandatory adoption of XBRL and accuracy of analyst (WANG, 2015). In addition to that, one of the major strengths of digital financial reporting depends upon data reporting that helps in making important decisions by identifying the opportunities that will require more resources and attention. The financial users who use digital financial reporting can use the financial system wherever they want. In addition to that, outsourcing of the tasks related to financial management also becomes easier as several common tasks can be performed rapidly or can be made automated. This will ensure that the financial users are able to focus more on the important tasks along with the aspect of reduced costs. The financial users are also able to view real-time financial information that can potentially be effective in terms of supporting the decision-making of management. The aspect of faster access to data provides financial users to develop new ways of using information. Flexibility is another key benefit of digital financial reporting as it allows interaction and collaboration with the accountants, which makes the concept of concept of reassigning and modifying tasks easy. After the financial users obtain all the relevant financial information based on ease of accessibility, it becomes easier to predict future financial outcomes. Overall, the use of digital financial statements ensures transparency of the financial information, which is a necessary clause in the modern-day business environment, and also, the financial reporting possesses integrity that can generate a sense of trust in the business functioning of a firm. Lastly, digital financial reporting also benefits the environment for financial users by reducing paper consumption by making the information gets distributed through digital channels.

4. Digital financial reporting should be adopted by all companies around the world because the there is a structured form of XBRL data, and all the line items sit beneath the headings that tend to directly reflect the disclosure and presentation requirements of IFRS standards. The financial users will be able to locate notes more easily and identify the specific interest of line items along with the details and amounts. Therefore, by adopting the concept of digital financial reporting, all companies around the world can strengthen their capital market as it comprises of a wide range of stakeholders and the ease of accessibility in financial practice.

Positive accounting theory (PAT) is based on actions that include accounting policy choices that have been made by firms along with the firms' response process to the new standards of accounting (Osho, 2018). The PAT significantly influences the adoption of digital financial reporting based on various factors, which is becoming the ultimate requirement of modern-day business enterprises. The concept of PAT is based on the factors of availability, usage, convenience, and accessibility of financial reporting, and digital financial reporting consists of all the factors related to PAT. Implementation of digital financial reporting will require effective response strategies such as upgraded systems, and the PAT influences the response strategies that are required for applying new standards of accounting. Overall, digital financial reporting will enable better security, functionality, integrity, and flexibility that have become mandatory factors required in the modern accounting system (Jang-Jaccard and Nepal, 2014). Therefore, based on the influence of PAT, modern-day business organizations can consider all the mandatory factors that are required in the financial reporting to make it more efficient and ensure that the digitalized form of financial reporting delivers the best possible results in terms of attracting investors and various other similar that can help in the growth of a company.

IFRS (2020). IFRS - Speech: Digital reporting—questions for practitioners, standard-setters and researchers. [online] Available at: [Accessed 13 May 2021].

Jang-Jaccard, J. and Nepal, S. (2014). A survey of emerging threats in cybersecurity. Journal of Computer and System Sciences, [online] 80(5), pp.973–993. Available at: [Accessed 13 May 2021].

Osho, A. (2018). The General Tenets of Positive Accounting Theory Towards Accounting Practice and Disclosure in Corporate Organizations in Nigeria. [online] Available at: [Accessed 13 May 2021].

Shan, Y.G. and Troshani, I. (2014). Does Xbrl Benefit Financial Statement Auditing? [online] ResearchGate. Available at: [Accessed 13 May 2021].

US SEC (2018). | Staff Observations From Review of Interactive Data Financial Statements (from June 15, 2011). [online] Available at: [Accessed 13 May 2021].


XBRL (2017). iXBRL | XBRL. [online] Available at: [Accessed 13 May 2021].

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