Accounting measures the concern and records the measuring. Firm ‘s fiscal coverage is the manner to pass on their information with capital markets. XBRL Fiscal Reporting is a radical manner to unwrap company ‘s information to external stakeholders, including the ordinance portion and the market portion. As the new cyberspace based concern coverage linguistic communication, XBRL Financial Reporting offers many benefits in the readying, analysis, and communicating of concern information. ( XBRL International ) To happen out the positive impact of XBRL Financial Reporting, prior researches about the benefits of XBRL acceptance are reviewed. Researchs about the impact of XBRL describing on the capital market show that the acceptance of XBRL coverage has negative relation with information dissymmetry and convey incremental information to capital markets. Besides, researches about the impact of XBRL describing acceptance to investors reported that XBRL-based fiscal information increased investors ‘ ability to get and incorporate fiscal information in their investing determination process.
Besides, as XBRL Financial Reporting is expected to replace traditional fiscal coverage, it is of import to research how to give confidence on XBRL Financial Reporting. This is because the confidence on XBRL describing strengthens the function of XBRL Financial Reporting as an information beginning. Prior researches about the issues in confidence on XBRL case papers and the conceptual model for the confidence on XBRL coverage are reviewed in this paper.
In the last subdivision, the prospective research about the impact of XBRL Financial Reporting on the direction accounting determination process is presented. The research suggestion illustrates the expected positive consequence of XBRL Financial Reporting on direction cut downing the existent net incomes direction.
What is XBRL?
In this subdivision, the XBRL ( extensile Business Reporting Language ) is a standard XML ( extensile Markup Language ) coverage linguistic communication for pass oning fiscal information through the cyberspace. XBRL aims to heighten the efficiency, truth, and dependability of fiscal coverage. XBRL offers fiscal and non-financial informations contexts. Data in XBRL format does non necessitate be converted from one application to another because informations are independent of applications by utilizing standard tickets for informations points ( Farewell, 2006 ) . Standard tags in XBRL paperss enable specific designation, convenient analysis, automatic exchange and storing, and dependable presentation of fiscal information in across different package applications. XBRL significantly increases the velocity of fiscal informations intervention, reduces the likeliness of mistake and permits automatic checking of information. A Consumers of fiscal information, including investors, analysts, fiscal establishments and regulators, can have, happen, comparison and analyse informations much more quickly and expeditiously if it is in XBRL format ( XBRL International ) .
Figure 1 XBRL Instance Document Generating Procedure.
Figure 1 illustrates the XBRL case papers bring forthing process. The process starts with choosing the XBRL proficient specification. By choosing and keeping the XBRL specification, the comparison and consistence of XBRL taxonomies are valid. XBRL model consists of XBRL taxonomy and XBRL case paperss.
2.1 XBRL Taxonomy
In XBRL, all of the elements are grouped together into a aggregation of fiscal and concern coverage footings, taxonomy.A XBRL Taxonomies map as the lexicons of elements. XBRL Taxonomies are the classification schemes which define the peculiar ticket for single points of informations, such as “ net net income ” ( XBRL International ) . By labeling the concern information utilizing XBRL taxonomy, the concern information can be more expeditiously and efficaciously processed, analyzed, and distributed. Besides, XBRL is easy extensile. Taxonomy footings can be customized, so that houses utilizing XBRL can bring forth their ain elements, Extensions, to show their alone coverage situation.A By utilizing the extensions companies and organisations can run into assorted particular demands. In add-on to each company ‘s ain extensions, Industry Specific Taxonomies exists. The intent of Industry Specific Taxonomies is to supply standard taxonomies that describe the industry featured points, such as “ Jet-way Landing Rights ” . The Jet-way Landing Rights is an plus component for the air hose companies and it addresses the alone point of air hose industry.
2.2 XBRL Instance Document
The XBRL case papers is the concern facts expressed in the XBRL format. The chief intent of the case papers is to roll up fiscal informations tagged with elements from a referenced taxonomy for coverage and determination devising connotations. In add-on to showing concern “ facts, ” the case papers presents some farther information that is used to show the facts, such as the name of the organisation, period, measurement unit, truth in footings of figure denary points, and whether the fiscal statement being reported is existent or predicted. In add-on, the case papers gives mention to other files on definition of concern constructs, relationships with other constructs, GAAP, professional publications, footers, human clear labels of concern constructs, and presentation manners. An case papers includes a unit for each type of measured informations tagged. Currencies and portions are the most frequent illustrations of units of step in fiscal coverage. ( Srivastava 2009 )
Researchs in look intoing the impact of XBRL-formatted fiscal statements in capital market
Benefits from XBRL acceptance has been researched for many positions. XBRL allows information to be easy accessible to all users irrespective of whether they are professional users or novice users. This increases transparence of the concern information. Therefore, XBRL will do it easy for concerns to conform to the regulative coverage mandatary, such as Fair Disclosure Regulation. Besides, XBRL increases the relevancy of accounting information in seasonableness position. Ettredge ( 2002 ) pointed out that there exists clip slowdown between official filing of fiscal statement and web-posting of the statement. However, XBRL provides the capableness of speedy revelation, so the slowdown between official filing and web site poster is non applied to XBRL format coverage. In this research reappraisal subdivision, documents about accomplished benefit of the acceptance of XBRL coverage, instead than conceptual benefits, are presented.
3.1 Does XBRL acceptance cut down information dissymmetry?
Yoon H, et Al ( 2010 ) examined whether XBRL acceptance reduces the degree of information dissymmetry in South Korean stock market. Besides, they investigated whether the impact of XBRL acceptance on cut downing information dissymmetry is bigger for big houses than for little houses. They selected South Korean stock market as the sample for the survey. In South Korea, the policy of registering fiscal statements in XBRL format has been compulsory since October 1, 2007. The companies, listed in the Korea Composite Stock Price Index ( KOSPI ) and the Korean Securities Dealers Automated Quotations ( KOSDAQ ) , have to register their fiscal studies to the Data Analysis, Retrieval and Transfer ( DART ) system utilizing XBRL format.
The information dissymmetry was step by utilizing bid-ask spread. The bid-ask spread is the difference between the monetary values that quoted by purchasers and Sellerss for a given security. Information dissymmetry and the bid-ask spread have positive relationship. By dividing the sample into two groups, pre-XBRL acceptance period and post-XBRL acceptance period, the writers tested the consequence of XBRL acceptance on the information dissymmetry in South Korean stock market. The index variable was used for the XBRL acceptance.
Yoon H, et Al ( 2010 ) reported that XBRL acceptance lessened the information dissymmetry of the South Korean stock market. Writers interpreted the consequence as “ XBRL acceptance reduces the clip and cost to go around corporate information in stock markets every bit good as enhances the compatibility of this information for integrating among different information systems. XBRL acceptance besides increases the transparence and quality of corporate information in the capital market, which improves the hunt capableness of XBRL and the circulation of corporate information. Finally, XBRL acceptance facilitates corporate revelation, which reduces the information dissymmetry of the capital market ( P. 6 ) . ” Besides, they found that the impact of XBRL acceptance on decreasing information dissymmetry is stronger for big houses than little houses. Based on the consequences, this research provides supports for the compulsory XBRL acceptance by demoing the positive consequence of XBRL registering on the capital market.
3.2 Does search-facilitating engineering better the transparence of fiscal coverage?
Hodge, et Al ( 2004 ) examined whether using an XBRL-enhanced hunt engine AIDSs nonprofessional fiscal statement users in geting and incorporating associated fiscal information when in their investing determination doing process by executing an experiment with 96 MBA pupils as replacements for non-professional fiscal statement users.
Specifically, writers concentrated on the stock option compensation revelation and non-professional users ‘ acknowledgment ability for the revelation. Directors are permitted to either acknowledge the just value of stock option compensation in the income statement as an disbursal or unwrap this information in the footers ( Statement of Financial Accounting Standard ( SFAS ) No. 123, Accounting for Stock-Based Compensation ( FASB 1995 ) ) . In the instance that the stock option compensation is disclosed in the footer, the reported income become higher than the income of the instance that the compensation is included in the income statement. On the other manus, if an investor integrates the information in the footer with the information in the income statement, so the investor should do same decision about the degree of income in both instances.
Hodge, et Al ( 2004 ) reported that many of participants do non entree the engineering, but participants who use search-facilitating engineering are more likely to get footnote information, and are more likely to incorporate the footer information with related information on the visage of the income statement when doing judgements and determinations than participants who do non utilize search-facilitating engineering. Besides, they suggested that the benefits of using hunt easing engineering should be publically acknowledged to promote fiscal statement users to utilize the engineering. They pointed out that developing investors on how to utilize thins engineering may be necessary.
This research showed that search-facilitating engineering can assist non-professional users decently find and use the fiscal information in their investing determination process, nevertheless the fact that the engineering exists do non better the user ‘s determination devising process. It is of import to promote information users to use the engineering.
3.3 Does XBRL describing have incremental information content?
Efendi et Al ( 2010 ) investigated whether XBRL describing format has incremental information content beyond the Securities and Exchange Commission ( SEC ) quarterly and one-year studies submitted to the bequest EDGAR ( Electronic Data Gathering and Retrieval ) system which uses HTML or ASCII format ( henceforth EDGAR filings ) . This information content emerges from the smaller investors ‘ ability to utilize XBRL information and to analyse the information more expeditiously in their investing determination process, although there may be no auxiliary information beyond EDGAR filings.
The sample consists of 342 observations from the SEC XBRL Voluntary Filing Program in 2005 to June 30, 2008. The voluntary filing plan outputs a natural experimental scene for the trial whether XBRL format itself provides incremental information to the market. This is because the Voluntary Filing Program allows take parting houses to experiment with XBRL and feed back their 10Q and 10K fiscal statement in XBRL format on the ulterior twenty-four hours after their EDGAR filing. Based on the allowance, there is outlook for new information in XBRL format fiscal statement.
In placing the being of incremental information, writers apply the non-directional Patell ( 1976 ) process to observe market reactions by look intoing the happening of squared standardised surplus returns on the twenty-four hours the XBRL format studies are filed. They found that the monetary value discrepancy on the filing twenty-four hours is 1.58 times higher compared to benchmark period ( a period of 250days anterior to the filing twenty-four hours ) . Detecting important monetary value motions on the filing day of the month shows that XBRL format fiscal coverage conveys incremental information to capital markets. Market reactions to the XBRL filling would suggest that investors are utilizing the information from XBRL registering for trading intents.
Assurance on XBRL Instance Document
Although the SEC ( 2008 ) mandates top 500 public companies in the USA to subject XBRL formatted studies, get downing from June 2009, along with the traditional filing, it is non compulsory that those XBRL based studies be audited by a 3rd party. It is merely needed that these XBRL-based studies should reflect the same information in the fiscal statement in traditional format ( official EDGAR filing ) ( SEC 2005 ) . SEC does non necessitate a 3rd party confidence of XBRL-based study to promote filers to conform to the SEC demand without any incremental costs.
4.1Assurance on XBRL for fiscal coverage ( Plumlee and Plumlee 2008 )
Plumlee and Plumlee ( 2008 ) depict the procedure of how an XBRL case papers is created and discourse the issues involved in supplying confidence on XBRL case paperss. Writers concentrate on the displacement from a paper-centric to a data-centric focal point. “ Paper-centric ” position assumes users focus on the printed signifier of fiscal information. On the other manus, “ Data-centric ” position focuses on the rightness and the truth of the single ticket.
Writers point out that, since XBRL paperss are produced by labeling fiscal describing information with the XBRL taxonomies to do the information computer-readable and searchable, the possibility of stuff misstatements exists because of possible jobs in “ tagging ” . Based on this concern, writers raise several possible confidence issues for XBRL paperss. First, it is of import to do sufficient preciseness for what constitutes an “ mistake ” in supplying confidence on XBRL case paperss. Second, the counsel about the sampling method for the tickets should be clarified. Last, it is ill-defined how the “ hazard ” and “ materiality ” translate into the audit process of XBRL tickets. On the other manus, writers do non show any conceptual construction for executing an audit of the XBRL case papers. Srivastava and Kogan ( 2008 ) construct up “ a conceptual model ” for supplying confidence on XBRL case papers.
4.2 Assurance on XBRL case papers: “ A conceptual model of averments ”
Srivastava and Kogan ( 2008 ) suggest a conceptual model of averments for supplying confidence on XBRL case papers that is created based on the SEC synergistic informations filing demands. Writers contend that, in the epoch that the XBRL-based studies go the chief and lone format of the SEC filings, this conceptual model will must be revisited to be combined into the statutory audit methodological analysis.
Writers propose three sets of averments. Violating these averments will ensue in composing mistakes in the XBRL case paperss. Harmonizing to writers, the construction of XBRL case paperss makes it sensible to split the “ hazard of lacks analysis ” into the “ informations lack ” and “ meta-data lack ” parts. The former portion directs to the likely lacks of the facts that are marked up in the XBRL case papers, and the latter portion refers to the likely lacks of the mark-up itself, including both the mark-up lacks in the case papers and the XBRL taxonomies lacks.
Below is from Srivastava and Kogan ( 2008, p 13 )
The first set of averment is based on the likely information lacks in the XBRL case papers: Completeness, Existence, and Accuracy.
Completeness: All of relevant facts/data that are reported in the traditional format papers
are included in the XBRL case papers.
Being: There is no labeled fact/data in the XBRL case papers that does non be in the
traditional format papers.
Accuracy: The values of all elements and properties in the XBRL case papers accurately
stand for the facts in the traditional format papers.
Therefore, this averment includes two sub-assertions: Element Accuracy, and Attribute Accuracy.
The 2nd set of averment is derived from the possible lacks of the mark-up in the XBRL case papers.
Well-formedness: The XBRL case papers is well-formed- the papers conforms to all XML
sentence structure regulations.
Cogency: The XBRL case papers is valid – the papers conforms to all of regulations of XBRL
and referenced XBRL taxonomies.
Proper Representation: The labeled concern fact in the XBRL case papers decently describes the
facts in the traditional format papers
The 3rd set of averment is derived from the likely lacks of XBRL taxonomies used by the filer.
Proper Taxonomies: The facts/data tagged in the XBRL case papers uses proper general and
industry-specific XBRL taxonomies.
Valid Taxonomy Extensions: The XBRL taxonomy extensions referenced by the XBRL case papers are valid – the extensions conform to all regulations of XML and XBRL.
Proper Extension Elementss: The new elements in the XBRL taxonomy extensions referenced by the
XBRL case papers are introduced decently – the extension ticket, with its appropriate properties, is formulated merely when available criterion ticket does non be.
Proper Linkbases: The linkbases in the XBRL taxonomy extensions referenced by the XBRL case
paperss are suited.
The confidence supplier can roll up applicable points as the grounds to find the overall assurance whether all the averments are true. Sing the degree of support for each averment, the confidence supplier may find to obtain more grounds, suggest rectification to the case papers, measure up the sentiment, or show a clean sentiment. By proposing a conceptual model for the confidence on XBRL case papers, Srivastava and Kogan ( 2008 ) set up the benchmark process that assists hearers in planning and measuring an confidence battle for XBRL case papers.
Anterior researches found out that XBRL formatted fiscal coverage have positive impact on capital markets. Investors in capital market can increase their ability to get and incorporate the fiscal information by utilizing the XBRL format coverage. ( Hodge et al, 2004 ) Based on the comparison of XBRL based information, investors are expected to observe unnatural value in reported information. The abnormalcy can be found by comparing the each company ‘s public presentation in different periods or by comparing with industry benchmark.
In net incomes direction literature, direction ‘s accounting pick and their determination is of import factor with consideration on their inducement for the net incomes direction determination. Zhang 2006 found that directors consider accumulations direction and existent use interchangeable. They treat the accumulations direction and existent use as replacements and take one of them based on state of affairss they face. Besides, Cohen and Zarowin ( 2010 ) reported that, because of hearer ‘s and regulator ‘s examination, along with past net incomes direction activities, directors have more leanings to utilize existent direction. Gunny ( 2005 ) found that companies engage in existent net incomes direction by implementing following activities: ( 1 ) shortsightedly puting in Research and Development ( R & A ; D ) to increase income ( 2 ) shortsightedly puting in merchandising, general and administrative ( SG & A ; A ) to increase income ( 3 ) timing of net incomes acknowledgment from the disposal of long-standing assets and investings ( 4 ) cutting monetary values to increase gross revenues in the current period and/or overproducing to diminish COGS disbursal. These activities are non easy found from the analysis of fiscal statement, and this is the of import inducement to direction take existent net incomes direction instead than accumulations direction.
However, investors, who use the XBRL formatted fiscal studies and analyze house ‘s information, may happen those net incomes direction activities. Besides, as Hodge et Al ( 2004 ) pointed out, the acknowledgment of direction ‘s accounting picks to mask investors raise information user ‘s concern about the fiscal coverage dependability of the house. In this environment, direction ‘s inducements to carry on existent net incomes direction activities will be decreased. So the hypothesis for the research is that
H1. The acceptance of XBRL formatted fiscal statement has negative association with existent net incomes direction activities.
Sing this hypothesis, several related researches will be conducted.
A research about alterations in director ‘s net incomes direction determinations based on the XBRL coverage, in experimental scene
By utilizing archival informations, the relation of XBRL coverage and the existent net incomes direction happenings can be investigated.
Based on the research about the mechanism of XBRL coverage and the accomplished benefits of XBRL coverage, it is apparent that the acceptance of XBRL positively influenced on capital markets. Specifically, the XBRL format fiscal studies increased the investor ‘s ability to measure the fiscal information and use to their investing determination. Besides, researches show that the acceptance of XBRL coverage has negative relation with information dissymmetry and convey incremental information to capital markets.
Researchs about confidence on XBRL case papers raised of import issues. It is of import to handle the confidence on XBRL case coverage based on the data-level position. Taging process is the chief unit for the confidence. By extricating the factors of labeling process in three parts, component, mark-up, and taxonomies, the conceptual model gives meaningful foundation for the confidence on XBRL case papers.
By carry oning the suggested research, it is expected to demo that the positive impact of XBRL fiscal coverage on the direction besides exists. Sing investors ‘ improved ability to utilize the fiscal information, direction ‘s inducements to carry on existent net incomes direction are expected to be reduced. Then XBRL Financial Reporting is expected to hold positive impact on capital market by cut downing the existent net incomes direction behaviour and bettering the net incomes information quality.