XBRL and the qualitative characteristics of useful financial information

Abstract

Purpose

eXtensible Business Reporting Language (XBRL) is an internet-based interactive form of reporting language that is expected to enhance the usefulness of financial reporting (Yuan and Wang, 2009). In the UK and the USA, XBRL is mandatory, and in Australia, it is voluntarily adopted. It has been reported that in the not too distant future, XBRL will be the standard format for the preparation and exchange of business reports (Gettler, 2015). Using an experimental approach, this study assesses the usefulness of financial reports with XBRL tagged information compared to PDF format information for non-professional investors. The authors investigate participants’ perceptions of usefulness in relation to the qualitative characteristics of relevance, understandability and comparability.

Design/methodology/approach

This paper uses an experimental approach featuring a profit-forecasting task to determine if participants perceive XBRL-tagged information to be more useful compared to PDF-formatted information.

Findings

Results reveal that financial information presented with XBRL tagging is significantly more relevant, understandable and comparable to non-professional investors.

Originality/value

The authors address a gap in the literature by examining XBRL usefulness in Australia where XBRL adoption will be mandated within the not too distant future. Currently, the voluntary adoption of XBRL by preparers and users is low, possibly, because of a lack of awareness about XBRL and its potential benefits. This study yields significant implications for the accounting regulators in creating more awareness on the benefits of using XBRL and to create an impetus for XBRL adoption.

Citation

Birt, J.L., Muthusamy, K. and Bir, P. (2017), "XBRL and the qualitative characteristics of useful financial information", Accounting Research Journal, Vol. 30 No. 01, pp. 107-126. https://doi.org/10.1108/ARJ-11-2014-0105