Noting that XBRL has the potential to improve the effectiveness of financial reporting, IASB Chair Hans Hoogervorst said that XBRL has the potential to supplement the one-size-fits-all approach of today’s financial statements with an à la carte menu of financial information. In remarks at the IFRS Taxonomy Convention, the Chair said that this will allow users to extract the information they need, and no more. While XBRL enables retail investors, employees and casual observers of a company to extract information on key corporate metrics, more sophisticated users are free to slice and dice financial information and wade through as much or as little information as they need, he noted.
XBRL also has the potential to eliminate the re-keying of financial information into proprietary systems, he noted, thus reducing cost and error while increasing the speed and efficiency of analysis. Further, XBRL allows users of financial statements to consume financial information in whatever language they are familiar with. These are all significant benefits, he posited, and there is no doubt that XBRL is an idea whose time has come.
However, he cautioned that standard setters should be careful about promising too much. While XBRL is an important form of presentation, he said, standard setters must be realistic about what XBRL can and cannot do. The XBRL standard should not define the Board’s standard-setting activity, the IASB Chair emphasized, adding that ``the XBRL tail should not wag the IASB dog.’’ Rather, XBRL should be a normal output from the Board’s IFRS standard-setting work.
The IFRS Foundation and the IASB have three XBRL priorities. First, the IFRS Taxonomy must be of the highest quality. Second, the Boars must be more sensitive to XBRL requirements throughout the lifecycle of its standard-setting activities. Third, continued the Chair, the Board must work with other members of the XBRL community to unlock the potential of this important technology.
The Board has invested significant resources in developing a high quality Taxonomy, noted the Chair. To further enhance the quality of the Taxonomy, a few years the Board established two advisory committees: the XBRL Advisory Council and the XBRL Quality Review Team. According to the IASB Chair, these two committees have been extremely useful in helping the IASB with its work. The Chair pledged that the Board will work closely with FASB, the Global Reporting Initiative and elsewhere to offer the highest levels of compatibility between respective Taxonomies.
The Board will also ensure that XBRL is deeply integrated into its standard-setting activities. XBRL is no longer an afterthought to standard-setting activities, said the Chair, adding that Board technical staff now work with their XBRL colleagues throughout the entire lifecycle of the project, considering tagging implications as the standards are being drafted. In addition, the Trustees’ Due Process Oversight Committee, responsible for oversight of our standard-setting activities, applies the same rigor to XBRL oversight as it does to the IASB’s standard-setting activities. This is all designed to ensure that XBRL is a normal function of IASB standard-setting work, said the Chair, no more, and no less.
Finally, the IASB Chair noted that the European Parliament is considering embedding XBRL in the new EU Accounting Directive. In 2002, the Parliament voted overwhelmingly in favor of adopting IFRSs for use in the European Union, he pointed out, which provided the necessary encouragement for most of the world to follow suit. The IASB Chair hopes that the same will be true with XBRL.
In October 2011, the European Commission proposed replacing the two Accounting Directives (78/660/EEC and 83/349/EEC) with a single Directive better adapted to the present and future needs of preparers and users of financial statements. Dr Wolf Klinz, Member of the European Parliament, is the European Parliament Rapporteur for the new Accounting Directive.
The rapporteur is in favor of introducing the mandatory preparation of financial statements under an electronic, multi purpose XBRL format, which was already requested by the European Parliament in the past in the Future Structure of Supervision (2008/2148 (INI)) and Small Business Act (2008/2237(INI)) resolutions.
Dr. Klinz believes that a number of benefits brought by one harmonized electronic format could contribute to the creation of a one-stop reporting system used in other fields, for example taxation. However, recognizing that mandating XBRL could be quite burdensome for many small companies, the rapporteur suggests introducing it after appropriate preparation, including involvement of the European Securities and Markets Authority, from 2018.