Technical Review : Extensible Business Reporting Language

Globalization has been changing the world. It has interconnected people, nations, and even businesses. Today´s business can share information to investors around the world thanks to the intelligent software of the actual society. Being more specific, the way in which investors and users evaluate businesses performance is through the information contemplated in their financial statements. These financial statements illustrate the current assets, liabilities, and stockholder equity a company has in order to help users take economic decisions. However, not all the companies are regulated to provide the same structuralized information around the world. Each country possesses its own accounting standard that regulates the preparation of financial statements of a company. In that way, companies’ information might differ between countries making the comparability between financial statements difficult to be implemented by users in order to assess the performance of foreign businesses. In view of the need of a globally accepted accounting standard that promotes uniform standards for worldwide financial reporting, the International Accounting Standards Committee (IASC), which then becomes replaced by the International Accounting Standard Board in 2001, was created (Cathey and Schroeder 130). The IASB issues International Financial Reporting Standards (IFRS) that stands as the set of accounting standards that prepare and present the financial

The flexibility of XML has made it the standard for the formatting and sharing of data via the web. XML data is easily transferable across machines and applications and is not constrained by the operating system of the host machine. This ease of translation enables XML to be transformed into non-XML formats for use with databases and their associated applications.

The FASB accounting codification is an advanced system that allows certified public accountants and other users to quickly access non-SEC authoritative content, perform relevant research, and submit timely and appropriate feedback. The FASB codification research system is a real-time, online database that allows users to access codification whose primary aim is to simplify the accessibility and structure of all authoritative generally accepted accounting principles, reduce the time and effort invested when researching accounting-related issues, decrease the risk of non-compliance with the generally accepted accounting principles, provide access to all authoritative information from a single place, facilitate the updating of accounting standards, and foster research and convergence efforts for the FASB (Wiley, 2017).

We now want to look into the International Accounting Standards Board and framework for the preparation and presentation of financial statements. The conceptual frameworks are split into five categories and are in the following order: the objective of financial statements; underlying assumptions; the qualitative characteristics that determine the usefulness of information in financial statements; the definition, recognition, and measurement of the elements from which financial statements are constructed; and the concepts of capital and capital maintenance (Ankarath 11). The standards under IFRS are beginning to become much more popular across the world for several different reasons. The International Financial Reporting Standards are currently being used by at the very least 100 countries and “[was] expected that by 2011, more than 150 countries [would] have adopted them” (Ankarath 1). We happen to find this important because it seems that a lot of countries are starting to adopt IFRS to report their financial statements. One of the reasons why many countries made the switch over to IFRS is because “the decision of the U.S. SEC to allow foreign private issuers to list their securities on U.S.

States. Companies should report income, liability, equity, and assets. Many people (stockholders, investors, etc.) who have a stake in the company want to know this information before providing a service. In this paper, International Financial Reporting Standards (IFRS) and the Generally Accepted Accounting Principles (GAAP) will be compared for

The “Roadmap” presented by the SEC is a step by step process to implement a international accepted accounting standards. The Norwalk Agreement is a collaboration between the FASB and IASB to create financial statements to be used both domestic and internationally. A foundation that is based in London, but a US corporation was formed to work with the IASB is called the IASC Foundation. The eXtensible Business Reporting Language (XBRL) is an interactive data website was developed to translate financials into various languages. There have been many websites, books and educators available to train professionals on IFRS and the current changes. The US feels that we need to transition corporations in stages to be able to test for accuracy of the new adopted accounting standards. Even though the US is converting to international accounting principles

After over a decade of extensive deliberation, the IASB and FASB officially released their joint revenue recognition standard to be applied under both GAAP and IFRS. The FASB and IASB which they have been in collaboration for a converged revenue recognition principle since 2008. The new revenue recognition standard represents a milestone in the convergence process, as it is the first fully integrated joint standard. The purpose of the new revenue recognition principle is to standardize across the board how companies should recognize revenue recorded in financial statements.

The following research paper is about the new joint revenue recognition principles that were unveiled by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB), which standardizes generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS) on recognition of revenue in the United States. The new joint revenue recognition principle was created to increase the financial transparency and the comparability within the industries in the United States of America, and as well as the industries throughout the world. The companies in the United States currently use the GAAP standards and the rest of the world uses the IFRS. But each country

On May 2014, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) had jointly issue the converged standard, IFRS 15, on the Recognition of Revenue from Contracts with Customers. The new standard create a common revenue recognition standard for both IFRS and US GAAP, it clarify the principle for recognizing revenue, enable consistently application in regardless of transactions, industries or capitals

On November 18, 2002 the FASB and IASB came together at a meeting in Norwalk, Connecticut to start the wheels in motion for the purpose of establishing a new set of financial standards. The FASB and IASB are committed to create financial standards that will be accepted both domestically and internationally that are of high quality and compatible for financial reporting. At present more than a 100 countries already use the International Financial Reporting Standards. The U.S. at present has not accepted a changed in accounting procedures; therefore, this is going to be a major task for both the FASB and IASB to complete successfully this union. I do believe that the partnership between the FASB and IASB will achieve the goals of creating a common financial reporting set of standards that will be accepted by all.

On July 1, 2009, after five years of development, the FASB introduced the online Accounting Standards Codification research system. The FASB’s development of the Codification intended to serve three main purposes. Theses purposes included simplifying the means by which a user accessed the GAAP coding, ensuring the accuracy of the authoritative GAAP codified content and establishing a research system that could easily be updated with the results of the latest standard-setting activity (Financial, 2014).

Bortiz & No (2008) examined whether XBRL documents, furnished to the SEC’s XBRL Voluntary Filing Program VFP on EDGAR, conform to the suggested XBRL taxonomies and specifications as well as requirements for XBRL filings and whether the quality of XBRL filings improved between 2005 and 2007. Their examination include 9 points investigated to achieve their goal, use of extension taxonomies, notes and MD&A, agreement of XBRL-related documents with official filings, consistency, validation tests for extensions taxonomies and instance documents, FRIS and FRTA tests, and other errors.

The IASB and FASB have been working on a project together to minimize the differences in the way financial statements are presented to the public. Some of the major changes that we will notice in the statements are the adoption of the International standards. The information portrayed will be the same with some changes in the organization of the data. The changes are said to bring more understanding to the interpretability of financial statements as a whole.

XBRL is all about the electronic tagging of data. It has been compared to the introduction of bar-coding and to the introduction of the ISBN number for books. While financial data is an obvious choice for electronic tagging, all data can be tagged. XBRL is an extension of XML, the eXtensible Markup Language. An extensible language means one that is designed to easily allow the addition of new features at a later date.

It is essential that the information provided in financial statements is readily understandable by users. Users are assumed to have a reasonable knowledge of business and economic activities and accounting, and a willingness to study the information with reasonable diligence. Also information has the quality of relevance when it influences the economic decisions of users by helping them evaluate past present and future events or confirming or correcting the past evaluations. Information is material and it depends on the size of the item or error judge in the particular circumstance of its omission or misstatement. The IASB framework takes the view that materiality is a cut off point whether information is important to the users. If information must be relevant but so unreliable that it could be misleading so the information must be reliable. Information has the quality of reliability when it is free from material error and bias.