A Comparison of XBRL Filings to Corporate 10-Ks—Evidence from the Voluntary Filing Program

Abstract

SYNOPSIS eXtensible Business Reporting Language (XBRL) has the potential to improve the transparency of financial reports; however, its complexity creates the risk of introducing errors that are a threat to its usefulness. XBRL is a complex technological change in financial reporting of nearly unprecedented scope. Prior to June 2009, the date of the first mandated XBRL filings, the SEC made available a Voluntary Filing Program (VFP) to assist in addressing the difficulties of creating XBRL documents. This study examines errors in the VFP filings, and investigates whether stakeholders used their experience to improve the XBRL technology and processes. Findings indicate a reduction in errors over time, suggesting that the VFP for XBRL was successful. These results support the use of a VFP to identify and solve unanticipated issues and evaluate the feasibility of implementing large-scale technological changes in financial reporting and perhaps comprehensive changes in accounting standards such as the implementation of International Financial Reporting Standards.

Does the XBRL Reporting Format Provide Incremental Information Value? A Study Using XBRL Disclosures During the Voluntary Filing Program

“…A potential downside of studying market reactions to XBRL disclosures during the VFP period is that investors may ignore XBRL reports for reasons related to the quality of the reports, namely: 1) taxonomy development was an on-going project. Additionally, existing official taxonomies may not contain elements for all the information in a company's official 10Q and 10K, and thus the company is allowed to create its own extensions, which may create comparability issues; 2) there is no audit requirement for XBRL filings and some of the filings were found to contain errors, although they were usually very few and rare (Boritz and No, 2008;Debreceny et al, 2010;Bartley et al, 2011); and 3) the XBRL reports are provided under a safe harbour provision, in which a VFP company is protected as long as its efforts are in good faith and any known errors are corrected promptly after discovery. 5 These deficiencies raise questions on the usability of XBRL reports and they may bias against us finding any market reactions to the VFP disclosures.…”

“…When we separate our sample by filing years, we find that investor response is driven by the reports filed in 2008, the last year of our VFP sample period, which is also one year prior to XBRL becoming mandatory. Increasing awareness and familiarity with XBRL reporting, continuous improvement in the quality of XBRL data (Bartley et al, 2011), and standardization of financial accounting elements (Plumlee and Plumlee, 2008) may be some of the reasons why investors reacted strongly to XBRL reports in the final year of the voluntary filing period. Finally, we compare the relative information value of XBRL filings to those of earnings announcements and HTML filings.…”

Comments by the Auditing Standards Committee of the Auditing Section of the American Accounting Association on the PCAOB Rulemaking Docket Matter No. 34: PCAOB Release No. 2011-003, Concept Release on Possible Revisions to PCAOB Standards Related to Reports on Audited Financial Statements.

“…As noted above, research has noted that current XBRL-related documents often contain errors (Bartley et al 2009(Bartley et al , 2011Debreceny et al 2010;Weirich and Harrast 2010;Du et al 2011). As interactive data visualization software that presents financial statement values becomes readily available, investors will be more likely to rely on XBRL-related data.…”

“…Although the mandate explicitly states that public accountants are not required to provide assurance on these XBRL-related documents, early research (i.e., Bartley et al 2009Bartley et al , 2011Debreceny et al 2010;Weirich and Harrast 2010;Du et al 2011) finds that several documents contain errors. Further, new interactive data visualization software allows for the presentation of individual values from the financial statements (Dilla et al 2010;Janvrin et al 2011).…”

“…As noted above, providing assurance on XBRL-related documents is important, as investors are now using interactive data visualization software to display XBRL-related documents when making investment decisions. Unfortunately, early research (Bartley et al 2009(Bartley et al , 2011Debreceny et al 2010;Weirich and Harrast 2010;Du et al 2011) indicates that several XBRL-related documents contain errors.…”