XBRL: ISSUES AND CHALLENGES
Erlane K Ghani and Kamaruzzaman Muhammad

Throughout the world, a number of key regulators are advocating the need of Extensible Business Reporting Language (XBRL) and trumpeting this tool to be digitalising the financial information value chain thus bringing huge benefits to all relevant parties. Many companies in the world have started to prepare XBRL-based financial reports and the momentum of such practice is growing rapidly (Kernan, 2008). Similar to other countries, Malaysian regulators have also seen the need of adopting XBRL for all companies as a necessity to improve financial reporting. XBRL is seen to assist relevant parties in achieving the objectives of accounting framework in terms of relevance, consistency, timeliness and accuracy. The parties involves in the preparation and the usage of financial information such as the regulators, preparers, users as well as the auditors would have greater access to the financial information via XBRL since XBRL use the Internet as the medium of communication and transmission of information.

Due to the greater hyped of XBRL, the Companies Commission of Malaysia (SSM) have set to fully implement XBRL upon completion of a five-year XBRL initiatives initiated by Malaysia’s Registrar of Companies developed under its Strategic Direction Plan II. SSM plans to implement XBRL-based financial reporting in phases starting with listed companies, their subsidiaries and non listed companies followed by private listed companies (Francis, 2012). The implementation would kick-start in 2014 to be used nationwide in line with other countries that have implement XBRL. No doubt, SSM is serious in requiring the companies to fully adopt XBRL with high success with the intention to promote accuracy and timeliness of financial information as well as to increase data usability and exchange information flow with external stakeholders. However, to obtain such success, all relevant parties need to understand what exactly XBRL is.

Introducing XBRL
XBRL was initially known as Extensible Financial Reporting Mark-up Language (XFRML). It was later changed to XBRL because it was decided that corporate reporting encompasses not only financial reporting but also a broader range of reports. No specific definition of XBRL has been given in the early days except that it is known as a computer tool. A computer tool has a variety of functions ranging from a tool to present and read data, to analysing the data (Wu and Vasarhelyi, 2004). However, XBRL provides the financial community a standard based method to prepare and publish corporate reports in a variety of formats depending on the software used to download the XBRL documents for decision-making purposes. Figure 1 presents an overview of XBRL.

Figure 1: XBRL Overview

Standardised data classification Organisation’s business Organisation’s electronic report data business report data

Source: Adopted from Ernst & Young (2009)

Similar to HTML, XBRL comes from the mark-up language family (Wu and Vasarhelyi, 2004). The mark-up language in XBRL is used to format and structure the data in a document and provides an explanation of the meaning of the data. Mark-up language provides tags to the data items. The idea of tagging is that it allows computer readable and allows information to be used interactively. The tags function in two ways. First, they provide information on how the data should be formatted and presented to the decision-makers. These tags define and label the document with a set of elements, such as the titles, paragraphs and footnotes. Secondly, it provides the meaning and function of the data items, or what the data item represents.

Figure 2: Glossary of XBRL Terms
|Block text |A block of information such as a financial statement note that can be tagged using a single block text |
| |taxanomy tag. |
|Bolt-on implementation approach|Expected to be the most common approach for creating XBRL, this approach can use existing financial |
| |statements as the basis for creating XBRL (as opposed to an integration creation as part of the financial|
| |reporting process), or by consolidating different data sources. The bolt-on approach is achieved using |
| |XBRL creation software or outsourcing the creation of XBRL using a third party. |
|Contexts |Component of an XBRL instant document that is assigned to each piece of tagged data and contains defining|
| |meta-data, including reporting period, entity and other information. |
|Data-centric XBRL |Refers to that which is purely meta-data driven (compare with document-centric). It serves a similar |
| |function to a database, created for the purpose of discovery or access. |
|Detail tagging |The tagging of information such as a financial statement footnote using multiple tags to capture |
| |individual pieces of information within the footnote. |
|Dimensions |Information in an XBRL taxonomy that allows for the representation of the horizontal and vertical axes in|
| |a financial statement table such as the Statement of Equity |
|Document-centric XBRL |Refers to that which has the document (the text, some pre-existing format with its own structure) |
| |(compare data-centric). The mark-up language explicitly indicates when parts of an existing document have|
| |structure and meaning. |
|Dry-run |Essentially the act of performing a practice run of the entire XBRL creation, review and test submission |
| |process in preparation for the actual submission of XBRL to a regulator |
|Extensions |Modifications to a standard taxonomy. XBRL allows users to create company taxonomy extensions, including |
| |adding new tags, creating custom labels and editing various relationships between tags. |
|Inline XBRL |A standard for embedding XBRL fragments into an HTML document. The objective is to provide documents |
| |which can be viewed in a browser while making use of XBRL tags which can be processed automatically by |
| |consuming applications. |
|Instance |XBRL file containing a company’s financial information reporting periods and other related information. |
| |The instance document uses tags from taxonomies such as the US GAAP or IFRS taxonomies, as well as |
| |extension tags. |
|Integrated implementation |An approach where XBRL creation is integrated with existing accounting and reporting processes such as an|
|approach |accounting or financial reporting software system. |
|Interactive data |US term for the real-time exchange of businesses’ information using XML and other electronic technologies|
| |such as XBRL. |
|Meta-data |Means “data about data’ or the various contextual details that defines the financial reporting |
| |information, such as the type of data or reporting period. |
|Relationships |Part of a taxonomy (linkbases) used to define specific associations and other information about tags. |
| |There are five standard linkbase types: presentation, calculation, definition (dimensions), labels and |
| |references. |
|Rendering |A human-readable presentation of an XBRL instance document used to review aspects of its contents. |
|Tag definition |A description of a reporting concept represented by a ‘taxonomy documentation label’ used to help |
| |identify if a given tag is appropriate. |
|Tagging (or ‘mapping’) |How individual financial reporting and other data (e.g values, textual data) are identified using |
| |elements from the taxonomy. |
|Taxonomies |Electronic collections or classification of tags (elements) that define financial and other information |
| |and the relationships between them related to a defined framework (e.g IFRS taxonomy). Standard financial|
| |reporting taxonomies are individually developed to contain financial reporting concepts necessary for |
| |mapping primary financial statements and notes component parts to facts contained in financial |
| |statements. |
|Validation |Validation checks for different layers of consistency and comparability for determining if XBRL is |
| |created properly. |
|XBRL International |This is not a not-for-profit consortium of approximately 500 companies and agencies worldwide that |
| |developed the XBRL language, as well as promote and support XBRL adoption. XBRL International develops |
| |and maintains the XBRL specifications, but is not responsible for the development and maintenance of |
| |taxonomies. |

Source: Adopted from Ernst & Young (2009)

Specifically, XBRL uses XML schemas to define concepts which can be viewed as entities in a relational database sense and in specifying its taxonomy. Taxonomy is a set of link-based documents which assists in the identification of relationships among various concepts. For example: the XML schemas for XBRL link the items in the Statement of Financial Position using the Grandfather, Father and Son relationship. Therefore, under the Statement of Financial Position, there would have the component of Current Asset and under this component, there would have the items of inventories, account receivables and other current asset item which represent the son relationship. Figure 2 presents the glossary of XBRL terms for further understanding.

An XBRL document can be accessed with XBRL friendly software (XBRL, 2004). How the information is presented depends on the software used to access the document. For example: Within the Excel 2003™ application, user can download the financial data and verify its accuracy by viewing the items in the source document and converting the financial data from Bursa Malaysia or an intermediary into XBRL files. The user who wants to make an investment decision can also download XBRL documents using Excel 2003™ relating to two firms directly from the Internet without the need to copy the files. The information for the two firms would be presented in the form of rows and columns. The user would be able to select, copy and paste the relevant information items in order to perform various analytical tasks without the need to re-key the information items.

Issues and Challenges
Despite its uniqueness, XBRL poses few issues and challenges that need to be addressed to in order to ensure the success of XBRL-based financial reporting in Malaysia. These issues and challenges are different among relevant parties.

Preparers of XBRL-Based Financial Reporting
For the preparers of XBRL-based financial reporting, one of the main challenges that need to be addressed is the readiness of the preparers in Malaysia to do XBRL-based financial reporting. Ernst and Young in their 2009 ‘Top 10 XBRL readiness challenges’ report identified the issues that preparers may faced in filing XBRL. The report has lead to the following ways in resolving the challenges that may occur in Malaysia which include the followings: 1. A significant number of preparers still do not know what XBRL is, how XBRL works and the benefits of preparing XBRL. Ernst and Young reported in their report on a survey made by Compliance Week of US Companies that many companies are not aware of XBRL. It is not surprising that this scenario exists in Malaysia if no effort is being made to increase the awareness of XBRL. 2. Even though XBRL-based financial reporting is set to be mandatory in 2014 in Malaysia, preparers need beforehand make some form of test filing before mandatory date. This would increase their experience with XBRL and know when would be the right time to submit XBRL-based financial reporting and thus ensuring faster and accurate submission. 3. The pre-implementation process could assist in the preparation of XBRL-based financial reports without the hassle of rework cost and time. This could be done through up-front education, awareness, preparing and planning before implementation of XBRL. Other options including hands-on training and in-house consultant to assist preparers in preparing the reports via XBRL. 4. The cooperation and coordination of XBRL filing is necessitate across the technology, accounting and finance functions of the preparers since most cases, the finance function takes charge of the management process. 5. Selecting the software that has a XML system to produce XBRL-based financial reports would be a challenge to the preparers. It should be able to take into consideration the size and complexity of the taxonomy set schema by considering few issues such as what are the general user needs criteria, the appropriate vendor and test drive the software for XBRL. 6. It has been said that while preparers are busy focusing on the initial compliance obligation, it is also necessary for them to focus on the components of XBRL documents generation and their changes over time. 7. XBRL requires extensive tagging of the taxonomy in order to locate within a taxonomy structure a concept equivalent in attributes to an identified data point. This obviously, requires lots of time and effort which could become a challenging factor since the time and cost of producing XBRL often exceeds what regulators anticipate under their requirement. 8. Although the consultant and system designer are available to assist in the development of the taxonomies, the preparers are also require to understand and know how to build the taxonomy extensions. This is to ensure that the design of the taxonomies extension is in order and appropriate and error-free. However, accountants often without extensive knowledge on system design that consequently creates uncertainty on the technique of creating taxonomy extension. 9. Regulators such as Registrar of Companies, Bursa Malaysia and SSM may require different technical tools to disseminate XBRL file into a human-readable form. To what extent the preparers need to accommodate the needs of the regulators also need to be addressed. 10. Preparers also need to ensure the quality of the XBRL-based financial reports through reviewing the resulting XBRL documents. The review process often involving time and cost beyond the benefits as the process in broad in scope and also in reviewing the accuracy, completeness, rendering and structure of XBRL data.

Investors and Financial Advisors
Investors and financial advisors are said to be benefitted from using XBRL. Indeed, this is true since XBRL-based information would allow the financial advisors to better analyse and understand financial conditions of companies and the investors to invest with confidence (Francis, 2012). XBRL allows investors and financial advisors to get as much information as quickly than from the conventional methods of producing financing information from Bursa Malaysia or SSM. With the traditional methods, the investors and financial analysts would have to expense high effort in cutting, copying and pasting to gather the information (Boulton, 2005).

One might question however, to what extent the information provided via XBRL either through Bursa Malaysia or an intermediary provide assurance on the completeness and consistency of the information? Just because it is XBRL-based, it does mean that all information related to one company are reported in the required field and all financial data can be provided into the instance. Similarly, investors and financial advisors have to ensure that the tagging of information is not overwritten in an incorrect ways and that the financial data are transmitted correctly and the existence of a filter along the way would not remove the key data.

Another issue surrounding investors and financial advisors may be that not many of these parties are not aware or at least familiar with the existence of XBRL Most investors and financial advisors maybe lacking in knowledge of what XBRL is, how XBRL works and the benefits of using XBRL in analysing and understanding financial conditions of companies and across industries. It is not surprising that this scenario exists in Malaysia if no effort is being made to increase the awareness of XBRL. With the XBRL-based financial reporting requirement in 2014, investors and financial advisors need to step up in enhancing their knowledge and skills in XBRL. Perhaps regulators and preparers could put in efforts to increase the awareness on XBRL in order to gain full benefits of XBRL.

Regulators
For the regulators, XBRL can be seen as a way to meet financial reporting users’ expectation in getting information at the right time and at the right amount of information. The speed and agility of information is considered as important when regulators command compliance that companies need to provide financial information at an instant (Boulton, 2005). XBRL also seem to reduce the paper trail historically associated with general accounting principles.

One of the main challenges that regulators would face is that the benefits of XBRL would not be significant if the standard producers itself is not quite what it should be. Some standards (such as FRS 141) have been delayed in the implementation and the work to fully adoption of certain standards is taking way too long to do any good for users of financial reports which obviously deter expectations of XBRL.

XBRL also seem to achieve the objective of standardisation in financial reporting. The whole idea of XBRL from the regulators’ perspective is that the there would be a common taxonomies from all around the whole that allow users of financial reporting to make comparison at ease in terms of manpower and time. However, Boulton (2005) argued that XBRL International create their own taxonomies based on their country’s accounting rules and principles. It is not surprising that Malaysian XBRL would have done the same. In this scenario, the issue of standardisation throughout the world will remain an issue. Obviously, we need to start from a smaller frame before going to larger frame in developing XBRL. However, such action may have unfavourable consequences if the Malaysian taxonomies of XBRL are not in line with the global XBRL taxonomies.

The adoption of XBRL-based financial reporting is set to kick start in 2014 in Malaysia. The adoption requirement would start in phases starting with the first phase covering all listed companies, their subsidiaries and non listed companies and then followed by the second phase covering private listed companies (Francis, 2012). However, experiences from relevant parties such as financial services companies that talks about disappointment of XBRL may become a challenge for the regulators to continue imposing the adoption requirement if the preparers are not really keen to adopt (Boulton, 2005). Agreeable that choice of adopting XBRL or not may not be available since it is a requirement, but the XBRL implementation in 2014 in Malaysia could be delayed.

Another issue that the regulators have to take note consultants and system designers alone would not be able to develop XBRL without knowledge on the XBRL taxonomies of which may delay full implementation of XBRL. Regulators could provide assistance in fostering the growth and proliferation of XBRL content and services by helping consultants and system designers overcoming the burden of deep specification knowledge and deliver metadata-enhanced XBRL content financial application so that could convince preparers on the need of filing with XBRL.

For the consultants and system designers, one of the main challenges posed by XBRL is the management and querying of XML schemas. XML schemas are used to define XBRL concepts. XBRL needs a XML system that could support XML schema standard and offer efficient querying and management of XML schema. The understanding is that any XML system that could ingests XML schemas could support efficient querying over them. This XML system could also be able to provide easy ways to manage the taxonomy set schema and the taxonomy information specified in taxonomy documents referred to by the schema. However, how do we ensure that the XML system could provide us such assistance?

One of the ways to have XBRL success is by having a XML system that have a schema compilation process. Schema compilation assists in validating the XML input schema document navigates references between various schema entities and saves the compiled XML schema to catalogue tables. The references may be understood and buried in the XML structure (Grandfather, father, son relationship). XML system should also allow the XML schemas to sync within another XML schema through imported references. References navigated during schema compilation should also be persisted within the compile XML. The compilation process of the XML schema should allow the navigation of implicit and explicit references that link various schema components.

The XML schemas should be fully integrated with the data repository that has a file system interface within the database. The schemas could be accessed through familiar file system URL paradigm such as the SQL interface to allow full retrieval of document and/ or retrieval of specific document of interest. The integration of the XML schemas with the data repository could allow events to be used in enforcing referential integrity constraints between a taxonomy set schema and its associated taxonomy documents. The integrity constraint check simplifies the management of XBRL taxonomies. Therefore, the registration of the taxonomy set schema should load its associated taxonomy into the database to improve manageability of the taxonomy set schema. In addition, the association between the taxonomy set schema and its taxonomy documents needs to be automatically enforce referential integrity constraints on the taxonomy documents.

The importance of XBRL in the financial reporting paradigm is inevitable. This is even so with the need to make Malaysia as a digital country by 2020 (Francis, 2012). However, there are issues and challenges that need to be resolved in making XBRL-based financial reporting a success. Cooperation and participation from all relevant parties in terms of knowledge and understanding are vital in making sure that this technology would indeed become an important tool in the accounting profession.

REFERENCES

• Boulton, C (2005), XBRL chugs along despite scant users, Internet use, www.internetnews.com/.../XBRL+Chugs+Along+Despite+Scant+Users.htm • Ernst & Young (2009), Top 10 XBRL readiness challenges: Issues preparers face filing in the new interactive data format, www.ey.com/.../EY_Top_10_XBRL_readiness_challenges.pdf • Francis, P (2012), Intro to XBRL, Accountants Today, September/ October, 34-41 • Kernan, K (2008), XBRL around the world: A look beyond U.S shores to put the SEC’s interactive data initiative in a global context, Journal of Accountancy, October, 1-5

XBRL (2007), Efficient querying and manageability of XML schemas for XBRL, Vancouver, December XML Schemas in the Context of XBRL - XBRL Conference Archives

• Wu, J and Vasarhelyi, M (2004), “XBRL: A New Tool for Electronic Financial Reporting”, Business Intelligence Techniques: A Perspective from Accounting and Finance, Springer, 73-92

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Potential data uses

Printed financial statements

Bank filings

Instance document

Taxonomy

Regulatory filings

Tax returns

Website