The Improvement of Governance Decision Making Using XBRL

The Improvement of Governance Decision Making Using XBRL

Ahmad Ahmadpour (Mazandaran University, Iran)
Copyright: © 2013 |Pages: 8
DOI: 10.4018/978-1-4666-1960-9.ch008


eXtensible Business Reporting Language (XBRL) has the potential to influence users’ processing of financial information and their judgments and decisions. XBRL is an eXtensible Markup Language (XML)-based language, developed specifically for financial reporting. XBRL, as a search-facilitating technology, contributes to direct searches and simultaneous presentation of related financial statement, and facilitates processing footnote information which could help financial statements’ users. XBRL is more than a distribution mechanism for data or facilitating technology. XBRL has the potential to significantly improve corporate governance. Putting that potential into practice requires an XBRL taxonomy model that is data based instead of document based. This paper hypothesizes that in the presence of search-facilitating technology, users’ judgments of financial statement reliability will be influenced by the choice of recognition versus disclosure of stock option compensation than in the absence of search-facilitating technology. When the stock option accounting varies between two firms, the search technology helps in both acquiring and integrating relevant information. The paper suggests the implementation of XBRL improves transparency of financial information and managers’ choices for reporting that information.
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Recognition Versus Disclosure

The FASB’s conceptual framework states that an item should be recognized in the body of the financial statements only if it (1) meets the definition of a financial element (e.g., asset, revenue); (2) is measurable with sufficient reliability; (3) is relevant to users’ decisions; and (4) is reliable in the sense of being representational faithful, verifiable, and neutral (SFAC No. 5, para. 63). Items that fail to meet one or more of these criteria are candidates for disclosure.

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