Developing and implementing ‘extended Business Reporting Language’ standards for online corporate reportingWed 4th Nov 2015
Research on the role of the internet in corporate reporting at the University of Birmingham started in the 1990s with Professor Andrew Lymer. His initial findings on the use of the internet for corporate communications was widely presented and used throughout the period of the late 1990s to the mid-2000s. This drew attention internationally to the role that information technology can play in corporate reporting in the UK and beyond.
The key output from this period was a report published in 1999 commissioned by the then International Accounting Standards Committee (now International Accounting Standards Board). The research found that there was a disconnect between the national standards being developed by individual professional bodies and the global nature of the financial industry, and consequently put forward a road map setting out the steps necessary to achieve international coherence for online business reporting and provide greater value for stakeholders from online communications channels. This map was subsequently adopted by the international body responsible for setting auditing standards as the means by which online reporting activity should be audited at the time [Financial Reporting on the Internet – Responsibilities of Directors and managers].
This work led directly to initiatives in XBRL (eXtended Business Reporting Language) which became the core language for online reporting activity by the late 2000s.
Research funded by the Institute of Chartered Accountants in England and Wales (ICAEW) included an experimental study of the use of digitally tagged annual reports and made 12 recommendations regarding the development, regulatory framework and education required to support the effective implementation of the technology.
A further report was produced for the ACCA by Prof Lymer with colleagues from Dundee University. This report called for a change in the way XBRL technologies were rolled out in the UK at a time when mandated use of this technology for tax filings and corporate governance filings was being planned in the UK. It was used by the teams undertaking work on the tax filing standards in particular.
Benefits and Impact
The main impact that senior staff at both HMRC and at Companies House have acknowledged was in the contribution of Prof Lymer and his colleagues (Dr Nick Rowbottom and Dr Joanna Locke) from the Birmingham Business School in the successful delivery of programmes to use XBRL as the standard for mandatory on-line filing of company statutory accounts and tax computations introduced in the UK in April 2011. The lead HMRC project manager said the Birmingham staff provided an authoritative perspective on XBRL and accountancy issues, particularly the mechanics of accounts preparation. Overall, this measure was designed to bring efficiencies at HMRC through reducing manual processing of data and allowing staff to focus on more complex activities which contribute to raising tax revenues.
Impact in setting international standards for XBRL
Digital reporting data’s greatest potential contribution is to achieve global communication of business information to facilitate decision making. The Birmingham researchers’ focus in the XBRL international standards setting area has been on the need for openness and effective inclusion of the needs of the retail investor in the design of digital reporting.
Impact on this aspect was achieved in part through Dr Locke’s membership of the XBRL Advisory Council (XAC) of the International Financial Reporting Standards (IFRS) Foundation. The role of the XAC is to provide strategic advice to the IFRS XBRL Team regarding the development and adoption of IFRS XBRL taxonomies – the basis on which many companies around the world now report their corporate activity to various national government regulators and to the wider public. The Birmingham researchers have contributed to international standards setting for company reporting through their participation in the XBRL Advisory Council, where they have successfully promoted greater transparency in reporting to the benefit of retail investors.
The direction for regulation of digital reporting recommended in this report influenced also EU policy. In June 2013, the EU agreed revisions to the 2004 Transparency Directive, including a new requirement demanding that from January 2020 company annual financial reports be in a single electronic reporting format in order to improve accessibility, analysis and comparability of reports.