The adoption of XBRL in the corporate sector has improved the process of financial reporting for both accountants and investors of a firm. It has a significant impact on transparent and integrity of businesses because it provides room for managers to screen all the facts of financial data in such a way that it can be processed and analyzed effectively. The technology provides machine-readable and informative reports that make it possible for firms to save on costs, increase data integrity, improve efficiency, reliability, and accuracy of financial information.
Since XBRL reduces the costs of processing information and its asymmetry, managers are able to enhance the transparency of their organizations and the security market as they also focus on improving information structure ( Debreceny & Piechocki, 2007 ). In the long run, this enhances the efficiency of the social and economic activities of the entire operations. The information environment is also improved based on how the event returns volatility is reduced. The technology is very efficient as far as transparency is concerned because it focuses on a fair and full disclosure of fundamental information on operation management and corporate activities. Transparency of these reports leads to a reduction in the processes of financial data manipulation as it improves accountability through management.
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XBRL is a very effective tool as far as corporate governance is concerned. It provides more room for quality decision making because information formatted in this form offers a professionalized structure for management to improve their performance within the market ( Suwardi & Tohang, 2017 ). Managers will also be able to make informed decisions on key aspects that may need to be addressed within their organizations based on how financial data is interpreted. The supportive analysis is made possible through this technology where computing software does all the reporting. This eliminates the likelihood of making human error and fraudulent activities. Firms are therefore able to maintain integrity and transparency in their environments as they increase their level of global competition within the market. The adoption of a better regulatory framework is made possible as awareness is created on the impact of this technology on the corporate governance of an organization ( Debreceny & Piechocki, 2007 ). Based on the level of risk awareness that a firm has, they are able to adapt fluid environments that are integrated with the use of XBRL to provide more reliable and accurate financial statements.
XBRL has led to the establishment of a standardized system-to-system- information exchange thus enabling a higher level of syntactic and semantic interoperability ( Suwardi & Tohang, 2017 ). Based on how a firm adopts this technology in their framework, they will be able to align their operations with the global standards that permit every data piece to be presented in any corporate financial report. XBRL is a very critical component when it comes to the process of re-engineering and re-structuring information reporting process within an organization and across business reporting supply chains ( Debreceny & Piechocki, 2007 ).
From the information provided above, it is evident that XBRL plays a very important role as far as corporate governance and transparency are concerned. Those who have a proper perspective of this technology are able to use their financial information to evaluate their firms and make financial projections over the coming years. This tool has made it possible for firms to make use of comparative analysis techniques meaning that they can easily be able to establish trends and patterns of this information. Managers are also able to broaden their analysis so that they can include their desired specific measurements in a manner that would not have been possible without this tool. The elimination of human error has also increased transparency by reducing human error and improving accuracy, efficiency and reliability.
References
Debreceny, R., Felden, C., & Piechocki, M. (2007). New dimensions of business reporting and XBRL . Wiesbaden: Deutscher Universitäts-Verlag.
Suwardi, A., & Tohang, V. (2017). An Analysis of XBRL Adoption Towards Systemic Risk of Financial Institutions Listed in NYSE. Australasian Accounting, Business and Finance Journal , 11 (4), 23-37.
