Why is XBRL needed in the financial community?
The eXtensible Business Reporting Language (XBRL) is necessary for the financial sector as it serves to define standard ways of passing information regarding financial transactions to other business entities. This standard guide in communication enables financial workers to use financial statements to make transparency accomplishable ( Cheng et al., 2021) . Through transparency, the financial community manages to handle unwanted habits that may result in activities like corruption. Auditing and evaluating various transactions are more manageable when using the XBRL among professionals in the community ( Cheng et al., 2021) . The guideline also enables the professionals to be accountable while exchanging finances and recording them.
In your opinion, why did the Securities and Exchange Commission mandate its usage?
The security and Exchange Commission mandate the usage of XBRL because of its benefit in making information available. The commission uses this opportunity to ensure data relating to financial transactions are available to the public ( Cheng et al., 2021) . Gathering information relating to financial transactions in various companies is essential to promote communication to investors ( Cheng et al., 2021) . Members of the public interested in various businesses may use such information to learn about companies that seem promising to invest in and have good future returns. Disclosure of financial information is a necessity when it comes to investment.
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What does it provide that was not available before XBRL?
Before the availability of the XBRL framework, the business sector had problems handling data regarding financial transactions. The standard’s existence was effective in making the process of passing information free of errors ( Cheng et al., 2021) . When handling large amounts of data, financial experts may encounter some errors. The guide prevents such situations; it also promotes the process of analyzing data. Comparisons enable the financial community to efficiently understand the information that exists in their firms due to the implementation of the XBRL ( Cheng et al., 2021) . Lack of errors is an achievement that contributes to more transparency in the financial sector. Historical irregularities declined due to the use of the framework as it guides on better presentation of transactions data.
Reference
Cheng, X., Huang, F., Palmon, D., & Yin, C. (2021). How does information processing efficiency relate to investment efficiency? Evidence from XBRL adoption. Journal of Information Systems , 35 (1), 1-25. https://doi.org/10.2308/isys-18-063
