Regulatory Implementation Choices: The Case of XBRL

Abstract

Regulators around the world have mandated the use of eXtensible Business Reporting Language (XBRL) in financial reporting with a goal of serving the public interest by improving the usability of financial data. This study examines the different types of decisions regulators make when adopting XBRL. We further analyze the advantages and disadvantages of the choices regulators make and their impact on both the companies who are required to file the information as well as the users of the information. We posit potential factors that may impact the different decisions regulators make. We also offer a set of recommendations for regulators’ consideration. Regulators should consider extending the scope of information available to users (e.g., sustainability information), refining taxonomies that have suffered from too many unique extensions, continuing to improve data reliability to decrease the “expectations gap”, and improving the ability of user to consume data in order to benefit from the public good. This study informs policy setting in general as well as the specific context of XBRL policy setting.