Academic journal article Management Accounting Quarterly

The Different Levels of XBRL Adoption

Academic journal article Management Accounting Quarterly

The Different Levels of XBRL Adoption

Article excerpt

Though eXtensible Business Reporting Language (XBRL) has been championed as a way to improve the efficiency of financial reporting, accuracy of financial data, timeliness and reliability of financial data, and the ease with which data can be acquired and analyzed, many companies still resist using it without an external mandate. In 2008, the U.S. Securities & Exchange Commission (SEC) issued a rule that requires domestic and foreign firms to file their financial statements in XBRL and post their financial statements on their corporate website using XBRL. Other regulatory agencies around the world have enacted similar mandates. XBRL is now required for external financial reporting by banking regulators in Europe and for all publicly traded companies in the United States. Firms with a market value of less than $75 million (or less than $50 million in revenues if market value is not easily determined) were required to file using XBRL for quarterly and annual reporting periods ending after June 15, 2011. (1)

While these and other companies are now required to use XBRL for external reporting purposes, there is no requirement for companies to adopt XBRL for internal uses. They can outsource their conversion rather than convert their financial data to XBRL internally. After conversion, companies must then determine how the XBRL tags will be used: They can convert financial data into XBRL for external purposes, such as satisfying regulatory mandates, or they also can choose to use it for internal purposes, such as consolidating financial statements.

The lack of a mandate for internal XBRL use combined with the wide latitude in how companies can meet the requirements for XBRL-converted financial statements has led to a number of different levels of XBRL use. In an effort to get a clearer understanding of how organizations adopt and use XBRL, we distributed an online survey to decision makers within various organizations to assess their level of adoption, their perceptions of the costs and benefits associated with XBRL, and how they learned about XBRL.

XBRL Adoption

We defined four different types of XBRL adopters: nonadopters, low adopters, medium adopters, and high adopters. Firms generally will choose the level of adoption based on the perceived costs and benefits of each level. Nonadopters are companies that do not use XBRL for any purpose. Low adopters use XBRL for regulatory or trading-partner purposes but outsource the conversion of their data to XBRL. Medium adopters are those firms that convert financial data to XBRL in-house and only use the XBRL-formatted financial data for external purposes. Finally, high adopters convert their financial data to XBRL in-house and use XBRL for both internal and external purposes. Private firms that adopt XBRL for internal purposes are also considered to be high adopters because they have made the choice to adopt XBRL for at least one internal purpose with limited regulatory influence. Table 1 summarizes the benefits and costs of each level of adoption.


Nonadopters are not required to use XBRL by any trading partner or regulatory agency. By not adopting, these companies avoid the financial cost associated with XBRL conversion but also forsake any potential benefits associated with XBRL use. Representative nonadopters include private firms or firms located in countries without regulatory mandates for XBRL.

Low Adopters

By electing to outsource the XBRL conversion and filing of their financial reports, low adopters eliminate the need to significantly change internal information systems and adopt XBRL for their own use. Organizations often choose the low adoption route because they perceive outsourcing as cheaper, lack the in-house expertise for XBRL tagging, or do not want to purchase an XBRL mapping tool.

Outsourcing XBRL conversion typically consists of the following steps:

1. …

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