Extensible Business Reporting Language in India

Introduction

XBRL

XBRL (eXtensible Business Reporting Language) reporting is gaining momentum as a medium of digital financial reporting (Ogundejiet.al, 2014). It is a meta-language, based on XML and used as electronic communication of business information. The primary purpose of XBRL is to facilitate the preparation, publishing, exchange, and analysis of financial statements. In fact, using the framework of XBRL it is possible to facilitate numerous types of reports that can efficiently be parsed by computers (Vasarhelyi and Alles, 2008) and software applications available for the analysis of such information (Silveira et al., 2007). XBRL can be considered as innovation as it is becoming an internet business standardization language (Willis, 2007). A XBRL report does not only contain business and financial reporting information but it also includes attributes that describe that information. It doesn’t change the financial reporting standards but change the way in which business and financial information is reported. Typically, an XBRL report consists of an XBRL instance document containing the financial facts and taxonomies that provide the information about how facts are interrelated in the financial statement. Taxonomy works as a electronic dictionary for business and financial terms within the business realm. Instance documents are business reports that are physically connected to taxonomies. It contains both numerical and non-numerical data and information about the data.

XBRL in India

The XBRL wave started in India in late 2007 when the Institute of Chartered Accounts of India (ICAI) initiated the idea digital business reporting using XBRL with different regulators in India. XBRL implementation can achieve immediate benefits for Indian companies in terms of a more efficient means to file incorporation documents online and a simplified mode of filing of returns and forms. The benefits to Indian capital market include easy access to public information for users at anytime and from anywhere, which may increase information transparency. With increased coverage, it is hoped that the XBRL data thus collected would significantly enhance the Government capability in policy formulation and regulators, corporates as well as public and investors at large. Major regulators involved in the adoption of XBRL in India are Ministry of Corporate Affairs (MCA), Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and Insurance Regulatory and Development Authority (IRDA). From 31^st March, 2011, Ministry of Corporate Affairs mandated XBRL reporting (in phases) for companies, who would adopt the Commercial and Industrial Taxonomy developed by ICAI. In the first year (phase 1), the focus was on a certain class of companies who are listed in India, with paid up capital of Rs. 5 crore and turnover of Rs. 100 crores, would have to file their Balance Sheet and Profit and Loss in XBRL format from the FY 2010-11 onwards. The subsequent years witnessed a significant change in the regulatory reporting format and a new schedule VI for improvement in disclosure system for financial statements was enforced by the Companies Act 2013. The taxonomy architecture also underwent considerable change. Companies are also required to file their cost audit report and compliance report in XBRL format. Filers have the option to create their own XBRL documents in house or to convert their financial statements into XBRL format through outsourcing. Regardless of which approach, the first step is to tag each financial element to the published XBRL taxonomy so that accounting information can be converted into XBRL format. Once XBRL instance documents are created, filers need to validate the instance document before filing on MCA portal. Off-line process validates XBRL instance documents for business rules using the MCA off-line tool. Second, for online validation (Pre-scrutiny) the instance documents are uploaded and validated from the MCA21 system (MCA 2012).

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The Ministry of Corporate Affairs (MCA) has adopted the XBRL taxonomy for Commercial & Industrial (C&I) Companies. Regulators like RBI has implemented the XBRL based regulatory filings for banks using Internet and Indian Financial Network. SEBI and IRDA are in the process of implementing XBRL. But the adoption is not uniform across various sectors of businesses in India. As every organization faces some teething problems when adopting a new technology, the same holds true for XBRL. Firstly, XBRL has a steep learning curve to begin with. Therefore, there’s a big challenge for the company to bring together a workforce skilled for using this new technology. It requires training efforts and change management initiatives on the company’s part to prepare employees for such advancements. Organizations should also be careful about the probable effects of the technology adoption procedure on existing processes and people; and take necessary steps to minimize any adverse behavioral impact.

Research Objective

Therefore adoption of XBRL becomes a relevant research area of interest among academics and practitioners (Pinsker,2008; Muller,2013). Researches around the world are carried from various disciplines on XBRL. Further, majority of academic XBRL research has focused on the US market (Srivastava and Liu, 2012) and, therefore, there is a need to see how non-US countries have implemented XBRL. Further, little research is cited regarding end-user attitude towards XBRL adoption (Muller, 2013). Being a behavioral study, the present research has applied a technology acceptance model (TAM) to identify the predictors for attitude formation required for successful adoption of XBRL. Based on Baldwin (2006) study we classified the stakeholders for the system in four groups. The ‘Standardizer’ creates taxonomies, accounting standard, Legislator and regulator. ‘Providers’ are the companies, divisions that provide platform for creating reports. ‘Intermediaries’ are auditors, financial aggregators. ‘Addresses’ are Investors, regulators, managers. The present work attempts to analyze the acceptance of XBRL technology by ‘Intermediaries’ including auditors and company financial professionals responsible for preparation of XBRL report in Indian companies. Thus, the study has implications for auditors, as well as for firms who operate in India and in countries whose XBRL implementation reporting in mandatory.

Literature Review

XBRL

As pointed by many researchers, XBRL is used as most advanced and rigorous standards taxonomy developed to help for a better assurance of future digital financial reports (Cohen, 2009; Lymer and Debreceny, 2003; Boritz and Wo, 2008; Plumlee and Plumlee, 2008; Shrivastava and Kogan, 2009; and Gonzalbez and Rodriguez, 2012). XBRL adoption allows organisations to report quickly (Cohenet al., 2005), and standardised data to be accessed at a lower cost with greater transparency and cheaply. With the adoption of XBRL, financial information can be optimized for creation, discovery, consumption, and reuse, and XBRL also enables supply of information for business reporting to communicate among players more efficiently (Vasal and Srivastava, 2009; Debreceny et al., 2005). Additional XBRL benefits include cost savings because of increased data processing capability, decreased data duplication and decreased cost of bookkeeping (Pinsker and Li, 2008; Yoon,2011). Alles and Piechocki (2009) develop a framework for understanding how tagged data can be used to change the way in which decisions affecting governance are made. Roohani (2007) argues that XBRL would facilitate corporate governance and provide transparency to employees, investors and creditors, and regulators. Alles and Piechocki (2009) commented that XBRL will improve corporate governance. Premuroso and Bhattacharya (2008) confirm that early and voluntary filers of financial information in XBRL format demonstrate superior corporate governance and operating performance relative to their non-adopting peers. But Doolin and Troshani (2007) believed that benefits of XBRL are not expected to be immediate but will accumulate over time.

Tornatzky and Klein (1982) and Rogers (2003) suggest that the relative advantage, compatibility, complexity, and the ability to trial and observe a technology like XBRL, all play a significant role in the adoption decision. Potential adopters typically evaluate the relative advantage and benefits of new technology against the perceived costs (Doolin and Troshani, 2007; Oliver and Whymark, 2005; Premkumar et al., 1994). Adopters will weigh the initial and ongoing cost of adopting the technology (Rogers, 2003) against potential benefits such as a reduction in compliance costs and increased competitive advantage (Oliver and Whymark, 2005). The greater the perceived positive relative advantage, the more likely an organisation will adopt the technology. Chartered Accountants will be primarily responsible for the implementation of XBRL in an organization (Gauri, 2014). Current study examines the factors that influence individual decision to adopt XBRL using Davis (1989) Technology Acceptance Model (TAM).

Technology Acceptance

Due to complexity and context-sensitiveness, technology adoption required various models and which has speculated in the past two decades to specify the factors influencing organizations technology adoption (Wolfe, 1994; Jeyaraj et al., 2006; Doolin and Troshani, 2007). These include the technology acceptance model (TAM) (Davis, 1989), TAM2 (Venkatesh et al., 2003), theory of planned behaviour (Ajzen, 1991), innovation diffusion theory (Rogers, 2003), and the unified theory of acceptance and use of technology (Venkatesh et al., 2003). Among all, TAM is the most popular model build upon a well known theory of IS (Information System) research.

The literature of IT adoption relates to various Personal factors (Davis, 1989; Troshani and Doolin, 2005; Venkatesh, and Davis, 2000), Technological factors, Environmental factors and organisational factors (Troshani and Doolin, 2005). Personal factors include dimensions of TAM (Technology Acceptance Model) like perceived ease of use and perceived usefulness, attitude towards technology, which were proven to be more successful in measuring the impact on technology adoption. Technological factors including relative advantage (Zaltman et al. 1973), complexity (Rogers, 1983), compatibility (Kwon and Zmud, 1987), observability (Rogers, 1983), and trial ability (Venkatesh, and Davis,2000). Technology complexity includes the current knowledge and skills of the employees in the organization (Doolin and Troshani, 2007). Davidson el al. (2006) and Rogers (2003) revealed that lack of knowledge and skills hinders the adoption of XBRL by organisation accountants. Environmental factors include external pressure (Iacovou et al., 1995) and competition (Grover, 1993), Innovation Adoption (Tornatzky and Klein,1982; Rogers, 1983). Organisational factors include top management support (Rai and Howard, 1994; Thong and Yap, 1995), organisation structure (Lai and Guynes, 1994), centralisation and formalisation (Zmud, 1982; Grover and Goslar, 1993), organisation size (Grover and Teng, 1992). But with present research scope, we only examined the impact of determinants defined in Technology Acceptance Model (Davis,1989).

Research Model

TAM is an adaptation of theory of reasoned action by Fishbein and Ajzen (1975) and was mainly designed for modeling user acceptance of information technology in the workplace (Davis, 1989; Davis et al., 1989). The positive relationship between behavioral intentions and actions is extensively described by the theory of reasoned action (Azen,1980) and the theory of planned behavior (Azen, 1991). The TAM model assumes that system use is directly determined by behavioral intention to use the system which is in turn influenced by users’ attitudes toward using the system and the perceived usefulness of the system. This model displays a high level prediction power of technology use (Goswami, 2014). The present research uses the TAM (Technology Acceptance Model) model proposed by Davis (1989) to understand the acceptance in respect of perceived usefulness and ease of use dimensions. Both are most closely related to the characteristics of the XBRL system. Perceived usefulness (PU) the degree to which a person believes that using a particular system would enhance his or her job performance (Davidson et.al, 2006). Perceived ease of use (PEOU) is the degree to which a person believes that using a particular system would be free of effort.

Research Methodology

The research methodology of this study is divided in following points:

• Source of data-The source of data collection is primary data which is collected from the professionals working in various companies and responsible for creation of XBRL reports.
• Sample size-as per the difficulty of finding the qualified respondents who were responsible for the XBRL based financial reporting;the sample 20professionals of Rajasthan state were selected randomly. Each author has contributed 5 the filled questionnaire and the data were collected from 12 companies as a representative sample.
• Sampling technique-The sampling technique used is convenient sampling.
• Hypothesis- as per the nature of the research two hypotheses were developed and shown under the head of data analysis.
• Analysing Tool: Multivariate Regression Analysis were used to analyse the data and to identify that which independent variable results change in dependent variable.

Conclusion

The present research begins with a clarification that global adoption of XBRL will have a large impact on financial and corporate reporting process. Indian companies can also be benefited with this technology innovation along with its inherent operational advantages. TAM has proven to be a useful acceptance model in helping to understand and explain the user behavior in XBRL implementation. The study examined the effect of perceived usefulness and ease of use on attitude of Indian financial professionals towards XBRL reporting.

Change management is also a crucial step to be taken before implementing a technology like this. Employees are quite reluctant for changes in processes. This makes it imperative for companies to conduct change management which helps employees embrace the change openly. Staying up to date with current taxonomies is also essential. The implementation roadmap must be charted out with detailed planning for the technology’s adoption to be a success. It is critical to ascertain the most suitable method for your organization to implement it. Your decision to go for bolt-on, or outsource or built-in approach must be carefully thought of and minutely planned keeping in mind the organization needs.

Future Research

It is worth noting that whereas XBRL has exhibited capabilities to produce the digitized version financial statements, it is still unable to capture information displayed through various other sections of the financial statements and the annual reports. Particularly, the information displayed through the notes to accounts and, management discussion and analysis sections of the annual reports. This is indeed a challenging area for future research. All aspects concerning the improvement of efficiency by applying XBRL like time savings, reduced effort, and improved communication are mentioned frequently in literature but hardly any research activities could be recognized. Future researched should focus on the evaluation of productivity of financial reporting. Other potential area of research is system flexibility, which measure the cross-system compatibility and system independent processing of XBRL business and financial information. The impact of demographic factors upon the XBRL adoption among consumers must be examined. Based on our discussions and literature review, we suggest that research focus might also be on the economic impact of XBRL. This may help to present a clear business case to the stakeholders which should contribute to the comprehensive adoption of XBRL.