International Standardization of Financial Reporting: IFRS and XBRL

• In Event: Earnings Management and Market Reaction

Abstract

In response to an increasingly complex global business environment over the past couple of decades, a call has come for greater consistency in financial reporting standards across national borders and a better means to communicate financial information to both internal and external users, in addition to reducing the cost of producing it. As a result, two simultaneous initiatives are currently transforming the world of financial reporting – International Financial Reporting Standards (IFRS) and eXtensible Business Reporting Language (XBRL). Both have gathered wide-spread support and adoption globally.

This paper reviews the history and current literature related to both movements and attempts to examine whether they are accomplishing their explicit and implicit goals and objectives. In the case of IFRS, these are to expand the ability for capital formation across national borders, reduce both information and compliance costs, and enhance comparability, quality, and transparency of financial reports. As for XBRL, its goals are to streamline the financial information supply chain, reduce costs of processing data into information for decision making (both inside and outside firms), and to allow for faster and easier analysis of financial reporting.

Authors

• Tracey J Riley, Suffolk University

• Lewis Shaw, Suffolk University

• Ariel Markelevich, Suffolk University