Lou Rohman, vice president of XBRL Services, Merrill Corporation | December 04, 2017
Although tagging IFRS financial statements under the SEC’s new mandate using the IFRS Taxonomy will create some initial apprehension, I do believe wholeheartedly in the IFRS Taxonomy’s ability to convey the IFRS standards clearly and accurately via XBRL digital financial reporting.
So it was reaffirming to read the recent speech by Hans Hoogervorst, chair of the International Accounting Standards Board (IASB), to the Brazilian Accounting Pronouncements Committee (CPC) in which he outlined the IASB’s “Better Communications” initiative aimed at bringing better clarity to financial reports. He cited the IFRS Taxonomy as being one of the initiative’s three components for improving communications with investors.
This is quite an endorsement of XBRL and highlights how important communicating financial information in a tagged, digital format is likely to be in the coming years, both in the U.S. and internationally.
A Much-Needed Shift in Focus
According to Hoogervorst, the IASB is intent on shifting the focus of financial reporting globally from one of a “check the box” compliance function to one that is seen as a channel for good communication. Many investors and industry watchers are often overwhelmed by the huge amounts of poorly organized content in today’s financial statements.
As Hoogervorst noted, part of the reason for this rests in the limited IFRS guidance for items such as formatting the income statement. Going forward, the IASB will seek to focus not on developing extensive accounting standards with significant recognition or measurement changes, but to focus on how that information is formatted and presented.
Following the XBRL Roadmap
The end-goal with the IASB “Better Communications” initiative, as with IFRS XBRL tagging as a whole, is to ensure companies can communicate a clear, consistent and objective story to investors through their financial statements.
I’ve been closely involved with the IFRS Taxonomy and its advisory group for several years, and I agree with Hoogervorst’s belief that the IFRS Taxonomy provides a great roadmap for achieving these goals and will help facilitate the growing electronic consumption of financial information.
Not only is it more efficient than scanning and searching HTML, paper-based documents, but it will also improve the effectiveness of financial communications.