XBRL has been widely adopted by Regulators throughout the world, in one of 3 ways:
1. Mandated XBRL filings
2. Voluntary/Optional XBRL filings
3. Converted/Facilitated XBRL filings
Mandated XBRL Filings:
This is when the regulator mandates to their filers that they must file their financial returns using XBRL starting at a given point in time, usually providing an 18-24 months lead time. These regulators would not provide any facilities to the filer to generate or convert their data to XBRL; it is up to each filing organization to determine what they’ll need to do to convert their financial data to XBRL. Failing to submit their filing in XBRL by the set deadline would usually result in penalties for the non-compliant organization.
The Securities Exchange Commission (SEC) in the US is a good example of mandated XBRL adoption: the SEC mandated organizations to file their Financial Statements in XBRL in 2008 but left it up to each organization/filer to determine how to generate their XBRL filing.
This approach to XBRL Adoption isn’t conducive to 100% compliance or even data accuracy, as it usually results in each filing organization having to scramble to determine the best and/or most affordable means of generating XBRL instance documents by the set deadline.
Voluntary/Optional XBRL Filings:
This is when the regulator announces their readiness to accept XBRL filings, but it is completely voluntary and there are no associated penalties for not filing in XBRL. This type of adoption usually results in a minimal XBRL compliance rate as there is usually no incentive for the filing organization to incur the cost of generating XBRL filings from their back-end systems. Typically only very large organizations that file in multiple jurisdictions (and that have already internally adopted the XBRL standard) would comply.
Regulators choosing to adopt this Voluntary/Optional approach, like the Australian treasury’s Standard Business Reporting (SBR) initiative, typically experience a very slow adoption rate and do not realize the immediate benefits of XBRL adoption.
Facilitated XBRL Filings:
This is when the regulator mandates to their filers that they must file their financial returns using XBRL starting at a given point in time, usually providing a 12-18 months lead time. These regulators would provide all their filers with a Data Collection or Data Conversion facility that will convert a standard format to XBRL on the filers behalf. This approach to XBRL Adoption usually results in a 100% filer compliance and maximum data accuracy, as it does not place any additional burden on the filer.
This approach also ensures that the data validation for completeness and accuracy is done at submission time against the taxonomy, reducing the regulators processing and re-submission costs, while providing them with the added benefit of being able to properly compare and asses 100% of all filings in a given industry and across industries.
Although the converted/facilitated XBRL adoption approach is the most desirable from both the filers’ and the regulators’ perspectives, yielding all the XBRL benefits and eliminating all but arguably one of the disadvantages of XBRL adoption (near real-time Transparency), there is a cost to rolling out this data collection/conversion facility to all filers. That cost has consistently come down over the years and at the publishing of this article, depending on the software vendor, stands at less than 1 year of ROI.
The Deposit Insurance Corporation of Ontario (DICO) is a good example of the Facilitated XBRL approach. In adopting XBRL, DICO not only revamped their back-office systems to accept and process XBRL filings, but they also provided their filers with a thin-client Data Collection facility to capture all the required business information. Once validated and submitted by the filer, these filings were then converted into XBRL instance documents for processing by DICO’s back office system. It is important to note that DICO’s filers (Ontario credit unions) were not exposed to XBRL at any point in time, and in most cases had no idea that their filings were being translated and consumed as XBRL instance documents.
