Modernizing Business Reporting


The AICPA’s Assurance Services Executive Committee issued a white paper to address how transparency in financial reporting will be improved through the use of eXtensible Business Reporting Language (XBRL) and enhanced business reporting (EBR) that takes into account nonfinancial factors that affect a company’s value. The paper, The Shifting Paradigm in Business Reporting and Oversight, is intended to help build awareness of trends and opportunities and outline a plan that supports the sustainability of the CPA profession in a changing world.


“The current reporting and assurance model does not effectively meet user needs in today’s global markets,” says Alan Anderson, chair of the Assurance Services Executive Committee (ASEC). “We wrote this paper to highlight changes in the global business environment and help organizations understand and appreciate emerging reporting needs. External stakeholders are increasing the pressure on organizations to receive similar types of information they use for internal management purposes.”


ASEC asserts in the paper that private and public companies would benefit from adopting XBRL and EBR. The paper explores the forces of change, such as globalization, advances in technology, market reaction and new social structures, and the impact of those forces on the state of reporting and assurance. It also outlines the efforts already under way around the world to improve the quality, transparency and relevance of reported information. The paper illustrates key milestones to be addressed and the respective roles and responsibilities of corporate reporting participants to complete the shift toward enhanced business reporting.


The SEC in May issued a proposed rule that would over time require all public companies to submit financial statements formatted in XBRL. If the proposal is adopted, public companies using U.S. GAAP with a worldwide public float over $5 billion (approximately the 500 largest companies) would provide their XBRL submission for fiscal periods ending December 2008. All remaining public companies using U.S. GAAP and foreign private issuers using IFRS as issued by the International Accounting Standards Board would provide XBRL-formatted financial statements over the next two years.


The SEC received comments on the proposal from many organizations, including the AICPA. A final SEC rule on the use of XBRL for reporting is expected in the fall.


See the executive summary below or click here to see the complete paper. Information about XBRL and EBR is available at and


Amy Pawlicki is director of business reporting, assurance and advisory services, and XBRL for AICPA. Her e-mail address is




The Shifting Paradigm in Business Reporting and Oversight


by Amy Pawlicki

Director of Business Reporting, Assurance and Advisory Services and XBRL, AICPA

 On behalf of the AICPA Assurance Services Executive Committee


This paper was written to highlight significant, fundamental changes that are already impacting the content, format, and reliability of business information that is exchanged in the capital markets. This analysis examines the current state of business reporting and assurance, identifies the key forces of change that are challenging the limitations of this current state, and sets forth a current and future migration path toward a model that better addresses the needs, challenges, and opportunities of the 21st century.


The benefits of increased transparency through more relevant external reporting are important to public and private companies, not-for-profits, and governmental entities for both internal and external reporting purposes. Moreover, the movement to improve the relevance of reporting to better meet the needs of today’s markets is global in nature.


The relevance of information is impacted not only by its content, but also by the timeliness and efficiency with which it can be used. While today most external communications tend to be compliance-oriented and focused on historical financial statements, there is increasing pressure on organizations to start including the kinds of other information that they use for internal management purposes in communications to external stakeholders. There also is increasing demand, by both internal and external users of business information, for more timely information that is provided in a standard, electronic format that allows for quick and easy analysis. The current static, paper-based model is being replaced by an online model that is available on demand, in real-time (as appropriate), and that allows users to customize searches and drill-down into underlying concepts, data, and relevant resources. As the reporting model evolves to leverage greater capabilities and address emerging needs, independent assurance must adapt accordingly.


The primary factors driving change in the reporting and assurance model include the shift from the industrial age to the knowledge age; advances in technology, globalization, and market reactions to lack of transparency; and new social structures. Arising out of these forces of change as analyzed in this paper, a common theme is the recognition that the current reporting and assurance model is inadequate for the effective allocation of capital in today’s global markets. And yet, the standards, technology, and tools exist to automate and enhance reporting and assurance so that they have a positive impact on market performance.


Enhanced technologies and platforms such as the Internet, and standards for information dissemination, such as the eXtensible Business Reporting Language (XBRL), enable more transparent, relevant, and efficient reporting practices and processes and can be leveraged to drive the evolution of business reporting and assurance to better meet the needs of the modern global economy. These new capabilities both facilitate and necessitate a fresh look at the information that is produced and consumed to ensure maximum value. The Securities and Exchange Commission (SEC) Advisory Committee on Improvements to Financial Reporting (CIFiR), which was formed to address complexity in existing financial reporting requirements and make information more useful and understandable for investors, can represent an important step in this direction. Market driven initiatives, such as the Enhanced Business Reporting Consortium (EBRC) and the World Intellectual Capital Initiative (WICI), also are working to support and promote the reporting of relevant information that complements traditional financial reporting to provide a more complete picture of performance. New information formats and content have implications with respect to the role and methods of independent assurance, and the AICPA Assurance Services Executive Committee (ASEC) is working to address these implications. These are just a few examples of efforts underway around the world to maximize the quality, transparency, and relevance of reported information.


The current environment provides manifold opportunities for the accounting profession to take a leadership role. The profession, together with other market participants, must embrace change and focus its efforts on modernizing the reporting model by addressing the now imminent need for a broader “bandwidth” of information, different (automated) information distribution channels, timelier reporting, and new audit strategies and technologies. The alternative—failure to play a proactive and supportive role in a market driven solution—would negatively impact the relevance and sustainability of the profession.


This paper addresses the following elements of a recommended migration path toward achieving these objectives (see appendix, page 31, Shifting Paradigm – Roadmap, for a summary illustration):


l Support XBRL International Inc. in global XBRL technical standard setting
l Support coordination of United States generally accepted accounting principles (U.S. GAAP) and International Financial Reporting Standards (IFRS) XBRL taxonomies

l Work through EBRC and WICI to flesh out EBRC framework for key industries

l Establish standards for data integrity assurance, including security protocols


l Move quickly toward mandatory XBRL filing

l Establish regulatory safe harbors for companies and auditors advancing the XBRL state of the art



l Establish statutory safe harbors for companies and auditors advancing the XBRL state of the art


Individual CPAs (in public practice and industry):

l Develop competencies in XBRL and systems design and assurance



l Adopt XBRL for public reporting and provide for user feedback in order to continuously improve disclosure.


Click here to see the complete paper.



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