Modernizing Regulatory Reporting with the XBRL Standard: Key Considerations for Regulators

Regulators across the globe collect vast amounts of data from businesses to fulfill their mandates. The rise of the XBRL standard has revolutionized how this data is managed, analyzed, and utilized. By adopting XBRL (eXtensible Business Reporting Language), regulators are not only enhancing the quality and integrity of their data but also simplifying compliance for businesses. This blog discusses the key considerations regulators must account for when modernizing their reporting systems using the XBRL standard. 

The XBRL standard is a globally recognized framework that enables efficient data reporting and analysis. Its benefits include: 

1. End-to-End Data Integrity:
   XBRL ensures seamless system-to-system integration while also supporting form-based submissions, reducing compliance costs for regulated entities. Regulators can offer both options depending on the needs and sophistication of reporting entities. 
2. Improved Data Quality:
   Pre-defined public business  rules in XBRL validate filings before acceptance, ensuring consistency and accuracy. Private rules allow regulators to detect anomalies early and focus resources where they are most needed. 
3. Enhanced Accessibility:
   The XBRL standard supports multi-lingual data input and output, facilitating global accessibility of reports and datasets. 
4. Complex Data Handling:
   With XBRL, regulators can manage multi-dimensional datasets, accommodating various forms, templates, and data semantics. 
5. Integration with BI Systems:
   XBRL data can be seamlessly stored, transformed, and integrated into business intelligence (BI) tools, aiding in advanced analysis. 
6. Wide Industry Support:
   XBRL is supported by a plethora of software solutions, simplifying adoption for both regulators and businesses. 
7. Established Taxonomies:
   Over the years, IFRS has developed robust taxonomies for both regulators and businesses, enabling faster implementation and greater comparability. 

1. Clearly Defining Goals

Before embarking on a modernization journey, regulators must outline their objectives. These goals may include: 

• Internal Use: Enhancing data for regulatory analysis and supervision. 

• External Transparency: Providing stakeholders and the public with accurate, timely information. 

• Market Transparency: Enabling informed decision-making by investors and other market participants. 

Clear goals ensure the chosen XBRL framework aligns with regulatory priorities. 

2. Determining Levels of Data Comparability

Regulators must decide the degree of data comparability they aim to achieve. 

• High Comparability: Collecting standardized data for uniform analysis across entities. 

• Flexible Reporting: Allowing entities to report using their unique formats while maintaining data integrity. 

XBRL’s adaptability ensures both objectives can be met, depending on the regulatory context. 

3. Leveraging Existing Taxonomies

Reusing and extending established XBRL taxonomies, such as the IFRS taxonomy, offers significant advantages: 

• Enhanced Comparability: Standardized definitions across jurisdictions and entities. 

• Simplified Implementation: Reducing the effort and time required to develop custom taxonomies. 

• Interoperability: Facilitating seamless integration with existing systems. 

4. Managing Respondent Burden

Reducing the compliance burden is a critical factor for regulators. The XBRL standard allows for automation and reuse of existing data, significantly lowering the costs and complexities associated with regulatory reporting. Understanding the capabilities of the business ecosystem is essential to strike a balance between regulatory needs and business feasibility. 

5. Structuring Data Collection

Regulators must decide whether to implement: 

• Closed Reporting: Fixed formats for specific regulatory definitions, ideal for analytics. 

• Open Reporting: Flexible reporting that accommodates company-specific terms, suitable for market transparency. 

Both approaches are supported by the XBRL standard, enabling regulators to choose based on their specific requirements. 

1. Join the XBRL International Consortium:
   This provides access to expert guidance, peer collaboration, and ready-made resources, minimizing the risk of reinventing solutions. 
2. Assess Objectives and Data Usage:
   Define the scope, data comparability goals, and intended audience (internal or external stakeholders). 
3. Leverage Available Specifications:
   Utilize established XBRL taxonomies and rules to streamline the development process. 
4. Choose the Right Tools:
   Select specialized XBRL software to simplify reporting and ensure compliance. 
5. Plan for Multi-Dimensional Reporting:
   Use XBRL’s robust capabilities to handle complex datasets efficiently. 
6. Engage Stakeholders:
   Include regulated entities in discussions to ensure smoother implementation and compliance. 

Modernizing regulatory reporting with the XBRL standard is a transformative step that offers immense benefits, from improving data quality to enhancing market transparency. By clearly defining their goals, leveraging existing taxonomies, and managing respondent burden, regulators can implement XBRL effectively and realize its full potential. 

Joining the XBRL International Consortium and utilizing its resources ensures regulators can access the best practices and avoid unnecessary complexities. The result is a streamlined reporting framework that supports both regulatory objectives and the broader public good.