Tokyo 2011: Japan Grows XBRL Adoption, Pushes for Expanded Coverage

XBRL (eXtensible Business Reporting Language), the standard for reporting financial results using tagged templates that make it easier to analyze financial statements and compare like-for-like values, which was first adopted in Japan in 2008, is now gaining acceptance from the country’s accounting standards body, and could be expanded to cover new areas such as corporate actions, said Makoto Shibata, principal analyst in Bank of Tokyo-Mitsubishi UFJ’s e-business and IT initiatives division, in a case study at the Tokyo Financial Information Summit.

“XBRL enabled faster provision of information to investors,” he said. “XBRL data can be captured and new methods can be used for online analysis.”

Accounting issues have posed a challenge to adoption, Shibata said, citing discrepancies arising from different interpretations of data, based on XBRL, prompting the Japan Accounting Association to set accounting procedures for preparing XBRL documents, which will be rolled out to firms that use XBRL for reporting.

Initially, XBRL had been limited to certain types of financial information in Japan, Shibata said, but is now being promoted for accounting and for pricing data and corporate sustainability reports. “By using XBRL, there will be more effective and efficient analysis or re-use of this information,” he said. “But it’s limited so far, because the analytical tool has yet to be developed and the methodology of the analysis is not well developed either.”

In Japan, corporate actions reporting and processing is still largely a paper-based process, and is therefore another function that could benefit from the application of XBRL, Shibata said. To that end, Japan is turning to international organizations such as the Depository Trust and Clearing Corp and Swift to help “develop a taxonomy or standard process” to expand XBRL’s use to handle corporate actions. This effort will also require identifying all the stakeholders in this transition and working with them, he added.

Adoption of XBRL in Japan is also a key step toward meeting international financial reporting standards (IFRS), Shibata said. Japan had been due to implement IFRS by 2015, but recently postponed this goal to 2017. Still, eventual implementation of IFRS is inevitable, he said. “I’m sure IFRS will be adopted, so the corporate side needs to be prepared…. IFRS will be a growing burden for multinational companies because they need to really adapt and adjust to a different system.”