Implementation of Mandatory IFRS Financial Disclosures in a Voluntary Format: Evidence from the Italian XBRL Project

Recent research has highlighted how intensely accounting literature has focused on the potential benefits of XBRL for improving the efficiency and effectiveness of communication between companies and their internal and external stakeholders. Some studies have analyzed ex ante the degree of compatibility between the existing XBRL Taxonomies and actual corporate financial reporting practices, in order to identify the degree of potential misfit between these taxonomies and the related reported items in company financial statements. Other works have addressed the structural characteristics of voluntary XBRL adopters, particularly in the USA, based on the voluntary filing program of the Securities and Exchange Commission (SEC). Finally, some papers consider the relevant impacts of XBRL technology in one of two ways: either (a) once its formal implementation has already occurred (on a voluntary or mandatory basis) or (b), even before then, by assessing ex ante the potential impacts of this technology. Based on existing research on the motivation and characteristics of companies providing voluntary disclosures, our work takes a third way, by considering a pilot project activated in 2011 to implement the IFRS Taxonomy in the Italian market, thanks to an initiative of XBRL Italy. This empirical study was conducted over a fairly limited sample of both listed and non-listed Italian companies using a case study methodology and applying the 2011 IFRS Taxonomy to the main quantitative financial statements of the surveyed companies (statement of financial position, statement of comprehensive income, cash flow statement, and statement of changes in equity), which we globally refer to as “face financials.” The results of each application were then grouped together to derive qualitative considerations on the extent to which the 2011 IFRS Taxonomy fitted the actual needs of preparers. This study is qualitative in nature and represents the first step of a multiyear project to improve the IFRS Taxonomy by identifying the labels that need to be adjusted to match the local Italian accounting requirements.