December 2nd, 2019

By Azleen Ilias , Erlane K Ghani and Zubir Azhar 

Introduction

Extensible Business Reporting Language (XBRL) has evolved over more than a decade following the worldwide changes affecting the financial reporting landscape. XBRL, defined as “an open independent platform, international standard for a timely, accurate, efficient and cost-effective electronic storage, manipulative, repurposing, and communication of financial and business reporting data,” (Bergeron, 2003, p.15) is viewed as the mechanism that better suits into the current financial reporting landscape and even more so in the Industry 4.0 environment. However, as to date, XBRL has yet to be fully adopted throughout the world.

XBRL Adoption Worldwide

Since XBRL was first introduced in the United States (US), its adoption has spread throughout the world.  Three countries have successfully adopted XBRL, namely the US, Australia and Netherlands, in which their regulators demonstrated the benefits of data sharing among governments and regulators (Cordery, Fowler & Mustafa, 2011; Cohn, 2018).  The US as the largest country with a developed capital market has prompted SEC to adopt XBRL for use in the equity market by carrying out voluntary filing programs since 2005 (Kernan, 2008; Callaghan & Nehmer, 2009). In Australia, the Australian Prudential Regulatory Authority (APRA) has started to use XBRL in the financial services industry in February 2002 (Efendi, Smith & Wong, 2011). Similarly, the Netherlands has also successfully adopted XBRL when the Dutch Water Authority adopted XBRL for regulatory filings in 2004 (Baldwin, Brown & Trinkle, 2006). Other countries have also shown tremendous efforts in adopting XBRL such as the United Kingdom (UK) that saw Human Resources Revenues and Customs and Companies House started adopting XBRL (Mousa, 2010).

The ASEAN countries have also moved towards XBRL adoption. China has mandated XBRL reporting through the Shanghai Share Exchange and Shenzhen Share Exchange (Efendi et al., 2011). In Japan, the National Tax Agency of Japan, the Sumitomo Mitsui Banking Corporation and the Tokyo Share Exchange (ICAEW, 2010) have shown initiatives to adopt XBRL. Similarly, Korea have started XBRL adoption since 2003 with KOSDAQ Share Exchange (Baldwin et al., 2006). Singapore, under the requirement of the Accounting and Corporate Regulatory Authority, has also adopted XBRL since November 2007 (Azam & Taylor, 2013). In India, the Reserve Bank of India (RBI), the Bombay Share Exchange and the National Share Exchange (Kernan, 2008) started to adopt XBRL since 2007 whilst in Indonesia, the first regulator to use XBRL was the Central Bank of Indonesia. With many of these countries have adopted XBRL, it would be interesting to know the current XBRL adoption scenario in Malaysia.

XBRL Adoption in Malaysia

In Malaysia, the public listed companies are required to follow the Financial Reporting Act 1997, Company Act 2016 and Bursa Malaysia Listing Requirement when submitting financial reports. The accounting standards were established by the Malaysian Accounting Standards Board (MASB), whilst the Malaysian Institute of Accountants (MIA) and Malaysian Institute of Certified Public Accountants (MICPA) were the professional bodies involved. Other regulators that have been a part of reporting and involved in XBRL adoption are Bank Negara Malaysia (BNM), Securities Commission (SC), Suruhanjaya Syarikat Malaysia (SSM) and Inland Revenue Board (IRB). These regulators along with MICPA, MIA and MASB have become the XBRL Steering Committee.

BNM started its initiative to adopt XBRL in 2009 and the banking industry took the lead in XBRL compared to other industries. BNM began the initiative to XBRL in 2009 through the Integrated Statistical System (ISS) (XBRL International, 2010). The functions of ISS include managing and harmonising data, standardising the reporting format and collecting real time data. BNM can be considered a pioneer or early adopter of XBRL by embarking in it, which focuses on statistical reporting in the banking industry. BNM introduced XBRL-based financial reporting in June 2012 as part of its enterprise-wide initiative to transform and upgrade data management and system architecture in organisations under its supervision (BNM, 2013). This is in line with the International Financial Reporting Standards (IFRS) and the Malaysian Financial Reporting Standards (MFRS). The reporting refers mainly to financial statements, regulatory compliance data and industry-specific reports, which include data on financing and credit card business.

SC have embarked into the XBRL project starting with a small pilot project for reporting in XBRL. SC started its pilot project called the Private Retirement Scheme under SC’s first project (SC Strategic Masterplan, April 2011) and as a member in XBRL International. Together with the initiative that focused on creating a centralised electronic submitting system based on the XBRL interactive data format meant for prospectuses, financial reports, and updates for continuous reporting requirements to assist and ensure greater inter-operability and information access across a broad range of systems, data environment and entities in various market segments. Beginning May 2015, SC undertook XBRL for statistics, financial and regulatory reporting. They have also embarked into a project of Private Retirement Scheme as part of initiatives to strengthen the market information infrastructure in the Capital Market Masterplan 2. SC has progressively adopted XBRL with the established SC Common Reporting Platform (ComRep) with the use of excel-based filing preparation tool or any type of tools to prepare the XBRL document. SC also plans to improve its reporting methods from template based XBRL to Inline XBRL for corporate reporting (XBRL International, June 2018).

SSM has taken the initiative to adopt XBRL in 2010, in line with the SSM Second Strategic Direction Plan 2010-2014 (XBRL International, 2013). The XBRL taxonomy was released as the SSM Taxonomy (SSMT) requiring all public listed companies to comply with the MFRS, while the private limited companies are required to comply with the Malaysian Private Entity Reporting Standards (MPERS). The taxonomy, however, does not include banking, financial or insurance industry players or companies limited by guaranty and foreign companies. SSM has also encouraged the companies to submit their financial statements and reports using Malaysian Business Reporting System (MBRS). SSM applied MBRS preparation tool (mTool), which is similar to XBRL in preparing and generating annual returns, financial statements and reports and exemption applications. SSM has also taken the initiatives to provide training and awareness programs for the practitioners such as corporate secretaries, accountants and auditors. SSM has a wide transformation program for information technology infrastructure and the software ecosystem in ensuring that XBRL adoption is a success. The objective for XBRL adoption is “to implement XBRL for the reporting of financial statements to ensure that the financial reporting in Malaysia goes beyond the traditional paper-based format and the transformation journey to become a top tier registry and regulatory authority in the region (MAICSA Annual Conference 2013, 2 July 2013). SSM has also initiated transformation programs for the purpose of eliminating all manual registration handling and transition to an automated online process, which is MBRS.

IRB has also started to implement XBRL with the aim of facilitating the way of storing, sharing and the usage of business data. In 2011, IRB has formed their XBRL committee and envisioned XBRL adoption for tax computation. IRB hoped that the adoption of XBRL would enable them to achieve a higher tax return compliance rate. This regulator has also gone through several stages of XBRL adoption before embarking on submission for tax computation via XBRL. To date, IRB has developed the Malaysian Income Tax Reporting System (MITRS), a system that adopts XBRL taxonomy. IRB has released their XBRL taxonomy in February 2019, which is expected to kick-start in 2020.

Conclusion

BNM, the first regulator to adopt XBRL, has focused on new ideas and acted as an example for other regulators in Malaysia. BNM played a role in reducing uncertainty regarding XBRL adoption and subsequently, influenced other regulators to adopt XBRL. Meanwhile, SC was the first to initiate a pilot project and continuously with the ComRep. Both BNM and SC could be considered as examples to SSM and IRB before these two latter regulators decided to adopt XBRL. It can be seen that the adoption of XBRL at these four regulators namely, BNM, SC, SSM and IRB are currently at par with that of their international counterparts.