What Are the Reasons for Extensions – Development of an Extension Framework

Abstract

We investigate the nature of extension. Extensions are discussed controversial in the academic literature. It can be summed up within the literature with one group, which regards extension as a means for increasing transparency, while the second group assumes extension are misused and “abnormal” extensions reflect obfuscation of unfavorable information. Some of the authors draw the conclusions that XBRL reporting should be revised due to the identified obfuscation. This working paper looks into the facts and the research methodologies applied to draw conclusions. XBRL is in this context very often described as the issue, but XBRL is just a tool, so the question is rather how the tool is applied and what are the set conditions. Extensions offer limited transparency, which is an issue caused by the architecture of XBRL and not by the preparers. Therefore, the author recommends to improve the architecture on the extension and develop a framework, which reflects the substance of extensions. The findings have implications for regulators in determining the form and nature of extensions to allow, practitioners in preparing and coding digitized financial statements.