Research On Hierarchical Extension Of XBRL Financial Reporting Taxonomy

XBRL (eXtensible Business Reporting Language) has been spreading and developing for more than ten years from its first creation in 1998. Decades of countries and regions have released or are creating their own national taxonomies. The reporter files XBRL financial report based on XBRL financial report taxonomy. The quality of XBRL financial reporting is influenced by the quality of XBRL financial report taxonomy directly, so taxonomy is one of the important issues in XBRL theory and practice. Only generalized financial information elements and their relationship are involved in the national generalized taxonomy as a result of the technical features of XBRL. Different industries and firms need to extend the generalized taxonomy based on their aspiration of personalized disclosure in order to disclose better in the adoption process of XBRL.Nowadays, the front edge of XBRL development has changed from the creation and release of generalized taxonomy to the taxonomy extension. But personalized disclosure may cause the reduction of consistence of data, quality of financial reporting and transparency of disclosure. The contradiction leads the taxonomy extension to a dilemma. The China national generalized taxonomy was released in 2010 and the industry extension is in process, such as commercial bank. Some basic questions about taxonomy extension have not been answered yet. This dissertation focuses on the two basic questions"Is it necessary to extend the taxonomy?"and"How to extend the taxonomy?". Not only people from practice field such as taxonomy creators, XBRL financial reporters, disclosure regulators, disclosure agencies and even investors but also researchers are interested in these questions.This dissertation sets the taxonomy extension as the key point and furthers the research in order to answer these questions employing the theory of economics, management, financial accounting, information science and data-base theory by involving theoretical and empirical methods. At first, this dissertation sets boundary of the concepts used followed by the literature review of the research topic. In order to answer the question"Is it necessary to extend the taxonomy?"this dissertation evaluates the capability of the current taxonomy from the aspect of information disclosure practice. Then this dissertation divides the second basic question"How to extend the taxonomy?"to two separated sub-questions"framework of taxonomy extension"and"method of taxonomy extension". In order to improve the effect and efficiency of taxonomy extension this dissertation tries to create the framework of taxonomy hierarchical extension based on the problems in the evaluation and ontology theory , then tests the framework in industry and firm hierarchy. This dissertation analyses the specific method under the framework which is different from the direct extension. At last some policy proposals of extension in general, industry and firm hierarchy are presented.The main research conclusions are as follows:1) The capability of current taxonomy is due to be improved and taxonomy extension is necessary.This dissertation introduces elements matching method to evaluate the capability of current taxonomy. Systematic sampling is used to get the 341 listed companies as the sample. This dissertation matches the elements in the footnotes of the 2009 annual reports of the sample and the elements of the general purpose taxonomy based on the list of 2116 elements one by one then divides them into re-used elements from taxonomy or firm-custom extension elements. This dissertation finds that the perfection and efficiency of the general purpose taxonomy are due to be improved and the capability is due to be improved also by the statistics and tests of the numbers and granular of extended elements, coverage rate and re-used rate of the taxonomy. The taxonomy extension is necessary in order to improve the capability of taxonomy.2) The framework of taxonomy hierarchical extension is feasible for taxonomy extension.The first sub-question of"How to extend the taxonomy"is"The framework of taxonomy extension". This dissertation first analyses the structure of taxonomy based on ontology theory and tries to create the framework of taxonomy hierarchical extension which is"general-industry-firm". The hierarchical and interactive characters of the framework can increase the consistence of tags in taxonomy and improve the transparency of XBRL financial report compared to direct extension.This dissertation tests the framework by empirical study. This dissertation uses the matching method to analyze the extended elements by industries. The results imply that both numbers and granular of extended elements differ among different industries and the numbers are influenced by firm's operating characters, ownership concentration, independence of board and agency cost between the management and owners. Additional robust tests are presented also. Above all, the extension has certain industry-specific character and firm-specific character. The framework of extension shows its hierarchical character.3) The combination of elements extension and relationship extension method is feasible for taxonomy extension.The second sub-question of"How to extend the taxonomy"is"The method of taxonomy extension". This dissertation introduces the specific methods of elements extension, relationship extension and measurement of extension under the framework of taxonomy hierarchical extension based on the theory of financial information element and taxonomy engineering. The distinction of re-used elements and extended elements is based on the tree structure of the elements in taxonomy. Relationship extension is based on the elements extension. Granular is the relative subtlety of information in the financial element space. The granular of element is a tool for measurement of extension and this dissertation also introduces its assumption, calculation principle and specific method.Following are the primary contributions of this dissertation in four aspects:1) Research on the framework of taxonomy hierarchical extension. There are limited literature of taxonomy and even fewer of framework of taxonomy extension. The author has not discovered academic papers which concentrate on the systematic theoretic research on taxonomy extension so far. This dissertation analyzes the framework of taxonomy extension in a systematic way based on ontology theory and adds to the research on theory of XBRL financial report taxonomy extension. 2) Research on the method of taxonomy hierarchical extension. This dissertation systematically analyzes the process of extending the generalized taxonomy to industry extended taxonomy, then firm extended taxonomy based on the framework of hierarchical extension of taxonomy and the relationship between element extension and relationship extension. This is useful for theory research and practice reference.3) Quantitative measurement of the extent of taxonomy extension based on element's granular This dissertation tries to measure the extent of taxonomy extension quantitatively by introducing element's granular. The granular of element is the relatively particular extent of element in a given financial information element space. This method contributes to the measurement of the extent of taxonomy extension.4) Quantitative research on the elements of disclosure practice based on the match of the element in generalized taxonomyIt is one of the technological problems in the XBRL research area that there is no access to obtain data for empirical study. This dissertation draws on the idea of matching method and distinguishes the reused elements and extended elements by matching the elements defined in the generalized taxonomy and extended elements in the disclosure practice. This method can measure the information of extended elements in the disclosure practice quantitatively and provide data support for research on taxonomy extension. The"total numbers of disclosed elements","total numbers of extended elements"and so on can be used as the proxy variables of the scale and extent of firm's disclosure from the quantitative measurement by XBRL taxonomy in other research on information disclosure.