22 nd XBRL International Conference “Sharing Economic Information in a Global World: the XBRL Contribution” 17-19 May

1. 22nd XBRL International Conference“Sharing Economic Information in a Global World: the XBRL Contribution”17-19 May 2011Brussels, Belgium Academic Research on XBRL IFRS Taxonomy and financial reporting practices: The case of Italian listed companies Diego Valentinetti and Michele A. Rea University “G. d’Annunzio” of Chieti-Pescara (I) May 19th, 2011

2. Agenda • XBRL role for financial reporting • Empirical research • Results • Conclusions

3. Agenda • XBRL role for financial reporting • Empirical research • Results • Conclusions

4. XBRL role for financial reporting • Periodically, companies report on their financial situation, results and business plans. • This reporting can be undertaken in compliance with an applicabile regulation, or on the company’s own initiative • There is always an obligatory core of standard information, constituted by the “accounts” or financial statements items

5. XBRL role for financial reporting • Relevance of XBRL Taxonomies: • acceptance for XBRL diffusion(Locke and Lowe, 2007) • completeness, adequacy, extensions(Debreceny et al., 2005) • impacts on quality of financial information(Baldwin et al., 2006) • assurance on XBRL financial reporting(Boritz and No, 2003; Cohen et al. , 2003; Lymer and Debreceny, 2003; Boritz and No, 2008; Plumlee and Plumlee, 2008; Boritz and No, 2009; Srivastava and Kogan, 2009) • standardization of financial information(Chang and Jarvenpaa, 2005; Wagenhofer, 2003) • harmonization and standardization of international business standards(Bonsòn, 2001; Premuroso and Bhattacharya, 2008)

6. XBRL role for financial reporting IFRS - Constr_misfit IFRS compliant reporting IFRS Taxonomy = or ≠ + Dis_misfit Business facts XBRL tags Taxonomy improvements < capital >…</ capital > = or ≠ Taxonomy extensions by companies Corporate reporting improvements

7. XBRL role for financial reporting Misfit Extensions voluntary items Disclosure type compulsory items PDF XBRL Format

8. XBRL role for financial reporting • XBRL implementation models (Bonsòn et al., 2009): • Active push: the regulators require the application of XBRL through a system of automatic conversion, or mapping. That is, companies can only use a standard taxonomy in a blind basis: no extensions for voluntary items that are provided in PDF or other traditional formats • Non-active push: the regulators requirecompanies to apply XBRL on their own accord. Companies tag their own information: they can extend the standard taxonomy and use XBRL also for their voluntary items

9. XBRL role for financial reporting Non-Active Active Source: Bonsòn et al., 2009

13. XBRL role for financial reporting Misfit voluntary items Disclosure type compulsory items non-active push active push XBRL implementation PDF XBRL Format

14. XBRL role for financial reporting Extensions voluntary items Disclosure type compulsory items non-active push active push XBRL implementation PDF XBRL Format

15. Agenda • Financial reporting: concerns • XBRL role for financial reporting • Empirical research • Results • Conclusions

16. Empirical research • Previous research: • US GAAP Taxonomy CI vs US companies(Bovee et al. 2002) • Non-active push • Misfit: 14% • Factors: financial statements (SCF) and industries (Entertainment and Petroleum refining) • IFRS Taxonomyvs European companies(Bonsòn et al. 2009) • ? • Misfit: 28% • Factors: financial statements (SCE) and industries (Financial and Insurance) • Italian GAAP Taxonomy vs Italian companies(Valentinetti and Rea 2011) • Active-push • Misfit: 4,8% • Factors: financial statements (MA), size, industries (Chemicals and Health Care) Taxonomy improvements Company reporting improvements

17. Empirical research • Research question: Does the IFRS Taxonomy adequately reflect the financial reporting practices of Italian listed companies? • Variables (Bovee et al. 2002): • Firm specific • New tags • Grouped • Research question: Does the IFRS Taxonomy adequately reflect the financial reporting practices of Italian listed companies? • Variables (Bovee et al. 2002): • Firm specific • New tags • Grouped + Dis_misfit Total misfit - Constr_misfit

18. Empirical research • Financial reporting: concerns • XBRL role for financial reporting • Empirical research • Results • Conclusions

19. Results Descriptive statistics of Total MISFIT MISFIT per Type and Financial Statement (means) Descriptive Statistics of Disaggregated MISFIT

20. Results • Multiple linear regression: - Constr_misfit - + Dis_misfit + R2 0.66 FINANCIAL SERVICES & INSURANCE + BS SIZE R2 0.58 + IS R2 0.62 + SCF R2 0.49 - SCE R2 0.12

21. Agenda • Financial reporting: concerns • XBRL role for financial reporting • Empirical research • Results • Conclusions

22. Conclusions The relevant degree of misfit noticed suggests: • the Non-active push model: • possibility of extending the Taxonomy without a loss of detailed information • companies become familiar with the standard and its technical advantages • and, since the financial sector affects the general misfit and the single financial statement documents: • justification for industry specific extensions or the adoption of the FINREP Taxonomy(Italy interested)

23. European FINREP Taxonomy Adoption Source: EUROFILING http://www.eurofiling.info

24. Source: IFRS Foundation http://www.ifrs.org/News/XBRL/Taxonomy+common+practice.htm

26. Source: ESMA http://www.esma.europa.eu/index_new.php

27. Thank you for your attention d.valentinetti@unich.it m.rea@unich.it References: Full references will be provided by the authors on demand.