XBRL Tag Extensions and Tax Accrual Quality
Journal of Information Systems, Forthcoming https://doi.org/10.2308/ISYS-19-054
Posted: 14 Nov 2020 Last revised: 16 Nov 2020
Date Written: September 26, 2020
The adoption of eXtensible Business Reporting Language (XBRL) requires management to label all information in their firm's financial statements and corresponding notes with either standardor custom extended tags. While prior literature has found that the rate of customization is associated with increased financial reporting complexity, there could be an unintended, beneficial consequence to tax reporting. We examine how the relative use of tax-related XBRL tag extensions could highlight unique tax activity characteristics, in turn increasing tax accrual quality and improving tax reporting transparency. We find that having a higher relative rate of extended tax tags is associated with higher tax accrual quality. That is, utilizing more tax tag extensions can assist in providing useful tax information, especially when a high number of total XBRL tags are used. Our results also suggest the need to reexamine the standard taxonomy to include more tax-oriented terms to improve financial reporting comparability.
Keywords: eXtensible Business Reporting Language (XBRL), Tax Accrual, Extensions, Financial Reporting of Income Taxes
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