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As Complexity Rises, Quality Slides, XBRL-Based Study Says

Tammy Whitehouse | August 15, 2014

A new academic study leveraging XBRL-produced financial data suggests there’s a measurable link between accounting disclosure complexity and financial reporting quality. The more complex a company’s filing becomes, the more quality suffers, according to the research.

In their research report, authors Rani Hoitash of Bentley University and Udi Hoitash of Northeastern University say that measuring accounting complexity has been elusive in the past, but now the existence of XBRL, or eXtensible Business Reporting Language, provides new insight. The more GAAP Taxonomy tags a company requires, and the more it must produce custom extensions to explain elements that can’t be found in the Taxonomy, the more complex the filing becomes, they say.

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