A report published by IMA® (Institute of Management Accountants) on digital transformation is gaining traction around the world.

The report, published in June 2020 and titled A Digital Transformation Brief: Business Reporting in the Fourth Industrial Revolution, advocates for a data revolution that would transform business reporting, oversight, auditing, and monitoring systems. According to the report’s findings, the increasingly complicated and fragmented regulatory environments around the world have made compliance overly burdensome for businesses and inhibited users of corporate reporting from obtaining useful information. Among its chief recommendations, the report explores how open data standards and technological innovations can foster global digitalized compliance and reporting processes. 

Among the authors of the report was Liv A. Watson, co-founder of XBRL and the XBRL International Consortium, senior advisor and digitization lead at Impact Management Project, and IMA Global Board member. Watson is involved in numerous strategic initiatives worldwide, including the European Commissions’ European Financial Reporting Advisory Group (EFRAG). Around the same time that IMA published its report, EFRAG established a task force to explore issues around EU nonfinancial reporting standards. Watson was appointed to this task force and named co-lead of the workstream that addressed the topic of digitalization.

Watson’s team was tasked with assessing the current situation of nonfinancial reporting among EU companies for three dimensions of standard-setting: (1) Content: What is disclosed? How is it disclosed? (2) Classification: Where is the information located? Does the required information have an address/taxonomy of data? and (3) Reporting Format: How is the information reported?  

Thanks to the work by Watson and her peers, the EFRAG task force in November 2020 published a progress report on its preparatory work. In February 2021, the task force issued its 228-page final report, currently available on the EFRAG website. 

“Many of the ideas and language around this topic in the final report are based on the IMA paper,” explained Watson. “It’s very gratifying to see how the issues explored in our paper provided both context and recommendations to this report, which will serve as a useful tool throughout the EU.” 

For example, page 42 of the EFRAG report includes a graphic directly from Business Reporting in the Fourth Industrial Revolution. More language from the IMA-published report appears on page 15, which explains: “This lack of cohesion in standards and (digital) taxonomy results in higher entity and regulatory costs in terms of time and resources. It also weakens the auditability of information and increases risks due to increased subjectivity, differences in interpretations, misinformation, and inadvertent partial compliance or noncompliance…These differences and gaps increase the complexity and challenge the usefulness of a compliance ecosystem…” 

Watson continues to work with other international organizations that might benefit from the findings and recommendations explored in the IMA report. “The need for the digitization of reporting is a global issue, and I value the opportunity to showcase IMA as a thought leader in this important initiative,” she remarked.

For more information about the EFRAG report, please visit www.efrag.org. Information on IMA’s other thought leadership initiatives can be found on the Research & Publications webpage.