Accounting Information Systems Hurt 3rd Edition Solutions Manual

Accounting Information Systems Hurt 3rd Edition
Solutions Manual
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Accounting Information Systems Hurt 3rd Edition Solutions Manual
Chapter 09 - XBRL
Chapter 09 XBRL
9-1
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Chapter 09 - XBRL
1. Reading review questions
a. What is XBRL? How is it related to XML? XBRL is a way to tag data from an
accounting information system; when properly tagged, the data can be read by many
different hardware / software combinations, regardless of the tools used to create them.
XBRL is part of a larger family of languages called XML; thus, XBRL is a specification of
XBRL.
b. Define the following terms related to XBRL: specification, taxonomy, instance

document. A specification is a specific example of a larger group; for example, XBRL
is a specification of XML, just as “unearned service revenue” is a specification of
“liability.” XBRL tags are organized in taxonomies, often based on commonly used
accounting terminology in specific industries. Because XBRL is extensible, users can
create tags for terms that do not exist in taxonomies. An instance document is a
document, such as a statement of cash flows or tax return, that has been properly
coded with XBRL tags.
c. How can XBRL benefit organizations? In short, XBRL benefits organizations by

allowing information to flow more freely and efficiently both within and outside the
organizational structure. Since accountants will largely be freed from the tedious task of
“translating” documents that have been prepared in different hardware / software
platforms, organizations will also benefit from accountants’ expertise in decision making.
d. Will most accountants need to learn to write “code” in XBRL? If not, how can
they create XBRL-tagged documents? Thankfully, most accountants will not need to
learn to write XBRL code. Numerous software packages, most of which function as
add-ins to existing programs like Word and Peachtree, can automate the tagging
process.
e. Respond to the questions for this chapter’s “AIS in the Business World.” I was
very fortunate to have three assistants available to prepare responses to the AIS in the
Business World vignettes for the third edition; I’ve posted their responses on my AIS
blog: www.bobhurtais.blogspot.com.
2. Reading review problem
a. Suppose you were talking to a finance major at your school who had never
heard of XBRL, but had recently gone to work for the FDIC. Briefly explain what
XBRL is and how it is useful to the FDIC and other organizations. XBRL is a way
to facilitate communication of financial information. Banks and other financial
institutions must file certain reports periodically with the FDIC, just as publicly traded
corporations must file reports with the SEC. If FDIC reports are properly tagged with
XBRL, they require very little human intervention to interpret, regardless of the IT used
to prepare them.
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Chapter 09 - XBRL
b. Explain the following terms as they relate to XBRL: taxonomy, namespace,

instance document. Which taxonomy would banks likely use for their call
reports? A taxonomy is a way of organizing knowledge; in XBRL, taxonomies are sets
of commonly used XBRL tags. A namespace is an Internet address that explains the
meaning of tags in a taxonomy, while an instance document is a properly tagged XBRL
document. So, a bank might prepare its call reports using Excel, then use an Excel
add-in to create an instance document based on tags from an existing taxonomy (and
other necessary tags). The instance document would reference the namespace so that,
regardless of the software used to interpret the instance document, tag definitions would
be readily accessible. A bank would likely use the Banking and Savings taxonomy to
prepare a call report.
c. What internal controls should banks institute to address the risks associated
with XBRL? What internal controls should the FDIC institute for that same
purpose? Banks and the FDIC should institute internal controls common to most forms
of information technology: policies on password characteristics and rotation, data
encryption, firewalls and the like. In addition, adequate supervision of the tagging
process is critically important for any entity preparing instance documents, to ensure
that appropriate taxonomies are employed and appropriate tags are properly used.
3. Multiple choice review questions. Answers to all of these questions appear at the
end of the textbook itself.
4. Making choices and exercising judgment

The point of these exercises, which appear in every chapter throughout the third edition,
is to encourage students to think critically and “outside the box.” Thus, I am not
providing solutions to them, as doing so would likely discourage the purpose of these
exercises.
5. Field exercises
Answers to these exercises will vary significantly; thus, like the previous set, I am not
preparing published solutions for them.
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Chapter 09 - XBRL
6. Contextual categories of XBRL

a. Type of balance: debit, credit
b. Time period: for the year ended 30 June 2011, for the quarter ended 31
December 2011.
c. Currency: US Dollar, Euro.
d. Account type: Liability, revenue
e. Accounting rules (i.e., GAAP): US GAAP, IFRS
f. Reporting language: English, French
g. Preparation tools: Excel, Peachtree, Quickbooks
7. XBRL tags
a. IFRS: International Financial Reporting Standards
b. ContextRef: Provides a specific context for tagged data, such as “current as

of.”
b. UnitRef: Identifies the measurement basis for reported amounts, such as the
Australian dollar.
c. Decimals: Specifies how many decimal places should be shown for each
piece of tagged data.
9-4
Chapter 09 - XBRL
8. XBRL tagging
a. Is XBRL relevant to companies that don’t file with the SEC? Justify your
response. XBRL is relevant to companies that don’t file with the SEC. As illustrated in
the reading review problem, the FDIC uses XBRL for Call Reports; the IRS can also use
it for tax returns.
b. List the six steps the authors recommend for creating XBRL-tagged
documents. (1) Download the taxonomies. (2) Open Dragon Tag and the file you wish
to tag. (3) Set up the entity profile. (4) Mark up the data. (5) Validate. (6) Export.
c. How many XBRL-tagged filings did the SEC receive as part of its voluntary
program? According to Exhibit 1 in the article, the SEC received 223 filings as part of
the voluntary program.
d. With respect to Dragon Tag software:
i. What are the elements of an entity profile? An entity profile comprises:

company ID, address / URL, default currency and default taxonomy.
ii. What is a “hopper?” According to the article, “A hopper is a time-saving

technique which applies more than one setting to a data item at one time.”
iii. What is “validation?” Why is it important? Validation ensures that the data
and calculations in the instance document are accurate. Without valid data, the
instance document may be unreadable.
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Chapter 09 - XBRL
9. Benefits of XBRL
a. Consolidate results across divisions with much greater speed and reliability.
b. Focus effort on analysis, forecasting and decision making, rather than on
laborious tasks in gathering, compiling and preparing data.
c. Free themselves from proprietary systems and software which are difficult and
costly to replace
d. Greatly reduce effort and costs in gathering and analyzing data.
e. Improve investor relations through provision of more transparent and user-
friendly information.
f. Make better use of software to improve efficiency and speed.
g. Make more effective use of the internet in communicating with investors.
h. Obtain more rapid and reliable data on company financial performance.
i. Save costs by preparing data in one form and automatically generating many
outputs.
j. Simplify the process and reduce the costs involved in regulatory reporting to
tax and other authorities.
10. Internal control issues for XBRL

Control issues cited in the report include: use of the appropriate taxonomy, tagging of
data, and integrity of tagged data. Subheadings under assurance issues include:
financial statements generated at a point in time, financial statements generated on a
real-time basis, ensure appropriate taxonomy is being used, review tagging
methodology and test the tags in the instance documents. Finally, emerging issues
comprise: including instance documents on web sites for public access, data status
from an assurance point of view, and context.
9-6
Chapter 09 - XBRL
11. Terminology
1. A 6. E
2. B 7. J
3. H 8. I
4. C 9. G
5. D 10. F
12. Multiple choice questions

1. C
2. A
3. B
4. D
5. B
13. Statement evaluation

a. Never true.
b. Sometimes true. Companies should use Dragon Tag if it is the most cost
effective and efficient method for tagging.
c. Sometimes true. The deciding factor is not a company’s geographic range,
but rather, its need for the benefits of XBRL.
d. Sometimes true. Diversification is not the deciding factor for XBRL adoption.
e. Sometimes true. Some G/L software can create XBRL tags.
f. Sometimes true. Organizations need to create their own namespace if they
create their own XBRL tags.
g. Always true.
h. Sometimes true. Some new controls may be needed, but existing controls
can often be applied to an XBRL environment.
i. Always true.
j. Always true.
9-7
Chapter 09 - XBRL
14. Prior material application
a. Earlier in the text, you learned that most AIS have five generic parts. The
chapter talked about internal controls related to XBRL; give an example of each
additional part related to XBRL. (For example, a 10-K report to the SEC would be
an example of an AIS output.) Inputs to XBRL would include the data files from
general ledger packages, such as journal entries and financial statements. The
principle process associated with XBRL is tagging, but could also include the process of
validating instance documents. In addition to 10-K reports, XBRL outputs could include
the FDIC call reports described in this chapter’s reading review problem. Finally, XBRL
tags are stored in a namespace; the XBRL files themselves are also a form of storage.
b. When an organization incurs a cost, it can be recorded in one of two basic

ways in the AIS. It can be debited to an asset (capitalized), as when a company
buys a piece of equipment. It could be debited to an expense (expensed), as with
salaries. Suppose a company hired a consultant to help with XBRL
implementation. If the company expects to use XBRL for at least five years,
should the cost of the consultant be capitalized or expensed? Use the FASB
Conceptual Framework to justify your response. The cost of an XBRL consultant
must be expensed in the period incurred. It does not meet the definition of an “asset”
from the conceptual framework, since its future economic value cannot be objectively
assessed. In addition, the matching concept would dictate that the cost be expensed
along with items like payroll and depreciation.
c. In our discussion of management concepts, you read about Vroom’s

expectancy theory, which helps us understand and analyze motivation in
organizations. With respect to an XBRL project, someone with low expectancy
might say: “Why should I invest the time and energy to learn about XBRL? I’m
lousy with computer stuff, and I probably can’t learn it anyway.” Create a similar
statement for the other two elements of expectancy theory (instrumentality and
valence). Then, explain how you would improve someone’s motivation by
addressing each objection. Someone with low instrumentality might say: “How will
learning XBRL benefit me? Am I going to get a pay raise?” And, someone with low
valence could comment: “I’m perfectly content in my job right now; there’s no reward
you can give me for learning XBRL that I would value.” To address low expectancy, you
could explain a structured process for learning XBRL that would allow almost anyone to
master it. Low instrumentality could be addressed by pointing out the benefits of
gaining additional knowledge, such as mobility within and between organizations. Low
valence may be more of a problem, as learning what reward a person values is more an
“internal” process than the others. Some probing, however, might lead to a potential
reward the person would value.
9-8
Chapter 09 - XBRL
d. The systems development life cycle comprises seven steps; the development
and implementation of XBRL is a systems development project. Work with a
group of students to develop a paper / presentation that explains how the SDLC
would apply to an XBRL project. For example, the initiation / planning phase
might begin when the CFO attends an XBRL workshop / presentation. Here’s a
short outline that such a paper / presentation might incorporate:
Initiation / planning: The CFO attends an XBRL workshop; the company conducts a
feasibility study for an XBRL implementation.
Requirements analysis: The XBRL team would interview accountants and others in the
company to determine what kinds of information they would need, and how XBRL would
facilitate the preparation and dissemination of that information.
Design: The team might review several examples of tagging software; they would also
look at various taxonomies to determine which one(s) would be appropriate.
Build: The team could, at this point, create additional tags; they might also choose a
tagging software.
Test: Employees could work with “dummy data” or previous financial statements to
develop instance documents.
Implementation: The company would begin using XBRL in its operations.
Operations / maintenance: Internal auditors, or other designated employees /

consultants, would monitor the use of XBRL, addressing problems and issues as they
arise.
e. Consider the article referenced in Exercise 8 above (Six Steps to XBRL).

Create a systems flowchart / Level Zero DFD / REA model documenting the
process described in the article. Clearly specify any assumptions you make.
Assuming that a team is designated to complete the six steps, a flowchart might look
like the one below:
9-9
Accounting Information Systems Hurt 3rd Edition Solutions Manual
Chapter 09 - XBRL
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1. Reading review questions

b. Define the following terms related to XBRL: specification, taxonomy, instance

c. How can XBRL benefit organizations? In short, XBRL benefits organizations by

2. Reading review problem

b. Explain the following terms as they relate to XBRL: taxonomy, namespace,

4. Making choices and exercising judgment

6. Contextual categories of XBRL

c. Currency: US Dollar, Euro.

d. Account type: Liability, revenue

e. Accounting rules (i.e., GAAP): US GAAP, IFRS

f. Reporting language: English, French

g. Preparation tools: Excel, Peachtree, Quickbooks

b. ContextRef: Provides a specific context for tagged data, such as “current as

i. What are the elements of an entity profile? An entity profile comprises:

ii. What is a “hopper?” According to the article, “A hopper is a time-saving

10. Internal control issues for XBRL

12. Multiple choice questions

13. Statement evaluation

14. Prior material application

b. When an organization incurs a cost, it can be recorded in one of two basic

c. In our discussion of management concepts, you read about Vroom’s

Implementation: The company would begin using XBRL in its operations.

Operations / maintenance: Internal auditors, or other designated employees /

e. Consider the article referenced in Exercise 8 above (Six Steps to XBRL).

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