A proposed Framework for Integrating XBRL and Blockchain to Improve Financial Reporting Transparency and Integrity: XBRL Chain

Abstract

The research aims to use the blockchain technology to ensure the distribution of XBRL content to a decentralized peer- to-peer network  while maintaining the authority of the government toward the whole data. The topic of combination XBRL and blockchain is scarcely discussed in academic journal due to the very early stage of technology development. This paper explains how to build a distributed ledger platform prototype that designed to improve financial reports transparency and integrity by using blockchain technology in line with XBRL to form XBRL chain. XBRL chain helps in developing smart contracts that more business rules encoded in software, why are as good as the person or team devising the rules and the developer turning those rules into code. These smart contracts with newest encoded accounting rules could effectively control the recording of accounting activities. Therefore, these contracts would provide automatic assurance on processes, such as posting, classification and cutoff. The proposed framework of XBRL chain makes the quality of information in the financial reporting more interoperability and comparability. This framework should subject to six situational conditions are: multi party, trusted authority, decentralization, smart contract, data confusability, and type of blockchain. A case study is implemented on Egyptian company (EDITA ) Food Company that publishes its financial statements under IFRS. The case explained how the integration between XBRL and blockchain can be built to implement XBRL mapping for consolidated balance sheet and profit or loss statement the mapping process is implemented under using black chain software. Also, the percentage of fit between IFRS taxonomy 2020 and Egyptian financial practices are measured. The findings of the case study revealed that, for EDITA Food Company, 89 percent of the elements in the two basic financial statements exist in the taxonomy. The high degree of misfit is found in the balance sheet statement 14 percent and in income statement is 6 percent limitations and future research directions are, this paper contributes to the literature by expending upon emerging concerns and providing opportunities for future research.