XBRL Tag Extensions and Tax Accrual Quality

What is it about?

This paper examines whether eXtensible Business Reporting Language (XBRL) tags impact a firm's tax reporting. Management is required to label all information in their firm's financial statements and corresponding notes with either standard or extended XBRL tags. Using a greater total number of tags can contribute to accounting reporting complexity and reduce financial reporting transparency. However, the percent of extended tax-related tags used could benefit a firm's tax reporting by providing additional tax-related information. Existing tax disclosures can make it difficult for financial statement users to understand how the financial reporting of income taxes maps into the amount of taxes actually paid. Extended tax tags could allow managers to highlight unique characteristics throughout the firm impacting the tax accrual, in turn improving tax transparency. We find that having a higher rate of extended to total tax tags is associated with additional tax information.

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