Education

Business reporting language

Ramchandran Iyer | Updated on April 14, 2011 Published on April 10, 2011

XBRL enables information to be produced in a standardised manner, saving time and cost and increasing accuracy.

XBRL is a computer language that enables documents to be read and analysed in ways that were previously not possible. Currently, financial statements or other information prepared in Word, Excel or HTML formats can be read, but not analysed or processed according to the user's needs.

For example, the word “Revenue” appears in many places in the financial statements, but if the reader wants to have all “Revenue” references and related information collated in one place, he would have to do so manually. XBRL enables the user's computer to “talk” to the financial statements and analyse a lot of such information.

Similarly, the management of a company would go through a time-consuming process of collation if it wants to compare its financial performance with those of peer-group companies. This can be facilitated if all companies are on XBRL.

Benefits of XBRL

Several stakeholders benefit from XBRL such as financial statement preparers, users and regulatory agencies. XBRL enables information to be produced in a standardised manner, saving time and cost and increasing accuracy.

Similarly, the user of such information can efficiently and accurately analyse data. XBRL even allows data labelled in one language to be translated into another. Regulators can get timely, accurate and consistent data for analysis and research. The benefits go beyond financial statements into any type of financial and even non-financial information because all information can be tagged.

Global implementation

Several countries have already mandated XBRL-based filing of financial statements. In Israel, all public companies are mandatorily required to do their filing using XBRL-based interface called MAGNA.

In Japan, beginning financial year 2008-09, approximately 5,000 companies and 3,000 investment funds are compulsorily required to do their filings using XBRL-based EDINET system. By the middle of 2012, all domestic and foreign companies that are publicly traded in the US are required to provide their SEC filings using the XBRL format beginning with simple block tagging, but progressing to more complex detail tagging of financial information including footnotes and schedules.

Similarly, in China, Singapore, Germany, Italy and Korea, XBRL filing is currently mandatory for certain select companies.

XBRL India is a ‘recognised' jurisdiction of the XBRL International created by the Institute of Chartered Accountants of India (ICAI) to spearhead the promotion and adoption of XBRL in India. Members of XBRL India include the premier organisations — Reserve Bank of India, Securities and Exchange Board of India, the Ministry of Corporate Affairs, Bombay Stock Exchange, National Stock Exchange of India, Insurance Regulatory and Development Authority etc.

XBRL India has already developed an Indian GAAP Taxonomy for Commercial and Industrial Enterprises and for banks. A taxonomy for non-banking financial companies is also in the offing.

XBRL compliance

XBRL compliance is already mandatory for several banking filings with the RBI and is expected to be mandatory for financial statements to be filed with stock exchanges under a forthcoming SEBI notification. This will expand to other filing requirements too.

The organisations have to identify business-reporting areas that could benefit from XBRL, determine whether the current ERP or other financial applications are XBRL-enabled, identify a pilot reporting process and assess how XBRL can be embedded into reporting systems, train relevant staff in XBRL reporting and seek timely assistance, as required, to efficiently manage the process.

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Published on April 10, 2011
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