If one were to get into a betting situation similar to Yudhishthira's in Mahabharata wherein we had to stake everything on predicting the price of one thing which would not increase exponentially next year, one would do better than the Pandava by wagering on the price of eXtensible Business Reporting Language (XBRL) services.

XBRL is a combination of software and e-filing applicable to the financial statements of an enterprise.

Listed companies in India and those with a turnover of Rs 100 crore or a paid-in capital of Rs 5 crore would need to XBRL their financial statements by November-end.

According to the Ministry of Corporate Affairs (MCA) Circular No 43/2011, a chartered accountant has to certify the financial statements prepared in XBRL mode. Overnight, XBRL sweat-shops have mushroomed and we could well end up in a situation wherein supply outstrips demand.

The Institute of Chartered Accountants of India (ICAI) has issued a Guidance Note on certification of XBRL financial statements.

Guidance Note

The note elaborates the procedures to be performed prior to certifying the financials, examination of source document with the XBRL rendered document, validation for errors using the MCA tool, examination of error logs at mapping and tagging stage, running the formatted XBRL information and notifying the management of any exceptions observed during the certification.

In case the XBRL financial statements have been generated by a third-party service provider, the practitioner can rely on the report given by the former. The note concedes that the practitioner need not be a geek in XBRL and can rely on the work of an expert for technicalities.

Ordinarily, the practitioner should not refer to the work of an expert in the certificate that does not contain his reservations/exceptions on the subject matter of the certification unless required by law or regulation to do so. If such reference is required by law or regulation, the practitioner should indicate in the certificate that the reference does not reduce the practitioner's responsibility in respect of the certificate. Being worded circuitously, the above requirement seems to put the focus on the practitioner even though he has relied on the work of an expert which could be a no-no for many practitioners. A rethink is needed on the mandate of requiring certifications on XBRL financial statements.

Errors in filing

The “ Leave the auditors alone” plea gains more strength with the statistic that XBRL US revealed that of the 41,000 plus errors and inconsistencies in XBRL filings to date, over 24,000 were related to simple issues like negative values being reported when a positive value is expected and positive values being reported when a negative value is expected.

Many of these errors are likely due to a lack of understanding about the proper use of negated labels. XBRL products abroad have a reverse engineering tool in which the XBRL filed statements are converted back into documents that humans can read, comprehend and correct.

If anything, this could be the solace that the certifying auditor is seeking. The need for a certificate can wait till such checks-and-balances tools are perfected.

Vendor list

Surprisingly, the MCA has maintained a roster of software vendors and service providers on XBRL.

The disclaimer that precedes the list is not a pick-up line that would woo a first-time XBRL filer. It states that the MCA will not recommend any vendor(s) for XBRL Software/Services and does not certify or authenticate the validity of the software/services offered by any of these vendors.

The criteria for getting into the list is that the entity should have tested out the MCA tool for XBRL with one filing. Instead of getting into overdrive on XBRL, the MCA could maintain and publish a log of all the errors that have occurred in the first filings.

Once these glitches are debugged, beneficial legislation such as certification and rosters can follow.

(The author is a Bangalore-based chartered accountant.)

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