XBRL - Extensible Business Reporting Language

What’s the context?

All Class I companies have to file their financial statements with the Ministry of Corporate Affairs (MCA or RoC) under XBRL mode for financial year ending 31-Mar-2011. The extended deadline for such filing was 31-Dec-2011, post which, companies will have to pay late fees for filing. For last year, it was applicable for 30,000 companies of which only 9000 companies have complied with as at Dec-2011. Research and polls have revealed that most companies defaulted in the filing on account of lack of knowledge and detailed knowhow on XBRL.

What is XBRL?

XBRL (eXtensible Business Reporting Language) is a language (part of XML) for the electronic communication of business and financial data which is revolutionising business reporting around the world. It provides major benefits in the preparation, analysis and communication of business information. It offers cost savings, greater efficiency and improved accuracy and reliability to all those involved in supplying or using financial data.

What are the potential uses of XBRL?

XBRL can be applied to a very wide range of business and financial data. Among other things, it can handle:- 

·       Company internal and external financial reporting.

·       Business reporting to all types of regulators, including tax and financial authorities, central banks and governments.

·       Filing of loan reports and applications; credit risk assessments.

·       Exchange of information between government departments or between other institutions, such as central banks.

·       Authoritative accounting literature – providing a standard way of describing accounting documents provided by authoritative bodies.

Who can benefit from using XBRL?

All types of organizations can use XBRL to save costs and improve efficiency in handling business and financial information. Because XBRL is extensible and flexible, it can be adapted to a wide variety of different requirements. All participants in the financial information supply chain can benefit, whether they are preparers, transmitters or users of business data. 

Those who stand to benefit include all who collect business data, including governments, regulators, economic agencies, stock exchanges, financial information companies and the like, and those who produce or use it, including accountants, auditors, company managers, financial analysts, investors and creditors. Among those who can take advantage of XBRL include accountancy software vendors, the financial services industry, investor relations companies and the information technology industry. XBRL will impact: 

·       Organizations that prepare financial statements
More efficient preparation of financial statements because they will be created one time and rendered many times, be it to the printer, to lenders, private investors, on Web sites, or as regulatory filings. 

·       Analysts, Investors and Regulators
Enhanced distribution and usability of existing financial statement information. Automated analysis, significantly less re-keying of financial information, transformation from one form into another, receiving information in the format you prefer for their specific style of analysis.

·       Financial publishers and data aggregation
More efficient data collection lowers operating costs associated with custom, idiosyncratic data feeds and reducing errors while concentrating on adding value to the data and increasing transaction capacity. 

·       Independent Software Vendors
Virtually any software product that manages financial information could use XBRL for its data export and import formats, thereby increasing its potential for full interoperability with other financial and analytical applications.

What is the future of XBRL?

XBRL is set to become the standard way of recording, storing and transmitting business financial information. It is capable of use throughout the world, whatever the language of the country concerned, for a wide variety of business purposes. It will deliver major cost savings and gains in efficiency, improving processes in companies, governments and other organisations. 

What are the benefits to a company from putting its financial statements into XBRL?

XBRL increases the usability of financial statement information. The need to re-key financial data for analytical and other purposes can be eliminated. By presenting its statements in XBRL, a company can benefit investors and raise its profile. It will also meet the requirements of regulators, lenders and others consumers of financial information, who are increasingly demanding reporting in XBRL. This will improve business relations and lead to a range of benefits.

With full adoption of XBRL, companies can automate data collection. For example, data from different company divisions with different accounting systems can be assembled quickly, cheaply and efficiently. Once data is gathered in XBRL, different types of reports using varying subsets of the data can be produced with minimum effort. A company finance division, for example, could quickly and reliably generate internal management reports, financial statements for publication, tax and other regulatory filings, as well as credit reports for lenders. Not only can data handling be automated, removing time-consuming, error-prone processes, but the data can be checked by software for accuracy. 

Unlike various companies who have launched a single day workshops on XBRL, Institute of Computer Accountants (ICA) is launching a 4 days extensive workshop on XBRL in Kolkata this January.