XBRL – The Language of Business, Finance and Accounts

Many organizations have been looking to the internet to bring the long-heralded promises of “better, faster, cheaper” data toxbrl eXtensible Business Reporting Language organizational decision-making, and specifically to business and financial reporting. An emerging technology standard, eXtensible Business Reporting Language (XBRL), promises to web-enable the financial reporting process for both preparers and consumers.

What is XBRL ?

XBRL (eXtensible Business Reporting Language) is a language for electronic communication of business and financial data which is revolutionising business reporting around the world. It is one of a family of “XML” languages which is becoming a standard means of communicating information between businesses and on the internet.

xbrl-meaning

Computer applications can use the XBRL data to recognize the information in an XBRL document – selecting, analyzing, storing, and exchanging it with other computers and present it in a variety of ways for users. As companies review their business reporting disclosure controls and procedures and begin to comply with new filing requirements, XBRL is becoming the chosen tool to help facilitate and restore confidence in business reporting and in turn, to communicate accurately the value of the company.

What XBRL is NOT ?

  • XBRL is NOT an all together new software language, but it is merely a reporting language which supports a global standard for exchanging business information.
  • XBRL is NOT an accounting standard although it can be used to represent reporting concepts and provide an explicit link from a reported concept to the relevant accounting standard.
  • XBRL is NOT a standard chart of accounts, but instead it is an extensible form.
  • XBRL is NOT a proprietary technology, but is freely licensed like an open source  (It is a language not a software).
  • It does NOT require companies to disclose additional information but merely about improving the quality and transparency of information already submitted to authority.
  • XBRL is NOT too complicated to understand, you don’t need to get acquainted with auto combustion engine, RPMs, but just know how to drive a car.

Do You Know?

XBRL has been developed by XBRL International, a not-for-profit consortium of over 600 companies and agencies which is promoting its worldwide use.

Understand the existing system of MCA

Section 220 of Companies Act,1956 Three copies of balance sheet and profit and loss account are required to be submitted with the registrar within 30 days from the date on which such books have been laid at the Annual General Meeting.Form 23AC
Form 23ACA
MCA Mandate – XBRL Companies Vide General Circular No.16/2012 dated 06/07/2012
Specified class of companies have to compulsorily file their Balance Sheet and Profit & Loss Account in XBRL mode for the F.Y. commencing on or after 01.04.2011

Specified Class of Companies

  • All companies listed with any Stock Exchange(s) in India and their Indian subsidiaries; or
  • All companies having paid up capital of Rupees five crore and above; or
  • All companies having turnover of Rupees one hundred crore and above; or
  • All companies who were required to file their financial statements for the previous year, using XBRL mode.

Specifically exempted Companies

  • Banking companies,
  • Insurance companies,
  • Power companies and
  • Non-Banking Financial Companies (NBFCs) are exempted from XBRL filing till further orders.

Why XBRL ?

1) The trend…. The journey along..

Past Present Future
Framework Historical Mixed Fair Value
Focus Profit and Loss account Mixed Balance Sheet
GAAP Indian Indian INDAS or IFRS
Standard Setter ICAI Multiple IASB
Reporting Annual Quarterly XBRL
Tax Significant Important Delinked
Complexity Low Medium High

2) Information Overload

What we say to dogs

XBRL Information

What they hear?

XBRL Infographic

What we say to Investors?

Dummy Corporation Limited

Consolidated Profit and Loss Account
Sales 800000 600000
Cost of Goods Sold 250000 150000
Operating Profit 550000 450000
Finance Expenses 20000 10000
Net Profit Before Tax 530000 440000
Provision for Taxation 150000 120000
Net Profit 380000 320000
Earning Per Share 38 32

What they hear?

Dummy Corporation Limited

Consolidated Profit and Loss Account
Sales 800000 600000
Blah Blah 250000 150000
Blah Blah 550000 450000
Blah Blah 20000 10000
Blah Blah 530000 440000
Blah Blah 150000 120000
Net Profit 380000 320000
Earning Per Share 38 32

4) Clerical errors

A recent report from MCA says that around 209 Listed Companies have summation and totalling up errors in Balance Sheet

5) Redundancy due to same Financial Information submitted to Different Authorities in different formats

The scope of data is defined by the law but agencies have some freedom as far as format of data they collect. Often various agencies or bodies are collecting the same information, which is another issue. The figure below explains how we submit our information to different authorities.

Reporting XBRL

Getting into the Language – XBRL Tagging

Instead of treating financial information as a block of text, XBRL provides a computer-readable tag to identify each individual item of data. By attaching identifying tags to individual pieces of data, a business reporting document becomes “intelligent” data, allowing the exchange of business reporting data by encoding the information in a meaningful way.

Plain Unstructured Data

  • J Anne Jose
  • 1A/2
  • Treasury Building
  • East Great Cotton Road
  • Anna Nagar
  • Tuticorin – 628006
  • Phone: 91 – 1234567890
  • Email: info@cadiary.org

Tagged Data


<Name><b>J Anne Jose </b></Name>
<Address>
<FlatNo>1A/2 </FlatNo>
<ResidenceName> Treasury Building </ResidenceName>
<RoadOrStreet>East Great Cotton Road <:/RoadOrStreet>
<Area>Anna Nagar</Area>
<City>Tuticorin</City>
<PinCode>628006</PinCode>
</Address>
<Phone>
<countrycode>91</countrycode>
<PhoneNo>1234567890</PhoneNo>
</Phone>
<Emailid>info@cadiary.org</Emailid>

Structuring the Text using XBRL

Unstructured Text

Inventory is valued at lower of cost or market value using FIFO method. Inventory as of 31st March 2012 and 2011 amounted to Rs. 32,00,000/- and Rs. 38,00,000/- respectively.

Structured Text

<Inventoryinformation>
Inventory is valued at lower of cost or market value using FIFO method.
Inventory as of 31st March 2012 and 2011 amounted to Rs. 32,00,000/- and Rs. 38,00,000/- respectively.
</Inventoryinfomation>

Structured for Meaning

<Inventoryinformation>
<stated at> valued at lower of cost or market value </stated at>
<vmethod> FIFO </vmethod>
<value2012> 32,00,000 </value2012> <value2011> 38,00,000 </value2011>
</Inventoryinfomation>

Structured for Global Meaning

<InventoryComponentscontextRef=“D-2012”>
<InventoryCostBasiscontextRef=“D-2012”> valued at lower of cost or market value </InventoryCostBasis>
<ValuationMethodContextRef=“D-2012”> FIFO </ValuationMethod>
<value2012ContextRef =“D-2012”> 32,00,000 </value2012>
<value2011ContextRef =“D-2011”> 38,00,000 </value2011>
</InventoryComponents>

Opportunities for CA, CS and ICWAI

  • Outsourcing XBRL conversions
  • Developing taxonomy with ICAI
  • Implementation of XBRL in organization
  • Improvisation in Audit, Assurance & consultancy services
  • Support to Software vendors
  • Creating awareness and Training

Last but not the Least.. Some facts…

  • India is a hot destination for XBRL data conversion work
  • A major portion of US SEC filing work is being outsourced to India
  • MNCs such as Merrill IT, RR Donley, Aptara have set up offices in India for XBRL data conversion work
  • A substantial portion of UK HMRC filing work is expected to be outsourced to India
  • Finance Professionals with knowledge of XBRL are in demand for outsourced work

'XBRL – The Language of Business, Finance and Accounts' have 5 comments

  1. November 25, 2012 @ 4:18 pm Avani Gala

    Nicely written.. curious on learning more about XBRL..

    Reply

  2. November 25, 2012 @ 4:22 pm Suresh Kondur

    Keep sharing sir..

    Reply

  3. July 11, 2013 @ 12:07 pm RAM

    GOOD ARTICLE

    Reply


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