Concept of XBRL
XBRL (eXtensible Reporting Markup Language) is a language for the electronic communication of business and financial data which is revolutionizing business reporting around the world. It provides major benefits in the preparation, analysis and communication of business information. XBRL offers cost savings, greater efficiency and improved accuracy and reliability to all those involved in supplying or using financial data. It is practically put into use into a number of countries and XBRL implementations are growing rapidly around the world.
XBRL is a result of collaboration between technologists and accountants from all over the world. Together they found XBRL International which is now made up of over 650 members, which includes global companies, accounting, technology, government and financial services bodies. It is an open, royalty-free software.
Advantages of XBRL
The benefits of XBRL expands to all stages of business reporting and analysis and is seen in the fields of:-
- Cost saving
- Faster, more reliable and more accurate handling of data
- Improved analysis and better information and decision making
Due to XBRL producers and consumers of financial data switch their resources away from costly manual processes that are time consuming and involve the assembly and re-entry of data.
XBRL, being a flexible language is intended to support all current aspects of reporting in different countries and industries. Due to its extensible nature it can be adjusted to meet particular business requirements, irrespective of the level of organization.
In the near future XBRL could develop itself to become the standard way of recording, storing and transmitting business financial information. It will deliver major cost savings and gains in efficiency, improving processes in companies, governments and other organisation. XBRL is able to be used in any country irrespective of the language of the country.
It is to clarify that XBRL is simply a language of information and it only reflects the data report under various accounting standards and it does not change them.
How does a company benefit by putting its financial statements into XBRL?
When a company presents its statements in XBRL, it benefits its investors and other stakeholders and enhances its profile. It also meets the requirements of regulators, lenders and other consumers of financial information, who demand reporting in XBRL. It also helps the company to improve its business relations.
How does XBRL work?
The basic function that XBRL performs is by making the documents readable. For this XBRL puts into use two documents:- Taxonomy and Instance document.
Taxonomy is an electronic dictionary of the reporting concepts. It consists of all the data definitions, basic XBRL properties and the interrelationships amongst the concepts. It includes terms such as net income, EPS, cash, etc. Each term has specific attributes that help define it.
Instance Document is a business report in an electronic format created according to the rules of XBRL. It contains facts that are defined by the elements in the taxonomy it refers to, together with their values and an explanation of the context in which they are placed. XBRL Instances contain the reported data with their values and “contexts”. Each instance document must be linked to at least one taxonomy.
Note:- India is a member of XBRL International and a separate company Under Section 25 of Companies Act, 1956 (Now Section 8 of the Companies Act, 2013) has been created to manage the operations of XBRL India which basically performs the following functions:
- To create awareness about XBRL in India.
- To develop and maintain Indian Taxonomies.
- To help companies, adopt and implement XBRL.