eXtensible Business Reporting Language (XBRL) is basically an electronic communication tool (or software) of business and financial data which helps capture information of business and financial data in a systematic and a uniform way.
How it helps : XBRL for business reporting in India
Currently for filing form 23AC & form 23ACA (ie) Balance Sheet and Profit & Loss Account with ROC, companies upload their balance sheet & Profit and Loss account in a Pdf format. Retrieval of information from this Pdf format is a challenge as companies do not have uniform method of presentation in their annual reports though all follow Schedule VI format. There are subtle variations in the presentations, which makes it quite difficult for comparisons among companies and also analysing data's of companies for various decision making. XBRL help comes in handy here. XBRL has developed General Purpose Financial Reporting XBRL taxonomy for Commercial and Industrial Companies, which helps to capture data in a systematic manner. All companies (there are certain exceptions here) should
- update their audited financials in the XBRL format (which is almost like an Excel facility)
- validate the data filled in XBRL (tool available within the XBRL software)
- Generate and XML file using XBRL tools
- Get it certified by either a Chartered or Cost Accountant or a Company Secretary
- File form 23AC & 23ACC along with this XML file
XBRL provides a coherent format of Schedule VI where every company has to fill in data in a sequential format along with schedules, notes to accounts, Directors Report & Auditors Report. XBRL taxonomy has been designed beautifully to cover all types of companies from manufacturing and service sectors, it is quite exhaustive. However currently Banking Companies are not covered which is currently under development.
How to capture data in XBRL :
There are lot of software vendors from where you can buy XBRL software plus there are also free software available for download. You can choose any of them. I tried it with the software purchased from taxmann publications. First there is a General Information where you have to provide general information about the company and also the method of preparation of your financials (ie) type of balance sheet, profit and loss account and cashflow. The detail of Balance Sheet is taken in from fixed assets to provisions and the main balance sheet account is generated. Similarly for profit and loss account all schedules from revenue to taxes are inputed and the main profit and loss account is generated. Cashflow is also generated. Data on various notes on accounts is also captured. The beautiful part is that all these reports are interlinked (ie) data in balance sheet / profit & loss account / Cashflow & notes on accounts should tie up if they are linked. For example expenses on Auditors fees is captured in Profit and Loss account as a single line item. In notes there is a requirement for detailed audit fees, the validation here is that the Audit fees total in Notes on account should tally with the audit fees captured in the profit and loss account. This is true for all the entries. This validation helps in accuracy of data.
Benefits of XBRL :
- Uniform presentation of data
- Can be used for updation by all Commercial and Industrial Companies including Service industries
- Data captured is exhaustive with all detailed information on financials of the companies
- Investors, analysts, regulators & general public can have exhaustive information in a relevant & consistent format
- Comparison between company's financials made easy
- Quite flexible as it can change to changes in regulations by making changes in taxonomy - so this will withstand test of time
XBRL is a tool which needs to be filled by an expert who has knowledge of Schedule VI and its relevant schedules. The expert can be within the organisation or there are also professionals available who can help companies fill in XBRL for a small fees. Overall I feel this is an important step towards systematic data collection, which will help business to grow further, I welcome this important change and hope to see this extend further to other areas like Direct tax & indirect tax data's.