XBRL Components:
Tags1:
XBRL tag is a computer code that represents one concept. XBRL uses tags to describe data. For example <Assets> 100</Assets>, the word Assets together with the brackets “<” and “>” is called a tag, and “<…>” is called opening tag and “</….>” is called closing tag.
Taxonomy1:
Taxonomy in general means a catalogue or a set of rules for classification. In XBRL, Taxonomy is a dictionary, containing computer readable definitions of business reporting terms as well as relationships between them and links connecting them to human-readable resources (metadata). A typical Taxonomy consists of a schema (or schemas) and linkbases.
Instance Document1:
An Instance Document is a business report in XBRL format. It contains tagged business facts whose definition can be found in the schema (or schemas) that the Instance Document refers to, together with the context in which they appear and unit description.
How does XBRL work?
Instead of treating financial information as a block of text, XBRL provides a computer-readable tag to identify each individual piece of data. A business reporting document becomes ‘intelligent’ data, allowing the exchange of business reporting data by encoding the information in a meaningful way. XBRL tags give data identity and context which can be understood by a wide range of software applications. It also allows data to interface with databases, financial reporting systems and spreadsheets.
Advantages of XBRL:
XBRL users span over all commercial, business and industrial establishments, the accounting professionals, data aggregators, investment Companies, banks, regulators and all users having a stake in financial statements and reporting. With XBRL, coding the same database can be used for meeting the information needs of all without any need for reprocessing and re-keying. XBRL is so designed that it can be used for distributing financial information in any format viz. HTML documents for web, printed reports and statements, electronic filing with securities and market regulators like SEBI in India and SEC in the USA. It is reliable, efficient, cost-effective, computer-readable, requiring no data entry again and again which is the most time-consuming, expensive and unreliable. Data once converted in the XBRL format can be easily processed by computers.
Since, XBRL provides an XML-based framework it can be used globally for creating, exchanging and analysing financial reports across all software formats.
It is the XBRL Tool that takes care of different software formats and converts the financial state-ments into the XBRL form. Therefore, almost any organisation can benefit from XBRL.
Companies can have their own internal reporting also in XBRL. Let us start with the basic information about a company. With companies going global it has become necessary to standardise financial reporting, not only within the country but across the globe so that we can have comparable and consistent financial data across space and time. A company’s own management can mine the data to reflect different aspects of the company’s working, carry out comparison with competitors and industry leaders and use it as a powerful MIS tool. An investment analyst through the use of XBRL would have timely data across companies to form meaningful conclusions and economists can have consistent information of sufficient granulation to make forecasts and run models. For bankers and credit rating agencies this will obviously be a huge bonanza enhancing the quality of their credit analysis.
The new-generation tools used for improving the decision-making process in the financial domain such as Business Activity Monitoring, Digital Dashboards, Business Intelligence Tools, Data Warehousing and Data Mining are adopting XBRL. An important improvement is for auditors, as XBRL enables continuous auditing. XBRL allows auditors to generate reports within a much shorter time frame as compared to the traditional model.
Worldwide status:
XBRL International which is a non-profit organisation, looks after the promotion and development of XBRL around the world. Some 500 plus organisations are members of XBRL International which include bodies like International Accounting Standards Board (IASB), The Institute of Chartered Accountants of England & Wales, Canadian Institute of Chartered Accountant (CICA), CA Bodies of Australia, Netherlands, Ireland, Singapore, New Zealand, International Federation of Accountant and many others are members of XBRL International. In addition, from the corporate world, Bank of America, Deutsche Bank, Dow Jones, Fujitsu, General Electric, Hitachi, IBM, Microsoft, Moody’s Oracle and SAP to mention a few are members of XBRL International. XBRL International has created local jurisdictions in each country where XBRL is already in use or is under development. There are 50 such local jurisdictions.2
IFRS Foundation has released IFRS Taxonomy 2010 on April 30, 2010. IFRS Foundation has also released IFRS Taxonomy 2010 Guide containing guidance on how to use IFRS Taxonomy 2010 from both an accounting and XBRL technology perspective.
India status:
XBRL India which is the provisional jurisdiction of XBRL International in India is looking after the promotion and development of XBRL in India. The Institute of Chartered Accountants of India (ICAI) is involved in XBRL India. India has just embarked upon XBRL standard. RBI which is the Regulator for all banks in India has implemented XBRL-based reporting for Capital Adequacy data (RCA – II Return) and has also released taxonomy for two more returns, namely, GPB Return and Form A Return. RBI has plans to convert other returns also on XBRL. * As per Media Reports, the Ministry of Corporate Affairs has also taken a decision to implement XBRL-based reporting for all companies in India from April 1, 2011. However, a notification to this effect is still awaited. SEBI is also planning to develop a platform for XBRL-based filing by all listed companies in India.
XBRL — The future of accounting:
From technical point of view, XBRL is replacing other previously defined XML standards for describing financial information and business reports during the last few years such as FpML, RIXML, or ebXML. A reason for this is the wide support from across the world. This will result in the next wave of innovation in ‘Enterprise Financial System’ because of the impact of XBRL on accounting, financial reporting and business intelligence. IT folks around the world are talking about three waves of innovation in XBRL. The first wave is of ‘Preparatory Software & Services’. This has to happen first as the companies start looking for software to convert their financial statements on XBRL format due to regulatory requirements. The second wave will be of ‘Analytical Tools’ for ‘Investment Analysis’ purpose. The third wave will be ‘Internal Systems’ in which one set of accounts is created that is used for investors, regulators and internal reporting purpose. In the next wave of XBRL-driven innovation, data will flow from operational systems all the way through consolidated internal reporting to external reporting to investors and regulators. This will enable regulators to get the transparency that they mandate and companies to get better internal business information/management information system (MIS).**
References:
(1) Eva Reyes, Daniel Rodrigues & Javier Dolado: Overview of XBRL technologies for decision-making in Accounting Information Systems.
(2) Federation of European Accountants: Extensible Business Reporting Language (XBRL) — The Impact on Accountants and Auditors.
(3) Liv Watson: Enhancing Capital Markets Transparency & Trust.
(4) Mike Willis — The Language of Accounting in a Digital World.
