ICAI asked government to mandate all companies to file their financial statements in XBRL format

Domestic companies may soon have to file financial statements in a computerised format to enable easy flow of information between regulators and facilitate comprehensive financial data analysis. In a letter to the ministry of corporate affairs, the Institute of Chartered Accountants of India (ICAI) has asked the government to mandate all companies to file their financial statements in a format known as XBRL, or eXtensible Business Reporting Language.

XBRL enables electronic communication of financial and business data and stores information in a format that can be accessed by all stakeholders for fast and easy analysis.

“If the financial statements are filed in XBRL format, not only will this ease the process of regulatory for both the company and the ministry but also provide benefits such as easier and effective analysis by various stakeholders who may access the filed financial statements,” ICAI president Uttam Prakash Agarwal said in his letter.

The accounting regulator’s proposal is aimed at changing the process of regulatory filing of annual accounts by companies, which is physically filed with the Registrar of Companies. The proposal, if accepted, will lead to the creation of a repository of electronically- maintained financial data that can be used for analysis by all stakeholders. The strategy will benefit all those who collect business data, including governments, regulators, economic agencies, stock exchanges, financial information companies, and those who produce or use it including accountants, auditors, company managers, financial analysts, investors and creditors. Banks, for example, will benefit from an XBRL-enabled financial data management system in determining credit appraisal of their corporate borrowers, ICAI explained in its presentation before the government.

XBRL uses an electronic dictionary of business and financial terms for enabling such a transformation in the system. Indicating that the groundwork for the transformation was ready, ICAI informed the government that the taxonomy for preparing XBRL-based financial statements for commercial and industrial enterprises was ready. XBRL enables producers and consumers of financial data to withdraw resources from costly manual processes that involve time-consuming comparison, assembly and re-entry of data. The companies can use XBRL to save costs and streamline their processes for collecting and reporting financial information.