Reporting of financial statements by a Company in XBRL

Introduction:

XBRL stands for Extensible Business Reporting Language. It 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. It offers cost savings, greater efficiency and improved accuracy and reliability to all those involved in supplying or using financial data.

Filing of financial statements by a Company in XBRL:

As per the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2015, the following class of companies shall file their financial statements and other documents under section 137 of the Act with the Registrar in e-form AOC-4 XBRL within 30 days of the date of annual general meeting:

• Companies listed with stock exchanges in India and their Indian subsidiaries;
• Companies having paid up capital of 5 crore rupees or above;
• Companies having turnover of 100 crore rupees or above;
• All companies which are required to prepare their financial statements in accordance with Companies (Indian Accounting Standards) Rules, 2015

Non-banking financial companies, Housing finance companies and Companies engaged in the business of Banking and Insurance sector are exempt from filing of financial statements under these rules.

Benefits to a Company from putting its data into XBRL:

• XBRL increases the usability of financial statement information. The need to re-key financial data for analytical and other purposes can be eliminated.
• By presenting its statements in XBRL, a company can benefit investors and other stakeholders and enhance its profile.
• It will also meet the requirements of regulators, lenders and others consumers of financial information, who are increasingly demanding reporting in XBRL. This will improve business relations and lead to a range of benefits.
• With full adoption of XBRL, companies can automate data collection. For example, data from different company divisions with different accounting systems can be assembled quickly, cheaply and efficiently.
• Once data is gathered in XBRL, different types of reports using varying subsets of the data can be produced with minimum effort. A company finance division, for example, could quickly and reliably generate internal management reports, financial statements for publication, tax and other regulatory filings, as well as credit reports for lenders.
• Not only can data handling be automated, removing time-consuming, error-prone processes, but the data can be checked by software for accuracy.

Following are the ways to create financial statements in XBRL:

• XBRL-aware accounting software products are becoming available which will support the export of data in XBRL form.
• Statements can be mapped into XBRL using XBRL software tools designed for this purpose.
• Data from accounting databases can be extracted in XBRL format. It is not strictly necessary for an accounting software vendor to use XBRL; third party products can achieve the transformation of the data to XBRL.
• Applications can transform data in particular formats into XBRL. The route which an individual company may take will depend on its requirements and the accounting software and systems it currently uses, among other factors.

XBRL works as follows:

XBRL makes the data readable, with the help of two documents – Taxonomy and instance document.

Taxonomy defines the elements and their relationships based on the regulatory requirements. Using the taxonomy prescribed by the regulators, Companies need to map their reports, and generate a valid XBRL instance document. The process of mapping means matching the concepts as reported by the Company to the corresponding element in the taxonomy. In addition to assigning XBRL tag from taxonomy, information like unit of measurement, period of data, scale of reporting etc., needs to be included in the instance document.

Components of an XBRL Document:

An XBRL document is comprised of the taxonomy and the instance document. Taxonomy contains description and classification of business & financial terms. It can be referred as an electronic dictionary of the reporting concepts. Taxonomy consists of all the data definitions, the 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, including label and definition and potentially references. Taxonomies may represent hundreds or even thousands of individual business reporting concepts, mathematical and definitional relationships among them, along with text labels in multiple languages, references to authoritative literature, and information about how to display each concept to a user.

The XBRL instance document is made up of the actual facts and figures. It 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”. Instance document must be linked to at least one taxonomy, which defines the contexts, labels or references.

Thus, XBRL technology leads to more information exchanges that can be effectively automated by use. This one standard approach leads to the best interest of the company and also helps to represent business interest of the Company globally. It warrants the accuracy of all the financial data for the end users and early collaborative decisions by the companies or those whose interest is involved for acquisition/ rights etc.

(The author of this article is a Practicing Company Secretary located at New Delhi and can be reached at ankitasinglaandassociates@gmail.com)

Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. No part of this document should be distributed or copied without express written permission of the author.