XBRL and Financial Reporting Taxonomy

According to XBRL Imcrnatnm.il (a not-for-profit consortium of approximately 550 companies and agencies worldwide working together to build the XBRL language and promote and support its adoption), XBRL (extensible Business Reporting language) is a language for the electronic communication of business and financial data which is revolutionizing business reporting around die 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 not a programming language; rather it is a XML-based markup language, which has been developed to revolutionize online financial and business reporting. Online filing of a conventional financial report is not new, which is nothing but a soft copy of the paper version. From the stakeholders point of view, a conventional report is static, non-interactive and less informative, and has become outdated. On the other hand, XBRL reporting is not just replacement of the existing reporting system.

When reports are prepared and filed in XBRL format, not only the summarized information is reported in the financial statements but also all the detailed information leading to the summarized information is available to the users of the report. In other words, every piece of information, reported on the face of the financial statements, will be linked to explanatory information, which can be retrieved by the users with the help of XBRL tags or labels. XBRL data are called interactive data’ because users can interact with the online report and get information according to their needs.

According to the USA Securities Exchange Commission Chairman, Christopher Cox, The new system will make it easier both to file information with the Commission, and to use it. For investors and analysts, it will represent a quantum leap over existing disclosure technologies. For companies, it will mean easier and less costly compliance with SEC requirements’. He further added that, ‘XBRL is fast becoming the universal language for the exchange of business information and it is the future of financial reporting With Financial Explorer or another XBRL viewer, investors will be able to quickly make sense of financial statements. In the near future, potentially millions of people will be able to analyze and compare financial statements and make better-informed investment decisions. That is a big benefit to ordinary investors.

The present study on XBRL is a knowledge-sharing initiative and it is not based on empirical data. It may be called ‘Internet research’. Since XBRL taxonomy is yet to be implemented in India, getting empirical data is not possible. It is a study on various issues related to XBRL such as, the terminologies and the tools used current state of application, etc.

Evolution of XBRL

Development of XBRLcan be traced to developments in two fronts. In the first front, the web-related Standardized General Markup language (SGML) gave birth to two languages—Hyper Text Markup Language (HTML) in 1990, and extensible Markup language (XML) in 1998. HTML is static and has predefined tags signifying how data elements are displayed and linked. But XML is dynamic which allows tags to be defined by the developer of the page.

These tags describe what those data elements contain. XML supports ‘metadata’ that attaches meanings to the data by attaching hidden attribute tags. XBRL (original name was XFRML) was developed in 2000 while trying to use XML in financial reporting. On the other front, popularity of OLAP (On-Line Analytical Processing) system also gave impetus to the development of XBRL.OLAP, developed in 1993, is a database design in which data can be analyzed from a multi-dimensional point of view for generation of strategic information.The key indicator of a successful OLAP application is its ability to provide information as needed, i.e., its ability to provide ”just-in-time” information for effective decision-making.

Combination of these two ideas led to the development of XBRI - The most important feature of XBRI. Is that its source code is open and free of license fees. From very inception, XBRLhas created ripples in the business world. Its advantage is so great that it is going to be the future mode of financial reporting.

Author Bio: Venkat is domain consultant in taxation development organization, which is, develops XBRL filing tool for CAs and corporate.

Vijayraj Reddy
Vijayraj Reddy is founder & editor-in-chief of Startmysalary.com, a financial blog which helps people to earn money, invest money and save money. You can find him on Facebook & Twitter or send him email at [email protected]

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