Essentials Features of XBRL reporting software

Essentials Features of XBRL reporting software

Introduction

eXtensible Business Reporting Language (XBRL) is an XML-based standard (eXtensible Markup Language) which has the potential to play an important role in the generation and use of financial information. XBRL is an Internet-based non-proprietary open standard which is used for the preparation, exchange and publishing of financial information among disparate computer platforms, software applications, and accounting standards. XBRL facilitates continuous auditing, thereby maximizing the transparency with which financial information is reported while also facilitating the enforcement of corporate accountability legislation. In general, with XBRL, the efficiency of the entire information supply chain is considerably enhanced.XBRL is a derivative of XML and as such it takes advantage of the ‘tag’ notion which associates contextual information with data points in financial statements. When formatted with tags, financial statements are called XBRL instance documents. The tags themselves are based on accounting standards and regulatory reporting regimes and are defined in XBRL taxonomies These are developed for specific countries, accounting jurisdictions, and even specific organizations Sometimes, multiple instance documents produced using different taxonomies need to be processed by the same software tool. Taxonomies for Financial Reporting Taxonomies can be created by any reporting entity and may span national jurisdictions, industries, or even individual companies. Taxonomies that have received official recognition by XBRL International are publically available in the Financial Reporting Taxonomies section of its Web site. Extending these taxonomies enables organizations to create financial statements that are valid and/or compliant without any loss to the integrity of their data.

Taxonomies enable the following,

•             Taxonomies describe any type of data: from numeric and monetary data to dates, Booleans, texts and any other XML data types. The X in XBRL brings extensibility so that virtually any data type can be created and added to the taxonomy.

•             Data validation: validation rules can be included in taxonomy along with definition of data types, for instance to provide rules for min-max values, max occurs, allowed enumerated lists.

•             Aggregation rules: one can describe the aggregation rules in the taxonomy to calculate totals and subtotals

•             Relationships: XBRL allows the definition of many interrelationship models between ranges of elements. The X in XBRL means - in this perspective - that existing hierarchies and relationships can be extended to specific needs

•             Presentation structures: for presentation purposes taxonomy can contain the many presentation structures and hierarchies

•             Data dependencies: dependencies between elements can be described in the taxonomy In India, XBRL taxonomies have been created and mandated by Reserve Bank of India (RBI), Securities and Exchange Boards of India (SEBI), and Ministry of

Corporate Affairs (MCA). It is expected that many other regulatory and national jurisdiction bodies such as Sales Tax and Income Tax authorities will be coming up with their specific reporting requirement using XBRL.Financial reports are laden with a large number of business rules, or formulae, which are infinitely important to the accuracy and validity of the data being reported. Many of the business rules are defined in XBRL taxonomies. These are commonly referred to as Calculation Rules. There are certain other business rules which are defined by the regulator which may not be part of the taxonomy and XBRL software tool need to provide the means to ensure that they are being followed.

In order to work in XBRL, you will need software. There are a number of XBRL tools in the marketplace today.  Some tools enable you to work with taxonomies (i.e., creation, extension, and validation), others focus on the instance document (creation and validation). There are also tools that will specialize in rendering, analysis, and reporting.  Some tools may offer one or more of these services within the application while others may only focus on one function.

There is no doubt that regulatory mandates, current or upcoming, are driving the adoption of XBRL worldwide.This is a major obstacle for organizations and other entities in understanding the real value of XBRL and developing a comprehensive strategy for its implementation because businesses tend to address the immediate concern of compliance with the new requirement, which usually translates in the conversion of a pre-existing regulatory report in XBRL format. This “bolt-on” approach to XBRL implementation — conversion of an external report to XBRL once it has been generated using pre-existing processes — is not where the real value proposition of XBRL for businesses lies. A clear understanding of the value proposition of XBRL in its various forms, including those relevant for internal use, is key to a more proactive strategy on XBRL adoption. It turns the obligation of a new mandate, and the related additional costs of compliance, into an opportunity for substantial gains in terms of pervasive cost reductions and increased process efficiencies that go far beyond the scope of any external mandate. These different forms have been introduced previously in this work from the general perspective of their role within the BRSC, but it is useful to revisit them now with a specific focus on their value and use from the perspective of businesses..

 

XBRL Instance Document and Software Tool

XBRL instance documents contain the actual content that is being reported and are validated by XBRL taxonomies. They are inherently subject to the rules of the XML specification and the XBRL instance schema and can also be assigned any number of additional extended taxonomy documents for validation.Instance documents contain the following general business reporting information based on the concepts defined in associated taxonomies:

•             Business facts or measurements, abstract element sexpressed as items and/or Tuples

•             Contexts, containing information about the entity being described

•             Units, which specify the simple or complex numeric terms by which an item has been measured (e.g., INR)

•             Footnotes, used to express irregular associationsbetween elements .All of the power and functionality that XBRL brings to financial data is useless without XBRL-conformant software tools to interpret and process this data.

XBRL is quite complex, and producing instance  documents manually is a practical impossibility. Consequently, the benefits of XBRL cannot be delivered  without software tools. These are generally developed  by software vendors and used for XBRL report generation.

Each XBRL software consists of number of layers, including data definition, application logic, business rules, formatting information and more. Each application has its own way to store data definition, meta data, data dictionary or repository. Most applications have a structured way to define and store business rules and calculations and all have application logic.