XBRL (Extensible Business Reporting Language) is a language employed for electronic communication in reporting the financial activities and standing of a business. It is acutely beneficial in preparing, analysing and communicating business details and financial services. XBRL guarantees cost savings and improves accuracy and consistency to business owners while submitting the financial details of their business.
In India, Ministry of Corporate Affairs (MCA) has made it mandatory for companies to file their financial statements in XBRL format since 2011.
Companies under MCA
The following companies in India need to file their financial statements with the MCA in XBRL format –
- All companies incorporated under the Companies Act, 1956 and having a paid-up capital of ₹50 million or more or a turnover of ₹1000 million or more;
- All companies listed in one of the Indian stock exchanges and their Indian subsidiaries regardless of their capital or turnover.
However, banking companies, insurance companies, power companies and non-banking financial companies are exempted.
The XBRL way
Here are some of the ways in which XBRL assists companies and financial professionals in India –
- Automation of data collection: Companies can automate the process of data collection with XBRL. Data from various departments of a company with different systems of accounting can be accumulated in less time. Various reports which use variable data subsets are produced after the data has been collected in XBRL. The finance department of a company can quickly generate internal management reports and credit reports. Therefore, it automates data handling, eradicates slow, deceptive processes and checks data accuracy electronically.
- Usefulness of financial statement details is enhanced: XBRL increases the utility of financial details. The reorganisation of financial data for analytical purposes is not needed anymore. A company can enhance its profile and serve its investors by filing financial statements in XBRL format. It also satisfies the requirements of creditors and regulators who are growing dependent on XBRL for annual reporting. Moreover, it performs a major role in augmenting business relations.
- A higher level of flexibility is ensured: Official standards govern financial statements follow official standards while handling multiple data. XBRL is very flexible as it helps organizations in preparing different reports. Accounting standards offer numerous choices for companies. Different companies can report different things and disaggregate data in the manner they prefer. Companies can move specific components of financial data and come up with unique ideas of reporting.
- Comparability and extensions are strengthened: Extensions are strong but can also trigger problems. They are utilized by security regulators to facilitate the exact presentation of financial statements. There are many other implementations which do not need their use because of their comparability. Financial statements are highly flexible and are not comparable. Each company makes its own disclosure which shows their financial circumstances differently.
The figures displayed in the financial statement of a company plays an immense role in making decisions, planning strategies, estimating failures and determining success – XBRL makes the filing of annual reports and statements easy and accurate.