XBRL Sustainable reporting brings accountability and transparency
The flow of information from one point to another is important to keep the ecosystem intact, especially in the financial world. Regulators need it to regulate the enterprises; investors need it to analyze the enterprise’s performance and make an investment decision. However, the effectiveness of reporting of business information lies in the speed of consumption by the users of data. The faster the consumption, the better the regulation – and transparency. The transformation from a paper format to an online format such as HTML and PDF has led to a faster flow of information to recipients. However, it still hasn’t resolved the challenge of converting the data from a readable format to an interactive format by deploying significant resources on the beneficiary’s side using Excel. Reduction of resources would slow down the process of conversion and result in data redundancy. Apart from the considerable time involved in consuming the data, there is also a risk of inconsistency among the users in the way the data is converted.
XBRL Sustainable Reporting
Then came XBRL (eXtensible Business Reporting Language), a globally accepted standard for exchanging business information that has revolutionized the financial world. To explain XBRL in simple terms, it is an interactive data format, as opposed to basic readable formats like HTML, PDF etc., that provides the consumers of reports with insights rather than just information. Reportable information can be standardized using the taxonomy (of course with diligent accounting judgment in choosing the right concept) resulting in a better comparison of data across various enterprises, geographies and business segments in no time.
Let us look at some of the challenges that XBRL resolves.
- Avoiding misunderstanding: Enterprises need to file their financial statements with regulators. These financial statements are available for public access either free of cost (example: filings with Securities Exchange Commission in the US) or on payment of a nominal fee (example: filings with Ministry of Corporate Affairs in India). There is always a scope for misunderstanding of a reported fact. Take, for example, net loss reported as $2.3 million in a Profit and Loss Statement. Reading the positive number $2.3 million, an average investor with limited or no accounting knowledge might understand it as a profit and make the wrong business decision. However, tagging with an XBRL taxonomy element will reflect the same value as negative $2.3 million, clearly showing that it’s a loss, not a profit.
- Finding critical information from a large report: Let’s take the example of Sustainability reporting. More and more enterprises are publishing Sustainability Reports to be transparent about their environmental, economic and governmental performance with the general A standard Sustainability report could run to more than 100 pages, with content in narratives and graphics. Though the entire report is important, there are a bunch of critical key metrics that give a clear picture of the organization. The Global Reporting Initiative (GRI), a widely accepted framework for Sustainability reporting, has recommended that reports be filed in XBRL voluntarily using the GRI taxonomy and the existing reporting format. When the key metrics are captured and filed in XBRL, users of the Sustainability Reports need not look for those key metrics in the entire report. Instead, they can pull the XBRL report and review the information.
There are many uses of XBRL, and the above are just a couple of examples, but they are important in our opinion. Transparency and accountability are not just about making data available on time but also about data being consumable on time. XBRL does this job quite brilliantly. We at DataTracks provide a range of XBRL solutions to fit different regions and regulations and are happy to join hands with the XBRL community in making the financial world a better place with accountability and transparency.
About DataTracks: DataTracks Limited is a subsidiary of DataTracks Services Limited. With a track record of more than 10 years, DataTracks is a global leader in preparing financial statements in XBRL and iXBRL formats for filing with regulators. DataTracks prepares more than 12,000 XBRL statements annually for filing with regulators such as SEC in the United States, HMRC in the United Kingdom, Eurofiling compliance reports in Europe, Revenue in Ireland, ACRA in Singapore, and MCA in India.
The views expressed are that of the author, and DataTracks is not responsible for the contents or views expressed therein. If any part of this blog is incorrect, inappropriate or violates any person’s or organization’s IP rights, please alert us at firstname.lastname@example.org. We will take immediate action to correct any violation