XBRL for MCA: Software or Service?
Various regulatory bodies across the world have embraced XBRL. In India, The XBRL wave started in late 2007 when ICAI initiated the idea of using XBRL in collaboration with the different regulators in India that control registered companies, banks, insurance undertakings, and listed companies. The Ministry of Corporate Affairs (MCA) mandated that XBRL regulatory reporting include all companies (in phases) from 2011 and released the Commercial and Industrial (C&I) taxonomy for the generation of XBRL reports as part of the AOC forms. India has come a long way since the first adoption, with multiple changes and improvements to the taxonomy and related validations.
Despite the number of years of experience in generating XBRL reports, meeting MCA requirements and staying compliant is not always as straightforward as it sounds. XBRL conversion can end up being a challenge in your compliance function. Everything from a slight taxonomy change to a tiny alteration in your statement data can set you back, even as you edge closer to filing deadlines.
The challenge to choose XBRL for MCA: Software or Service?
India is moving to the Indian IFRS accounting standards popularly known as Ind AS. Migrating to Ind AS will be complex considering that Ind AS is vastly different from the current Indian GAAP standards and it considerably expands the scope of regulatory reporting.
The hassle of keeping up
In the interest of data transparency, MCA requires more elaborate disclosures to be made by corporations under Ind AS. The number of elements in the Ind AS taxonomy has gone up to 6800 from the earlier 2500. Additional disclosures such as rate reconciliation, tax holidays and even joint ventures are now required to be made – if applicable, thereby ensuring accountable disclosures but also increasing the complexity of tagging in the process.
When it comes to validation, the MCA tool now validates close to 800 mandatory fields of information under IND AS. It also requires mandatory and accurate entry of unique records such as DIN/PAN/CIN/SRN – as opposed to the acceptance of dummy records in the Indian GAAP validation rules – greatly increasing validation robustness.
In any given year, there will likely be many revisions and updates to Ind AS taxonomy. It is expected that further updates to the validation tool will be released by MCA in due course. People converting financials to XBRL will need to identify validation errors, and revisit tagging decisions every time the rules are updated; the entire process can get rather overwhelming.
The burden of compliance
A complex document like a financial statement takes hours of work from a slew of different people. To convert all that information to an entirely new format is nothing to sneeze at. Just assessing and reviewing the sheer number of lines in a converted XBRL document can be daunting, let alone tagging each element and line individually.
Even after you’ve done that, the document has to pass validation checks with MCA’s tool, and any errors the tool finds have to be resolved, before you validate your document all over again. Because automated programs can consume the information in XBRL documents, the accuracy of that information is of paramount importance. And then comes the business of actually filing your report with the regulator. All of it goes to increase the pressure on filers.
The constraints of expense
Setting up a unit dedicated to just XBRL conversions might not be the most efficient solution, as you might not have filing requirements all year round. But investing in training an existing team is a viable option.
Allocating resources for a particular set of people to take on the XBRL responsibilities on demand involves certain nuanced decisions. They need to be retrained regularly to accommodate revisions to the reporting standard. They also need to be trained on implementing and using the tools they’d need to facilitate the conversions.
Even though this could potentially engage those people and make them unavailable for their regular duties during the period of filing, compliance is not an optional undertaking. Preparing these reports ultimately helps companies analyse their business processes better, and make decisions that will streamline their operations. It offers the information required for insight. So when it comes down to it, investment in compliance is boon disguised as a mandate.
Regardless of whether you’ve been handling your own regulatory reporting for a long time, evaluating your process is always a good idea. In some cases, a sizeable expenditure of time, money and human resources might not be the most sensible business decision. For such instances, enlisting the services of vendors will offset most of the friction associated with compliance reporting.
Because service providers employ XBRL experts with a singular focus, you can rest assured that your compliance needs will be met without a hitch. They will ensure that all latest updates are integrated in the taxonomy they use, they will enforce extensive reviews, and validate their work, and even coordinate with MCA so that your submissions go smoothly and are error-free. This will greatly reduce the cost of compliance, relieving companies of most of their regulatory burden. A good service provider will even grant you the freedom of making last-minute changes to your statements and will incorporate the changes reliably in the output they provide.
To find out how DataTracks can help with your regulatory reporting, and to experience seamless, error-free compliance with MCA regulations, write to us at email@example.com or call +91 95000 31152.
DataTracks is the foremost provider of regulatory reporting and compliance solutions, and we consistently hold the top two positions in the general rankings of the XBRL Cloud Report, indicating a demonstrable history of the lowest error margins and maximum adherence rates. With over 13 years of experience preparing 150,000+ compliance reports around the world, you can trust us to make your compliance reporting effortless.