XBRL – The Pathway to Compliance & Easy Financial Disclosure

eXtensible Business Reporting Language (XBRL) is a form of extensible markup language (XML) introduced to improve the quality of reporting and uploading financial statements and annual returns. XBRL compliance reporting maximizes the possibility of digitization, increased reliability, and comparability.

XBRL compliance in Malaysia

In the past year, the Malaysian economy has witnessed drastic changes in the financial reporting policies updated by SSM, where online (XBRL) reporting is considered to be the only safe and effective option. This is why, once mandated, companies will be required to prepare financial statements in the XBRL format and in compliance with Malaysian Financial Reporting Standards (MFRS) to facilitate easy comparability of data.

Regulatory Landscape in Malaysia

Malaysia has been actively working towards enhancing the efficiency, accuracy, and transparency of its financial reporting system. The introduction of XBRL (eXtensible Business Reporting Language) is a significant part of this initiative. The regulatory landscape in Malaysia for XBRL compliance is shaped by various government bodies and regulations aimed at ensuring uniformity in financial reporting and facilitating easier access to financial data.

The adoption of XBRL in Malaysia is primarily driven by the need to streamline the submission and analysis of financial data, reduce reporting errors, and improve the overall quality of financial information. This move aligns with global practices, ensuring that Malaysia remains competitive and compliant with international financial reporting standards.

Key Regulatory Bodies Involved

Suruhanjaya Syarikat Malaysia (SSM) – Companies Commission of Malaysia:

Role: SSM is the statutory body responsible for the incorporation of companies, registration of businesses, and regulation of corporate and business affairs in Malaysia.

Involvement in XBRL: SSM is the primary driver of XBRL adoption in Malaysia through the Malaysian Business Reporting System (MBRS). SSM mandates the use of XBRL for submitting annual returns, financial statements, and exemption applications.

Bank Negara Malaysia (BNM):

Role: BNM is Malaysia’s central bank, responsible for maintaining monetary and financial stability. It regulates financial institutions and oversees the implementation of financial policies.

Involvement in XBRL: BNM has adopted XBRL for regulatory reporting by financial institutions. This move ensures that financial data submitted by banks and other financial entities are standardized, accurate, and easily analyzable.

Timeline of XBRL Adoption in Malaysia

2014

Initial Steps: SSM began exploring the adoption of XBRL to modernize its financial reporting system. This involved studying international best practices and engaging with stakeholders to understand the requirements and implications of XBRL implementation.

2018

Launch of MBRS: SSM launched the Malaysian Business Reporting System (MBRS), making it mandatory for companies to submit their annual returns, financial statements, and exemption applications in XBRL format. This marked a significant milestone in Malaysia’s journey towards standardized financial reporting.

2020

BNM’s Adoption of XBRL: Bank Negara Malaysia mandated the use of XBRL for specific regulatory reporting submissions by financial institutions. This ensured that the financial data from banks and other entities were standardized and met the central bank’s requirements for accuracy and transparency.

But what is the role of XBRL compliance here? Let’s find out.

XBRL and Compliance Reporting

Companies require a massive amount of reliability and accuracy when it comes to reporting and disclosure of financial data. With the regulatory environment becoming complex, companies are changing and updating their ways of meeting compliance needs. With a plethora of guidelines, compliance becomes extremely tricky. The most common challenges that businesses face in financial reporting include:-

Automating routine tasks to reduce costs.
Analyzing and comparing the data efficiently.
Identifying the errors in the filling process rapidly.
Focusing on data analysis and decision making.
Obtaining secure data that can be entered automatically into the systems

This is where XBRL comes to aid.

Reduces the Need for Manual Entry

Relying on manual processes for preparing and reviewing financial statements can prove to be time-consuming and incorporates a greater risk of errors. XBRL reduces this reliance, allowing businesses to spend more time on data analysis and decision making. XBRL does not alter the data to be reported. However, it changes the way it’s reported.

Fewer Chances of XBRL Errors

The quality checks of XBRL, along with an identifying tag for each individual data and taxonomy compliance established by SSM reduces the chance of errors. Moreover, it automatically checks and corrects information before final submission.

SSM’s mTool to Your Rescue

mTool is an excel-based preparation tool developed by SSM to generate and validate XBRL financial statements and annual reports. It benefits users by displaying financial information in multiple formats, including tables and bar charts. Similarly, the mPortal platform also comes in handy for preparing & analyzing data and generating reports.

XBRL compliance and Financial Disclosure

CRD, an International Integrated Reporting Council (IIRC), identifies seven fundamental principles to achieve transparency and accountability in financial reporting: materiality, completeness, accuracy, balance, clarity, comparability, and reliability.

Source: https://www.xbrl.org/news/the-value-of-transparency/

XBRL format covers every single one of these principles and has digitalized financial reporting, making it more transparent than ever before. Transparency in financial reporting ensures better decision-making by private parties and policy creation by government agencies. It allows real-time disclosures by making essential and meaningful information accessible to interested users, including stakeholders, investors, and regulatory bodies.

The Growing Relevance of XBRL in Financial Reporting World

XBRL is a landmark in the history of financial reporting. It is a technological framework that provides tremendous benefits to businesses, regulators, accountants, and the general public if appropriately used.

To avail the benefits of XBRL, a trusted partner like DataTracks is all you need. Boasting 19+ years of experience, DataTracks has leveraged the technical skills and global expertise in providing XBRL compliance reporting and regulatory solutions meeting the SSM requirements.

FAQs

Why is XBRL compliance important in Malaysia?

XBRL compliance is crucial in Malaysia to enhance the accuracy, transparency, and efficiency of financial reporting. It helps regulators, investors, and other stakeholders access reliable and comparable financial information, aligning with international best practices.

Which regulatory bodies mandate XBRL compliance in Malaysia?

In Malaysia, XBRL compliance is mandated by:

Suruhanjaya Syarikat Malaysia (SSM) – Companies Commission of Malaysia: Requires companies to submit their annual returns, financial statements, and exemption applications in XBRL format.
Bank Negara Malaysia (BNM): Mandates the use of XBRL for specific regulatory reporting submissions by financial institutions.

What is the Malaysian Business Reporting System (MBRS)?

MBRS is a platform developed by SSM for the submission of annual returns, financial statements, and exemption applications in XBRL format. It streamlines the reporting process, ensuring standardized and accurate financial data.

When was XBRL compliance introduced in Malaysia?

XBRL compliance was introduced in stages:

2014: SSM began exploring XBRL adoption.
2018: Full implementation of MBRS, requiring mandatory XBRL submissions.
2020: BNM mandated XBRL for specific regulatory reporting by financial institutions.

What are the benefits of XBRL compliance for Malaysian companies?

Enhanced Transparency: Standardized reporting improves data comparability.
Improved Accuracy: Automated validation reduces errors.
Efficiency: Streamlined submission processes save time and resources.
Better Analysis: Facilitates effective financial analysis and decision-making.

What types of reports must be submitted in XBRL format in Malaysia?

In Malaysia, companies must submit:

Annual Returns: Mandatory submissions via MBRS.
Financial Statements: Submitted using the XBRL taxonomy specified by SSM.
Exemption Applications: Processed through MBRS using XBRL format.

What challenges do companies face with XBRL compliance in Malaysia?

Implementation Costs: Initial setup and training expenses.
Technical Expertise: Need for specialized knowledge and skills.
Ongoing Compliance: Keeping up with updates in XBRL taxonomies and regulations.

How can companies prepare for XBRL compliance in Malaysia?

Invest in Training: Develop internal expertise in XBRL.
Use XBRL Tools: Utilize software for tagging and submitting financial data.
Stay Informed: Keep up-to-date with regulatory changes and updates in XBRL requirements.