4 Common Challenges in Preparing Financial Statements in the XBRL Format

Even though XBRL is an interactive digital tagging system for financial reporting, companies continue to face several challenges when preparing XBRL reporting. They remain sceptical about its usefulness. 

One of the most significant hindrances in this arena is making the transition from stand-alone in-house XBRL preparation to outsourcing services. Outsourcing XBRL filing to the experts enables companies to not only bring all aspects of the ACRA-compliant filing preparation and reporting to rest but also gives them the added insurance of error-free filing. Let’s try to address these concerns.

Challenges Faced by Companies in Preparing Financial Statements in the XBRL Format

  • The Fear of Rejections or Warnings

First things first, whether you choose in house preparation or outsourcing, the major concern of every Singapore based firm is the fear of rejection or warning. Before final submission, most of the errors are pointed out, but the accuracy of the financial statements cannot be determined. But, with the help of credible and reputed conversion services, companies can now put all their worries at bay as these service providers make sure that all financial data is precise and there are absolutely zero chances of penalties or rejections. 

  • Error-free XBRL Filing

In order to ensure error-free filing of financial statements in compliance with ACRA, companies have to attempt multiple revisions. The issue here is that one cannot submit their financial statements in the XBRL format if there is even a single error point, which is why companies face a challenge as most of them are not fluent in proper XBRL tagging and ACRA Taxonomy. This is the reason why hiring an XBRL expert or outsourcing the tagging and conversion is an ideal choice.

  • Time Consuming

Converting accounts to XBRL (eXtensible Business Reporting Language) format is a meticulous process that typically takes about 30 minutes for a single set of accounts, but this duration can vary significantly depending on the complexity and detail of the financial statements being converted. In Singapore, the adoption of XBRL for financial reporting is part of a broader initiative to streamline financial reporting and enhance the comparability and transparency of business information across global markets.

The Accounting and Corporate Regulatory Authority (ACRA) in Singapore requires companies to submit their financial statements in one of two XBRL formats: either the Full XBRL format or the Simplified XBRL format. It’s crucial for businesses to understand under which category they fall to ensure compliance with ACRA’s requirements.

For a detailed guide on determining whether your company should submit a Simplified XBRL report or a full set of financials in XBRL, refer to the informative article, “Simplified XBRL or Full Set Financials in XBRL: Which One Should You Submit to ACRA?”. This resource provides valuable insights into navigating the complexities of XBRL filing in Singapore, helping you make the right decision for your business.

  • The Requirement of Manual Entries

Paying huge subscription fees for software to ensure accurate XBRL conversion doesn’t suffice anymore. With complex tagging and taxonomy, companies have to perform manual entries in order for the software to convert financial statements into the XBRL format.

Enhancing XBRL Reporting Quality: Strategies for Success

In the era of digital finance, the eXtensible Business Reporting Language (XBRL) has emerged as a cornerstone for financial disclosures, offering a structured and standardized format for reporting financial data. Despite its broad adoption, numerous organizations are confronting challenges with XBRL report quality. The repercussions of subpar reports are far-reaching, affecting analyst perceptions, attracting regulatory scrutiny, and posing legal and reputational risks.

The Crucial Role of Management in Ensuring XBRL Integrity

The reliance on automated validation tools, while beneficial, cannot supplant the fundamental responsibility of management in overseeing the XBRL reporting process. It is imperative for senior management to be actively involved in ensuring the accuracy and integrity of XBRL filings. Neglecting this duty not only jeopardizes the quality of financial reporting but also undermines the company’s credibility.

The Fallout from Inadequate XBRL Reporting

The stakes of neglecting XBRL report quality are high, entailing:

  • Analytical Obstacles: Poorly structured XBRL filings can confound analysts, impeding their ability to accurately evaluate the company’s financial standing and operational performance.
  • Regulatory Attention: XBRL issues can draw unwelcome attention from regulatory bodies, potentially triggering investigations and operational disruptions.
  • Legal and Reputation Impacts: Errors in financial reporting can have serious legal consequences and inflict lasting damage on a company’s reputation within the investment community.

Proactive Measures to Elevate XBRL Report Quality

To counter these challenges and harness the full potential of XBRL reporting, organizations can adopt the following strategies:

  • Resource Allocation: Committing sufficient resources, including skilled personnel, to manage the XBRL reporting process is critical for maintaining high standards of accuracy and compliance.
  • Advanced Data Tagging Techniques: Developing and adhering to meticulous guidelines for financial data tagging within the XBRL framework is essential for consistency and clarity in reporting.
  • Comprehensive Validation: A thorough review process, utilizing both automated tools and manual verification, is vital to detect and rectify any inaccuracies or inconsistencies before submission.
  • Collaboration with Experts: Partnering with reputable XBRL service providers, such as DataTracks, can significantly enhance the quality of XBRL reporting. With expertise in data tagging, validation, and submission processes, such partners provide invaluable support in navigating the complexities of XBRL compliance.

Realizing the Benefits of Superior XBRL Reporting

Investing in high-quality XBRL reporting yields numerous advantages, including:

  • Operational Efficiency: Streamlining XBRL reporting processes can conserve resources and enhance productivity across the organization.
  • Lower Compliance Costs: Accurate and timely submissions can reduce the likelihood of regulatory penalties and the need for costly corrections.
  • Improved Stakeholder Relations: Delivering clear and reliable financial information through high-quality XBRL reports strengthens trust and communication with investors, analysts, and regulators.

By recognizing the challenges and actively engaging in measures to ensure the quality of XBRL reporting, organizations can mitigate risks, leverage opportunities for improved efficiency and communication, and secure a competitive advantage in the realm of financial disclosure.

Many Challenges, One Solution – XBRL Outsource

Why face so many challenges when you can simply outsource the task of managing and converting financial statements into XBRL format to outsourced service providers like DataTracks. With an exemplary record of over 19 years, DataTracks has built a prowess in the error-free xbrl filing of financial statements.

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