XBRL and its Advantages
The Accounting and Corporate Regulatory Authority (ACRA) of Singapore mandated XBRL filing of financial statements in early 2014. You can find a ready reckoner for filing requirements here.
XBRL is essentially a language that hopes to achieve two things:
XBRL offers a number of benefits to all the stakeholders involved, namely regulators, investors, and filing enterprises, which override the initial difficulties that one may have when adopting the technology for the first time
For regulators, the ability to create validations and have them incorporated in a taxonomy that enterprises must use, ensures that basic errors are reduced to a minimum. Standardization also allows easy comparison. We will talk about the standardization benefit a little later when we discuss investors. Regulators can also publish data from companies (should the said data be legally available for public scrutiny) when the data is submitted to them as data, not documents.
Investors are the one group of stakeholders that obtain the maximum benefit out of XBRL. Standardized data can help investors compare companies accurately. An example is shown in the box below.
At first glance, Company B seems to have increased its topline by 25% from Year 1 to Year 2. Notice that, as an investor, the difference in currencies does not register as much as the impression that Company B has done better during the year.
|REVENUE||Year 1||Year 2|
|Company A (in Curr 1)||2000||2000|
|Company B (in Curr 2)||2000||2500|
However, a deeper analysis may reveal that Curr 2 is inflated more than Curr 1, so that:
instead of Curr 1 = Curr 2,
it stands atCurr 1 = 1.25 Curr 2,as on reporting date
This means that if standardized for currency, both companies have had no increase in topline, and therefore, are growing at the same rate (0%).
Although compliance with XBRL mandates is challenging initially, enterprises also derive a number of benefits from XBRL. XBRL is now being increasingly used for internal reporting. It allows data to be handled in a structured manner and in doing so, allows analysis packages to process large amounts of data. With appropriate BI tools, this provides a treasure trove of information and insight to the enterprise.
XBRL seems like an extra layer of compliance requirements (read: extra wasted resources, in terms of time, effort and cost). However, the teething problems that emerge for a first-time XBRL user can always be solved by simply outsourcing them to experts. The advantages of XBRL, however, outweigh the disadvantages.
DataTracks is a global leader in preparation of financial statements in XBRL and iXBRL formats. With over 10 years’ experience, 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, Revenue in Ireland, ACRA in Singapore and MCA in India. DataTracks provides world-class services with its team of certified accountants experienced in US GAAP, UK GAAP, India GAAP, SFRS and IFRS.
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