XBRL and its Advantages
The Accounting and Corporate Regulatory Authority (ACRA) mandated Singapore companies to file financial statements in XBRL in early 2014. The aim was to standardize the financial reporting format and make it easier to communicate and share this financial data.
But what is XBRL and its advantages? Lets’ find out.
What is XBRL?
eXtensible Business Reporting Language or XBRL is an electronic format for exchanging financial and business reporting information in a standardized format. This computer-based language enables the electronic communication of business data by providing a machine-readable tag. It enables various parties to have better access to information for analyses. So basically, XBRL is a language that achieves standardization and machine-readability.
XBRL offers several benefits to all the stakeholders involved in the company, namely investors, regulators, and filing enterprises. Read on to find out these key advantages of XBRL.
Advantages of XBRL for Investors
Out of all the company stakeholders, investors benefit the most from XBRL. How? Data in a standardized format can help investors compare the position of various companies accurately. The following example can help better understand the advantage for investors.
- The revenue for Company A in currency 1 remained at 2000 in years 1 and 2.
- The revenue for Company B in currency 2 increased from 2000 in year 1 to 2500 in year 2.
At first glance, it seems like Company B increased its top line by 25% from years 1 to 2. However, a deeper analysis may reveal that currency 2 is more inflated than currency 1. What does that mean?
Instead of currency 1 = currency 2, on reporting date, it stands at currency 1 = 1.25 currency 2. When registering the difference in currencies, both companies had the same growth rate (0%) and no increase in the top line.
Advantages of XBRL for Regulators
XBRL allows regulators to create validations and incorporate them into the taxonomy that enterprises use. This ensures reducing the basic errors to a minimum. It also helps regulators publish data from companies when data is provided and not documents. Furthermore, like investors, standardization helps in easy comparison for regulators.
Advantages of XBRL for Enterprises
Although compliance with the XBRL mandate seemed challenging initially, enterprises derived several benefits from XBRL. Today, XBRL is being used by all Singapore companies for internal reporting. XBRL helps enterprises handle data in a structured manner, allowing analyzing and processing of large amounts of data. With the right tools, XBRL can provide a lot of information and insight to the enterprise.
The Road Ahead
So now you know what is XBRL and its advantages. However, due to several requirements, companies may find it difficult to comply with the XBRL mandate. If so, you can easily solve the problem by outsourcing your XBRL requirements to an expert vendor. Enter DataTracks…
DataTracks is a global leader in providing high-quality, reliable compliance reports. With over 17 years of experience, DataTracks has prepared more than 220,000 reports for over 21,500 clients.
To know more about DataTracks and their XBRL services, contact a DataTracks expert at +65-31-582-850 or email at email@example.com TODAY!