Preliminary comments:
The following is extracted from Wikipedia:
XBRL (eXtensible Business Reporting Language) is a freely available and global framework for exchanging business information. XBRL allows the expression of semantic meaning commonly required in business reporting. The language is XML-based and uses the XML syntax and related XML technologies such as XML Schema, XLink, XPath, and Namespaces. One use of XBRL is to define and exchange financial information, such as a financial statement. The XBRL Specification is developed and published by XBRL International, Inc. (XII).
XBRL is a standards-based way to communicate and exchange business information between business systems. These communications are defined by metadata set out in taxonomies, which capture the definition of individual reporting concepts as well as the relationships between concepts and other semantic meaning. Information being communicated or exchanged is provided within an XBRL instance
XBRL is the open international standard for digital business reporting, managed by a global not for profit consortium, being XBRL International. Millions of XBRL documents are created every year, replacing older, paper-based reports with more useful, more effective and more accurate digital versions.
XBRL provides a language in which reporting terms can be authoritatively defined. Those terms can then be used to uniquely represent the contents of financial statements or other kinds of compliance, performance and business reports. XBRL lets reporting information move between organisations rapidly, accurately and digitally.
The change from paper, PDF and HTML based reports to XBRL ones is a little bit like the change from film photography to digital photography, or from paper maps to digital maps. The new format allows many parties to do all the things that used to be possible, but also opens up a range of new capabilities because the information is clearly defined, platform-independent, testable and digital. Just like digital maps, digital business reports, in XBRL format, simplify the way that people can use, share, analyse and add value to the data.
Usefulness and the basics behind XBRL:
XBRL enables preparers to utilize software to tag all financial items in their business reports to the elements within a taxonomy. This is accomplished with the creation of an Instance Document which then can be electronically exchanged and validated between computers or viewed in a human readable format (this is called rendering).
The following Q&As seeks to enable readers to better appreciate how XBRL works:
Q1 What is a Taxonomy?
A taxonomy is a grouping of financial concepts (known as “elements”) in which each concept is defined (often referred to as a ‘dictionary’). Additionally, the taxonomy will also define the relationships between the concepts within the group. Therefore, if we are working with an item in the Statement of Financial Position (SOFP) (balance sheet item) such as Cash, the taxonomy would contain various information and requirements, including the definition of Cash and would also demonstrate how Cash may relate to other SOFP (balance sheet) items (within the taxonomy) such as how it adds up (roll up) to Current Assets and finally, the Total Assets balance. All three of these items (Cash, Current Assets, and Total Assets) are financial concepts that are defined and presented in the taxonomy as elements.
Q2 What is Tagging?
Brief: Tagging is the process of applying the entity’s unique financial data to an element within the taxonomy. The tagging process is performed during the creation of an instance document.
XBRL tagging is the process by which any financial data shall be tagged with the most appropriate element in an accounting taxonomy (a dictionary of accounting terms, as explained above) that best represents the data in addition to tags that facilitate identification / classification (such as type of entity, reporting period, reporting / presentation currency, unit of measurement etc). Since all XBRL reports use the same taxonomy, numbers associated with the same element are comparable irrespective of how they are described by those releasing the financial statements.
Q3 What is an Instance Document?
An instance document is the file that includes the company specific business reporting information that has been keyed-in in a structured manner such that computers can intelligently recognize and exchange. Instance documents will be created for individual financial reports (e.g., in different parts of the world, this would refer to annual reports, earnings releases, submissions to creditors, etc.).
The instance document is an XML file where everything comes together. In this case, the entity’s specific data links (tags) to the elements in the taxonomies to form the XBRL document that can be validated and transmitted automatically for submission to the Regulators and the subsequent use by various users of such information.
Q4 What are some of the most important features of XBRL?
- Clear Definitions
XBRL allows the creation of reusable, authoritative definitions, called taxonomies, that captures the meaning contained in all of the reporting terms used in a business report, as well as the relationships between all of the terms. Taxonomies are developed by regulators, accounting standards setters, government agencies and other groups that need to clearly define information that needs to be reported upon (see earlier comments). XBRL does not limit what kind of information is defined: it is a language that can be used and extended as needed.
- Testable Business Rules
XBRL allows the creation of business rules that constrain what can be reported. Business rules can be logical or mathematical, or both and can be used, for example, to . These business rules can be used to:
- Stop poor quality information being sent to a regulator or third party, by being run by the preparer while the report is in draft.
- Stop poor quality information being accepted by a regulator or third party, by being run at the point that the information is being received. Business reports that fail critical rules can be bounced back to the preparer for review and resubmission.
- Flagging or highlighting questionable information, allowing prompt follow up, correction or explanation.
- Create ratios, aggregations and other kinds of value-added information, based on the fundamental data provided.
Benefits of XBRL Reporting:
Users of financial statements who have received information in XBRL format are generally delighted and satisfied because:
- They receive reliable/accurate data that they do not need to validate
- They receive the benefit of immediate analysis and insight without having to wait for filings
- Professional investors benefit from lower costs associated with gathering, aggregating and analyzing data and the higher reliability of data so they can cover more stocks.
- Corporate finance professionals like dissemination of financial statements in XBRL format because It provides quick and accurate understanding of financial performance in the capital markets, eliminates “noise” and facilitates speedy discovery of share prices
- Large corporations benefit from an increase in the number of analysts covering the stock.
- Smaller corporations (competing for analyst attention) benefit by jumping ahead in the queue and getting analyst coverage by providing interactive data.
MBRS:
As mentioned in the earlier article before this, Suruhanjaya Syarikat Malaysia has introduced the online tool that is based on XBRL, known as the Malaysian Business Reporting System (MBRS)
The many benefits of the new reporting system were covered in the earlier article, and are reproduced here as well:
- It reduces the time and cost of gathering financial and non-financial information. It can save time on data entry efforts or conversion of data formatting
- The information available can be translated to multiple languages.
- The business community and users can be assured as the system enhances data integrity and reliability. This is because the tool contains validity check and cross checks between related cells, automated calculations and many others that allow for the elimination of many errors.
- It also facilitates the analysis of financial reporting for better decision making by stakeholders
- It enhances the ability of companies to ensure better / improved compliance with the Companies Act or the accounting standards
- MBRS would also allow for an improved data analysis and quality.