Understanding XBRL


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Understanding XBRL

  1. 1. Compiled By<br />Sumit Binani<br />MBA (IIM-Cal), AICWA, FCS, ACA<br />&<br />CS Mamta Binani<br />UNDERSTANDING XBRLeXtensibleBusinessReportingLanguage<br />
  2. 2. Need for XBRL is not new<br />Businesses Exchange Information<br />100 ways to exchange info is part of the problem<br />Clients, Stakeholders, Regulators, Bankers, Auditors<br />Use of diff technology to compare benefits & costs<br />Need for a common standard accepted format for data exchange<br />XBRL has stood out of the pack<br />BUSINESS CASE FOR XBRL<br />
  3. 3. Evaluation Criteria-Effectiveness & Efficiency<br />Cost of Capturing data(training, maintenance, multiple software tools)<br />Timeliness of data<br />Flexibility of Data Collection<br />Quality of Data<br />Reuse of Data<br />BUSINESS REPORTING SOLUTIONS<br />
  4. 4. XML Standard: Low training cost. Lots of standard software for working with XML.<br />Open Standards Provide Leverage: Free tools, free standards, not locked into one specific vendor.<br />Commercial off-the-shelf software can be used<br />Cheap Business Rules Engines Improve Data Quality.<br />Flexible, Extensible, Comprehensive Solution<br />Structured versus Unstructured Data<br />Automated Exchange of Data within same org<br /> XBRL CHARACTERISTICS<br />
  5. 5. Access to Data<br />Timeliness, Quantity, Accuracy, Type of data<br />SEBI, RBI, MCA, Auditor, Banks, Holding Co<br />Onsite data is most qualitative and accessible<br />Transparency, Accuracy, is often questioned<br />XBRL is not about imposing any specific reporting burden<br />Automobile Companies – Quality Control Ex<br />REACH VS RICHNESS OF DATA<br />
  6. 6. We have both reach and richness? <br />Every entity could generate electronic audit schedules of data in XBRL. <br />Regulators, auditors’ systems could read this data whenever they want from their location.<br />A secure web service could be provided by every company and used by auditors, regulators (the SAME systems used for internal audit of the data, NOT different systems) rather than the endless paper, spread sheets,Worddocuments, etc. <br />How would that impact business reporting?<br />WHAT IF<br />
  7. 7. Consider an invoice. Data on the invoice might include:<br />the invoice number, "I-10001“; the invoice date, "July 1, 2005“; the quantity of each line item, "500 boxes“; • the amount of each line item, “Rs 3000“; • the total amount of the invoice, “Rs 9000"<br />The metadata for the invoice, which is data which expresses the information the invoice must contain, might be things like:<br />the invoice number must start with the letter "I", be followed by a dash, and must be a 5 digit number,<br />the invoice MUST contain an invoice number, an invoice date, at least one line item, and a total<br />METADATA-Data about data<br />
  8. 8. Expressed in a consistent, standard way, can be read by a computer application. <br />Can be exchanged automatically between applications along with the data being expressed, resulting in new and better ways to transform and evaluate data.<br />Driven applications can be updated by Business Users - cost-effectively than "hard coded" applications<br />In terms of financial reporting, we see applications driven by XBRL financial metadata (a standardized set of financial terms, or taxonomies)<br />METADATA-Data about data<br />
  9. 9. The fact that data can be defined in an organized way rather than unstructured, semantic meaning can be expressed as metadata, <br />At a relatively low cost because the applications are useful, flexible, and therefore used by so many.<br />A key to improving business reporting is metadata driven computer applications using open standards to express that metadata.<br />XBRL lays the platform for the same<br />METADATA<br />
  10. 10. One of the most powerful features of XBRL<br />Types of business rules might be:<br />Definitions such as "Assets = Liabilities + Equity“<br />Calculations such as "Total Property, Plant and Equipment = Land + Buildings + Fixtures + IT Equipment + Other“<br />Process oriented such as "If property, plant, and equipment exists; then a property, plant and equipment policy must exist and property, plant and equipment disclosures must exist.<br />Instructions or documentation such as "Cash flow types must be either operating, financing, or investing.<br />Separate from the Processing Logic -empowers Business User<br />BUSINESS RULES CAPABILITY<br />
  11. 11. And what if the business rules are also in a global standard format? <br />One can exchange the rules with others. for example,<br />1. use the rules to explain the data you are collecting,<br />2. which data needs to be collected,<br />3. validate the data prior to it being submitted, and<br />4. which data collection forms should be used by the type or quality of entity submitting data.<br />BUSINESS RULES CAPABILITY<br />
  12. 12. Humble beginning back in 1997<br />Charlie Hoffman, a USA CPA, Visionary behind XBRL using power of XML technology<br />XBRL is about better way of reporting accounting, financial and other information to interested users<br />One of the goals of XBRL is to create the information once and be able to easily present it in many ways<br />Reduces Time, Save Costs, Enables Quick Information & analysis<br />HISTORY<br />
  13. 13. HISTORY OF XBRL<br /><ul><li>October 1999
  14. 14. XBRL committee formed ; More than a dozen member organisations in USA
  15. 15. December 2000
  16. 16. Membership >70 organisations
  17. 17. February 2001
  18. 18. Membership >100 internationally, UK XBRL launched
  19. 19. June 2001
  20. 20. XBRL for US GAAP Financial Statements announced
  21. 21. October 2001
  22. 22. XBRL Australia and Japan launched
  23. 23. February 2002
  24. 24. Recognised XBRL jurisdictions include Australia, Canada, Germany, Hong Kong, Japan, Singapore, UK
  25. 25. ....... And the developmental journey continues</li></li></ul><li>Incorporated as Section 25 Company<br />Managing Affairs of Indian Jurisdiction of XBRL International<br />Objectives<br />promote and encourage the adoption of XBRL in India as the standard for electronic business reporting in India <br />facilitate education and marketing of XBRL <br />Develop, manage & update XBRL taxonomies <br />represent Indian interests within XBRL International <br />contribute to the international development of XBRL<br />XBRL INDIA<br />
  26. 26. Global effort to build “the digital language of business” by participants of the business reporting supply chain<br />XBRL permits the automatic exchange and reliable extraction of financial information across all software formats and technologies, including the Internet. <br />It enhances efficiency by allowing tagged (coded identifier) financial information to be transmitted in many formats and deployed with various analytical tools. <br />Users of Transnational Data (change label from eng to other)<br />WHY XBRL<br />
  27. 27. External<br />Financial<br />Reporting<br />Business<br />Operations<br />Internal<br />Financial<br />Reporting<br />Investment<br />and Lending<br />Analysis<br />Investors<br />Financial<br />Publishers<br />and Data<br />Aggregators<br />Companies<br />Auditors<br />Trading<br />Partners<br />Regulators<br />Management<br />Accountants<br />Software Vendors<br />Business Reporting Supply Chain<br />Processes<br />Participants<br />Benefitting out of creation of digital version of financial information using a common language<br />Adapted from “XBRL for CFOs” (www.xbrl.org)<br />
  28. 28. Communicate financial info electronically<br />No need to re-key data<br />Easier and cheaper than EDI<br />Built upon eXtensibleMarkupLanguage (XML)<br />Free public standard defining data sharing, publishing & exchange systems. <br />Separates information from style<br />Single source-can be output to any format<br />SALIENT FEATURES OF XBRL <br />
  29. 29. Credit Application<br />Banks<br />+<br />Text<br />Text<br />+<br />Regulatory Filings<br />ASIC/ATO<br />Text<br />returns<br />Report<br />GL<br />Report<br />+<br />Statements<br />in Print<br />+<br />Report<br />+<br />+<br />Statement in PDF<br />+<br />C of A<br />Statement<br />on Web<br />Text<br />+<br />Today: A Convoluted Information Supply Chain<br />Operational Data Stores<br />Investors<br />Corp.<br />Auditor<br />Adapted from “XBRL for CFOs” (www.xbrl.org)<br />
  30. 30. With XBRL: Multiple Outputs from a Single Specification<br />Printed <br />Financials<br />Accounting <br />System<br />Regulatory<br />Filings<br />XBRL<br />Web Site<br />Tax <br />Returns<br />Other Sources of Information<br />Bank <br />Filings<br />Source “XBRL for CFOs” (www.xbrl.org)<br />
  31. 31. Printed <br />Financials<br />Investors<br />Regulatory<br />Filings<br />Web Site<br />Tax <br />Returns<br />Other Parties<br />Bank <br />Filings<br />XBRL: Information flow TO stakeholders<br />XBRL<br />Source “XBRL for CFOs” (www.xbrl.org)<br />
  32. 32. THE TECHNOLOGY<br />The basis of XBRL is the XML.<br />XML is a recommendation of the World Wide Web (W3C) and is a subset of SGML (Standard Generalised Markup Language). <br />HTML is also a subset of SGML, but XML has been designed to overcome some limitations of HTML.<br />A key feature of XML is that is separates information from the way it is presented. <br />XML works by first defining a structure for the data – referred to as a schema. This defines the structure and the elements names for data without referring to any values of the data. <br />Secondly, files (called instance documents) are created that contain the data, but do not contain any information about how that data is to be presented or published. <br />As a result, the data is also separated from its presentation or style.<br />
  33. 33. HOW XBRL WORKS<br />Simply put, traditional financial statement data is tagged using a taxonomy to create an instance document.<br />XBRL’s delivery unit is the instance document. <br />The instance document is transmitted by the party who prepares the information to the party who can use it. <br />Understanding how XBRL works must therefore include some acquaintance with the necessary inputs to instance documents, the way in which instance documents are prepared for delivery, and some of the terminology XBRL’s developers have created.<br />
  34. 34.
  35. 35. APPLYING TAXONOMIES<br />Taxonomies contain definitions that are used to create tags that will be incorporated in instance documents. <br />All taxonomies must comply with the rules in the XBRL Specification, but they differ because they are specific to the type of information to be electronically expressed and to the related presentation requirements. <br />Taxonomies developed for the U.S. thus far reflect U.S. generally accepted accounting principles and reporting requirements primarily for four different industries: insurance, investment management, commercial and industrial, and banking and savings institutions. <br />These taxonomies were exposed for public comment, revised, and granted approved status by XBRL International.<br />
  36. 36. APPLYING TAXONOMIES<br />The 4 approved taxonomies contain definitions and information about financial reporting concepts, for example, goodwill, net income, gross sales, and cash and cash equivalents. <br />A financial reporting concept within XBRL is called an element.<br />Each element is assigned XBRL basic attributes and relationships. <br />These are characteristics that are formally defined by the taxonomy. They include numerical or non-quantitative descriptors. <br />The basic attributes and relationships are part of the data item’s context for purposes of XBRL. <br />The basic attributes and relationships are designed to be sufficient to enable other computers to understand the data item they receive and to enable people at those computers to use the data item with their application software for analysis, comparisons, or other computerized operations they wish to perform.<br />
  37. 37. This illustration shows that the financial reporting concept goodwill is the XBRL element “goodwill,” which is assigned basic attributes and relationships. <br />Basic<br />Attributes<br />Financial<br />Reporting<br />Concept:<br />Goodwill<br />XBRL<br />Element:<br />Goodwill<br />Relationships<br />to other<br />Elements and<br />Information<br />
  38. 38. 6 STANDARD ATTRIBUTES ARE IDENTIFIED FOR GOODWILL IN THIS ILLUSTRATION<br />Goodwill<br />Label<br />XBRL<br />Element:<br />Goodwill<br />Intangible Assets Goodwill<br />Tag Name<br />The excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired and liabilities assumed<br />Basic<br />Attributes<br />Description<br />Monetary<br />Data Type<br />Balance Type<br />Debit<br />Period Type<br />Instant<br />
  39. 39. RELATIONSHIPS ARE IDENTIFIED FOR GOODWILL IN THIS ILLUSTRATION<br />Publisher: IASB<br />Name: AS 142<br />Paragraph: 18<br />URL: http://www.fasb.org/pdf/<br />fas142.pdf<br />URL Date: 2004-08-01<br />XBRL<br />Element:<br />Goodwill<br />Reference<br /> Relationships<br />to other<br />Elements and<br />Information<br />Condensed Balance Sheet (Assets)<br />Assets<br />Cash and cash equivalents<br />Property plant and equipment<br />Goodwill<br />Total Assets<br />Presentation<br />Total Assets =<br />Cash + Property plant and<br />equipment + Goodwill<br />Calculation<br />
  40. 40. Customization to Capture Unique Info<br />“extensible” feature of XBRL. <br />Compliance maximizes the comparability of the XBRL instance documents for external financial reports when extension taxonomies are employed. <br />An organization can modify an element in a base taxonomy as well as supplement that base taxonomy, <br />extension taxonomy must comply with the XBRL Specification.<br />EXTENSION TAXONOMIES[facilitates Company Specific Business Needs]<br />
  41. 41. EXAMPLE OF EXTENSION TAXONOMIES<br />EX-1<br />A company presents goodwill before property, plant, and equipment in its balance sheet, <br />It can create an extension to change the relationship that is defined in the base taxonomy to present it that way.<br />EX-2<br />Assume Company MB tags its financial statements using the commercial and industrial taxonomy. <br />Company MB has a line item on its balance sheet for “XYZ Inventory.” <br />Because it is unique to Company MB, “XYZ Inventory” is not listed in the commercial and industrial taxonomy. <br />It therefore creates its own extension taxonomy that includes the new element.<br />EX3For instance, if the generic element “sales” were too general for specific needs, a taxonomy could be extended with two new items “equipment sales” and “consumables sales.” Both would roll up to the “sales” element.<br />
  42. 42. INSTANCE DOCUMENT & STYLE SHEETS<br />Tagging Operations leads to creation of Instance Document<br />Instance Doc captures the base taxonomy and the extensions<br />Softwares run the XBRL Instance Doc to produce desired report<br />Reports enables users to analyse or otherwise process published info<br />Instance documents that convey financial statements in XBRL can be created with the help of tagging software<br />Certain software products can extract data in XBRL format from accounting databases<br />
  43. 43. INSTANCE DOCUMENT & STYLE SHEETS<br />XBRL information is published with the aid of a style sheet application. <br />The style sheet describes how documents are presented on screens or in print. <br />It can convert the XBRL data in an instance document into a document that looks similar to financial information, such as a bsheet or income statement. <br />It is a standard mechanism for organizing and presenting XBRL data.<br />Style sheets are written in an extension of XML that is compatible with XBRL.<br />The extensible style sheet language called XSLT is widely used to format and reformat XML documents, including XBRL documents.<br />
  44. 44. EXAMPLES OF BENEFIT FROM XBRL<br />Spreadsheets <br />Basel II Reporting <br />Commercial & Consumer Loans<br />Forms, Forms and Forms<br />
  45. 45. UPDATES FROM XBRL INDIA<br />XBRL developed draft General Purpose Financial Reporting Taxonomy for Commercial & Industrial Companies (Mfg & Services Sector) <br />Covers the financial statements confirming to Indian AS, Company Law & SEBI Listing norms while adapting architectural features of the IFRS general purpose taxonomy 2006 <br />MCA has finalised the taxonomy for C & I for filing Bsheet & P & L in XBRL<br />XBRL Taxonomy for the banking sector is being developed <br />
  46. 46. MCA UPDATES ON XBRL <br />Mandated certain class of companies to file balance sheet and accounts for the year ended 2010-11<br />First Phase to Cover<br /> All Listed Companies in India and their subsidiaries including overseas subsidiaries<br /> All Companies having a paid up capital of 5 crores and above or Turnover of Rs 100 crores or above<br />All Companies falling in phase 1 are permitted to file upto 30-9-2011 without any additional fee.<br />
  47. 47. ThankYou<br />