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XBRL for financial statements - Question and Answers

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XBRL for financial statements is something intricate and hence a lot of questions may be in your mind. Hopefully, this write-up will eliminate the majority among them.

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XBRL for financial statements - Question and Answers

  1. 1. XBRL for Financial Statements: Questions and Answers Have a look on some the following XBRL financial statements questions and answers to get a comprehensive idea regarding the entire affair. Question: Help me understand what Extensible Business Reporting Language is? Formerly gone by the acronym XFRML, Extensible Business Reporting Language—is an easily available free electronic language, extensively used for financial reporting. Being an XML-based framework, it provides immense opportunities and possibilities for the financial communities to take the published financial statements of a public organization and the information they enclose so as to create, transform and publish them in a multitude of formats, dependably extract and without human intervention replace the same. It is important to understand that it does not attempt to usher in any novel bookkeeping standards. Instead, it strives to enhance the serviceability of the existing standards through the versatile digital lingo of commerce, which is XBRL. As a matter of fact, XBRL for financial reporting does not need the companies to provide additional disclosure to external audiences. Question: What are the applications of XBRL? The first and foremost goal is to help in publishing various monetary statements of businesses that are issued to outside users. In a nutshell, financial statements are nothing but a digitally improved version of normal paper-based statements, which
  2. 2. consist of the income statements, statements of equity, the balance sheet, statements of money flows, and all the notes made for the various financial statements along with the report created by an accountant or a bookkeeper. If considered, XBRL for financial statements can drastically improve the efficiency of processing various financial statements reducing the manpower and time required for the same, considerably. XBRL brings with it a myriad of leverages such as enhanced efficiency, assured exchanging reliability, easy publishing, better analytical flexibility, simple retrieve options and providing insights to better investments. Possible XBRL applications:  Financial Statements: Irrespective of the sort, nature and size of various financial statements, extensible business reporting language can be used to exchange and transform financial information. This is a great boon.  Taxes: XBRL will become the preferred specifications for the tax-returns filed and for all the items that appear on tax-returns.  Regulatory Filings: XBRL is expected be the preferred specification for a wide variety of filings required for governmental and other regulatory bodies for smooth processing.  For secretarial and commerce information: All the reports that are generated by the accounting system in place will be made available in XBRL formats to enable re-use of the same possible and viable.  Authoritative Literature: In order to enable easy, quicker and reliable use of various accounting related literature and resources published by FASB, AICPA, ASB and many others, XBRL will be the preferred format for the published resources.
  3. 3. Question: Explain XBRL for Financial Statements advantages? One of the most exciting versatilities is that, it can be used to efficiently prepare financial statements in multiple forms. And, it also provides for a unique option where any specific detail information can be extracted from any of the forms of the thus prepared financial statements easily. Let us consider the scenario where an organization needs to prepare a fiscal report for printing, a website and for filing. In doing so, with current technologies and methods, the organization—or the one that carries out the tasks, for that matter—needs to enter the same details for at least three times. However, with XBRL, the information is only entered once; same data will be rendered in the printable format, in the required HTML format for a website and in any of the preferred reporting formats for banking and other authoritarian report creations. Another issue that concerns most financial institution today is that it is extremely difficult to extract required data from a monetary report. Even for the widely used statement format such as EDGAR filing, one has to get the details manually. This is indeed a frustrating and increasingly time-consuming disadvantage of the existing system. However, with XBRL, it is quite easy to prompt a program to fetch any financial details from the statement and get the required details right away, which makes XBRL increasingly popular making a wider audience demanding quality XBRL conversion services. Question: Who stands to gain by using XBRL? Take a look at the various stakeholders of financial data supply chain who stand to gain from using extensible business reporting language.
  4. 4. Organizations that make financial statements: XBRL will provide for efficient financial statement preparation as the time and manpower required for the same is considerably less with extensible business reporting language formats, and once created it can be used and rendered for multiple purposes such as printing, websites, regulatory filings and the like. Regulators, Investors and Analysts: It provides for better sharing and usability of the current financial information available. Because of the flexibility of the format, it would be easier, simpler and effective to carryout automated analyses and insight generation. Since various types of financial statements are available at easily usable format, it would also facilitate less re-entering of details from one format to another. Monetary publishers and information collectors: Providing room for better and more efficient data collection, XBRL formats will enable to reduce the cost associated with data collection. It will also significantly reduce the errors that might come up otherwise. At the same time, it will improve the overall value of the collected data and its transactional value and capacity. Third-party software merchants: This can be used by any software program created to deal with financial statements as its data format exports and imports. Hence, it would be easy to integrate the same with various financial analytical applications for enhance inter-operability. In light of the said, XBRL financial analysis is very effective. Question: How XBRL work and make this possible? How to get the accurate information while using XBRL? In order to employ effectively for the best results, there are 3 basic needs to get right. They are;
  5. 5.  Creating a single specification that performs works and behaves in the same way for all the organizations using it and it must also be consistent across various financial statements irrespective of the type of the statements.  An application allowing financial report creation “tagged” with XML which certainly stick to the specification.  Style sheets that can render the pieces on information from the statements to any specific form or to any diversity of formats. XBRL is normally explained through the concerns it addresses to solve and is thus best explained. The lack of a single requirement which works for all the organizations can ask for the creation of various automated information rendering and mining tools for each and every specification used. This can only add to increased cost, reduced efficiency and data discrepancies. This is the reason behind the continued endeavors of various accounting professionals to give rise to one single condition that all can take advantage of. Of course, there will be conditions that need to meet the requirements of different industries, but all such specifications will fall under the similar framework. The only means to attain the desired consistency is XML; not HTML, SGML, PDF or raw text. Here, the aim is to drive a standards-based system that facilitates to arrange, bring out in a wide diversity of formats, barter and scrutinize financial statements irrespective of the software formats. This establishes several uniform categories for financial information by providing accord on the conditions that dictate the usability of the format. Even then, the system is sensitive and flexible enough to resonate well with the varying processes, organizational environments, schemes and even their management styles.
  6. 6. Question: How are the XBRL statements created? This is one of the most common XBRL frequently asked questions. XBRL type tags are integrated by the third-party software merchants to the accounting systems of the organizations wanting to take advantage of the format. It further helps the clients to cross-reference their concerned account to the said framework effectively and improve ease of operation for users without the glitches that plagued the older system. Question: How can XBRL fit into the SEC’s EDGAR? Are they carrying it out right? As required by the user, XBRL can without human intervention ‘Edgar-ize’ the monetary reports in use into 10Q, 10K or any other filings for better efficiency of the statements. We can expect to see the SEC making use of XML as a format for filing; in fact, they already ‘tag’ the necessary information. However, it does not gain the traction it must as XRBL as the ‘tagged information’ is unable to provide the required details and flexibility, which renders in less effective. Though EDGAR documents provide for a few detailed tags, it is rendered in groups, rather specific pieces of information, which altogether reduces the overall effectiveness of the tagged information. XBRL for sec filings is hence more preferred. Also read some of the key information about inline XBRL for SEC filing. Question: What XBRL means to those who prepare financial statements? Though XBRL is not a necessary one, having such a specification would help the companies solve many concerns and improve the efficiency of collecting, analyzing and utilizing the financial statements effectively. It provides for better distribution and
  7. 7. communication of various financial statements and thus provides better value for money for several stakeholders. Question: Why does the AICPA spearhead up this initiative? Being the leading national professional organization of CPAs in US, the AICPA has decided to spearhead the initiative to facilitate and support all the necessary developments for a common specification which will be utilized by the whole accounting industry to hold up XBRL. Additionally, irrespective of the size of the organization, all businesses are experiencing basic changes with respect to the advances in technology, changing customer preferences and attitudes. The CPAs have become an integral part of any business, which has the ability to drive change and support the business ecosystem to grow better and smarter. The CPAs have the innate understanding and repercussions of the financial statements and its languages and how they can be leveraged to drive growth and sustainability to the businesses. The looming change in the financial and business language is a natural one, though induced by the fast advances in the technology. The CPAs are undergoing changes for a few years now and the trend is expected to continue, as well. This definitely burdens the shoulders of the CPAs more, as it is their fundamental duty to help the investing community to better understand the financial stature and implications of the investments they make and if they need to reconsider their investment strategies.
  8. 8. Question: What does the future hold for XBRL? In a new study by AIMR on public companies, it is found that nearly 66% of the surveyed companies utilize a website and 76% of them publicize their financial information through their websites for various stakeholders to take note of. Another important fact stated in the study is that most of the financial data analysts preferred to get the information from the website even though there are several other sources present, as it is very easy to get the details from a website. In a different study, it is revealed that around 80% of the major US organizations disclose some kind of monetary information to the Web. The future appears to be more challenging, yet brighter for most public companies as most of them will continue to have websites and release their financial statements online. Companies that are looking forward to availing financial assistance from banks will start to present various financial statements on the form of XBRL through email and the same will be added to the database of the bank for references, scrutinizes and various analyses. We also expect that all pieces of monetary information, reliable secretarial literature and major studies related to the industry will also start to appear in XBRL formats for better utilization of the resource made available. SO, companies from around the globe have increasingly started creating XBRL documents Question: What charges will be incurred when your specifications are used to generate financial statements? The initiative is conceived to be licensed free of cost to ensure maximum utilization for the betterment of the distribution, analyses and data generation based on the financial statements. As this is poised to become a fundamental infrastructure on which the industry will start to grow better, the development cost it borne by the industry itself.
  9. 9. Also, having only one specification will help in minimizing the costs associated with developing and maintaining it. Question: Will this cause to any change in the existing accounting standards? No. XBRL for accounting has always been preferred. The specifications being developed will rely and depend on the various existing bookkeeping standards and principles. Question: Where do I get more information about XBRL? Visit;  The XBRL public website (http://www.XBRL.org)  The AICPA website (http://www.aicpa.org) For more information overview on XML standards, you can also visit  http://www.xml.org  http://xml.com Question: What will be the impact of XBRL on International Reporting Standards? Efforts are in place to develop an open structure that can provide for synchronized development of the specifications internationally and in other jurisdictions as well.
  10. 10. Question: How is XBRL different from other formats such as FinXml, FpML, OFX, Fix, and XML/EDI? Why are the efforts necessary? Except for XBRL, all others are transaction-precise specifications created to meet specific purposes whereas, XBRL reporting is precise. These hard works are necessary as each of them carries a specific purpose when developed. If you are in need of any services related to XBRL or have any queries, contact any of the best XBRL data conversion companies and they will guide you properly.

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