A Standard Means Of Business Communication Accounting Essay

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XBRL stands for eXtensible Business Reporting Language.  It is one of a family of "XML" languages which is becoming a standard means of communicating information between businesses and on the internet. It is a language for the electronic communication of business and financial data which helps us in improving business reporting around the world.  It helps in the preparation, analysis and communication of business information.  It provides greater efficiency, improved accuracy and reliability to all those involved in supplying or using financial data. With the help of XBRL a firm can reduce the cost of exchanging financial information with each other.

Development of XBRL

XBRL is being developed by an international non-profit consortium of approximately 450 major companies, organisations and government agencies.  It is an open standard, free of license fees.  It is already being put to practical use in a number of countries and implementations of XBRL are growing rapidly around the world. All types of organisations can use XBRL to save costs and improve efficiency in handling business and financial information.  Because XBRL is extensible and flexible, it can be adapted to a wide variety of different requirements.  All participants in the financial information supply chain can benefit, whether they are preparers, transmitters or users of business data.

Execution of XBRL

XBRL is also a part of the languages based on XML, or Extensible Mark-up Language, which is a benchmark for the electronic exchange of data between businesses through internet.  Under XML, identifying tags are applied to items of data so that they can be processed efficiently by computer software. XBRL is an improved version of XML which provides more flexibility and power to meet the requirements of business and financial information.  It facilitates unique identifying tags to be applied to items of financial data, such as 'net profit'.  However, these are more than simple identifiers.  They provide a range of information about the item, such as whether it is a monetary item, percentage or fraction.  Labels in any language can be applied to items, as well as accounting references or other subsidiary information while using XBRL. In XBRL we can show correlation between the items and their respective groups, most importantly, it is easily extensible, so companies and other organisations can adapt it to meet a variety of special requirements. The rich and powerful structure of XBRL allows very efficient handling of business data by computer software.  It supports all the standard tasks involved in compiling, storing and using business data.  Such information can be converted into XBRL by suitable mapping processes or generated in XBRL by software.  It can then be searched, selected, exchanged or analysed by computer, or published for ordinary viewing.

Data Collection and Reporting

By using XBRL, companies and other producers of financial data and business reports can automate the processes of data collection.  For example, data from different company divisions with different accounting systems can be assembled quickly, cheaply and efficiently if the sources of information have been upgraded to using XBRL.  Once data is gathered in XBRL, different types of reports using varying subsets of the data can be produced with minimum effort.  A company finance division, for example, could quickly and reliably generate internal management reports, financial statements for publication, tax and other regulatory filings, as well as credit reports for lenders.  Not only can data handling be automated, removing time-consuming, error-prone processes, but the data can be checked by software for accuracy. 

Small businesses can benefit alongside large ones by standardising and simplifying their assembly and filing of information to the authorities.

Data Consumption and Analysis

Users of data which is received electronically in XBRL can automate its handling, cutting out time-consuming and costly collation and re-entry of information.  Software can also immediately validate the data, highlighting errors and gaps which can immediately be addressed.  It can also help in analysing, selecting, and processing the data for re-use.  Human effort can switch to higher, more value-added aspects of analysis, review, reporting and decision-making.  In this way, investment analysts can save effort, greatly simplify the selection and comparison of data, and deepen their company analysis.  Lenders can save costs and speed up their dealings with borrowers.  Regulators and government departments can assemble, validate and review data much more efficiently and usefully than they have hitherto been able to do.

The IASC Foundation (IASCF) has developed a high quality XBRL 'taxonomy' for IFRSs (in effect, a dictionary of data tags that explains what each tagged element is and how it should be treated under IFRSs) that will be maintained in line with the annual Bound Volume of IFRSs.

In November 2002, the XBRL International Steering Committee (ISC) issued the IAS Primary Financial

Statements (PFS) Taxonomy as an XBRL Recommendation and also issued the IAS Explanatory Disclosures and Accounting Policies (EDAP) Taxonomy as a Public Working Draft. Both the PFS and EDAP taxonomies are available on the Internet from XBRL International's XBRL Resource Center.

The PFS Taxonomy includes XBRL representations of a classified balance sheet, an income statement, a statement of changes in equity, and a cash flow statement. The PFS Taxonomy encompasses the core financial statements that private sector and certain public sector entities typically report in annual, semi-annual, or quarterly financial disclosures as required by IAS 1.7 and IAS 34.8.

Significant accounting policies and other explanatory notes are modelled in a separate XBRL taxonomy, the Explanatory Disclosures and Accounting Policies (EDAP) taxonomy, which has been released as a public working draft.

In XBRL, a taxonomy consists of the core part which is a schema (or more schemas) and linkbases. If you compared it to the physique of a crab, the schema would be its head and trunk (where all the major organs are situated) and the linkbases would be its limbs. Of course, a schema could exist without linkbases in the same way as that a crab could theoretically live without limbs but in order for crab to survive and for the taxonomy to be optimal both parts of the body are necessary.

Relating the XBRL taxonomy to the general taxonomy term explained above the schema is the part that contains definitions of elements (such as Assets) whereas linkbases provide relationships between them. In the example of the classification of living things, the explanation of what is an Organism, Domain, Kingdom, Division and Class would be placed in the schema while the hierarchical relationships between them would appear in the linkbases.

An XBRL schema stores information about taxonomy elements (their names, ids and other characteristics). It can be regarded as a container where an unstructured list of elements and references to linkbase files are described.

From the technical point of view the XBRL Schema is an XML Schema tailored to particular business and financial reporting needs. The schema itself represents a set of unrelated elements. Schemas are created using XML Schema technology and their physical form is a file with an extension .xsd. Together with linkbases it creates an XBRL taxonomy.

The root element (the most general one) of all schemas is <schema>. It opens (<schema>) and closes (</schema>) every schema document. It contains some attributes describing it. Because the same element could be defined in many schemas each of which would assign it a different meaning (for example under various GAAPs the concept Assets may be defined differently), to distinguish between the elements we use namespaces. Namespace look like Internet addresses (for example "http://xbrl.iasb.org/int/fr/ifrs/") but they are not.

The reason for using names that look like www locators (URIs) is that they are unique and therefore are appropriate to identify the elements that are unique to a schema. Instead of using the whole, long address we can assign it a prefix. If we define for example that ifrs="http://xbrl.iasb.org/int/fr/ifrs/" then, instead of quoting the whole URI before an element name, we can simply use ifrs (for example <ifrs:Assets/>).

The main purpose of XBRL schemas is to provide the computer with information on how it should represent and process accounting terms. As explained in the XBRL section, computers do not have built-in accounting knowledge so they have to be taught what a particular concept means and what its characteristics are. To learn more on how to explain accounting to a computer go to the Element section.

Exposure Draft of ICAI on General Purpose Financial Reporting XBRL Taxonomy for Commercial and Industrial Companies

ICAI has recently issued an exposure draft of general purpose financial reporting XBRL taxonomy for commercial and industrial companies.

Keeping in view the rising importance of XBRL and the advantages it has to offer, the Institute of Chartered Accountants of India constituted a Group on XBRL in January 2007, under the chairmanship of the President, ICAI. The main objective of the Group is to establish a forum for the development of XBRL in India including its promotion and to develop taxonomy for XBRL based reporting bearing in mind the peculiarities of the Indian Accounting Standards.

Recently, the Group has finalised the draft general purpose financial reporting XBRL taxonomy for commercial and industrial companies. This draft taxonomy covers the financial statements, viz., Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement and the related non-financial information. The draft taxonomy has been developed conforming to Indian Accounting Standards and Company Law while adapting the architectural features of the IFRS general purpose taxonomy 2006.

While building the taxonomy three broad reporting categories have been considered, taking into account the different reporting requirements. These are

Commercial and Industrial

Banking Companies

Non-Banking Finance companies

All reporting entities would fall under any one of the above mentioned categories. The current version of ICAI XBRL taxonomy is a general purpose taxonomy, designed for Commercial and Industrial group (C&I), which would include trading entities, oil and gas companies, service providing entities, real estate and construction companies and all other commercially operated entities.

The ICAI XBRL taxonomy has been constructed to conform to the Indian Accounting Standards and Company Law while adapting the architectural features of the IFRS XBRL taxonomy 2006.

Structure of the Taxonomy Files

The taxonomy for financial statements (GAAP elements) is covered in three different modules covering the Balance sheet, Income Statement and Cash Flow respectively. Each module contains a schema sheet as well as other sheets that depict, among other things, the relationships of the elements with each other (the linkbases). The Non GAAP module contains the taxonomy for the Non GAAP elements (mostly accounting policy and notes to accounts information). This module also has a schema sheet apart from other sheets that depict the presentation and calculation relationships as well as labels.

The schema (essentially a dictionary of all the elements that are there in the taxonomy) contains the XBRL attributes for each element as well as the reference to authoritative literature (the reference linkbase) and a short explanation (documentation) of each element. There are about 2400 odd concepts in this taxonomy across financial statements and Non Gaap information. Each module also contains the details of three linkbases, presentation, calculation and label. The presentation and calculation relationships are in multiple extended links (extended links are logical grouping of elements based on certain criteria).

Every sheet in a module is designed to contain a specific extended link. The names of the extended link suggest the categorisation of the elements it contains which could be either a presentation or a calculation link. In the taxonomy for the Balance Sheet, all elements falling within a legal requirement such as the Accounting Standard or Schedule VI of the Companies Act are categorized as a specific extended link carrying the name 'Statutory'. This has both presentation and calculation sheets as extended links.

The calculation extended links contains weight in addition to the attributes defined in the schema file. Weights are assigned to the elements, in such a way that they add or subtract in order to arrive at their parent level concept. The label linkbase contains period start labels, period end labels, positive labels and negative labels in addition to the standard labels, wherever required.

XBRL Taxonomies, also published via this site, are the dictionaries which the language uses. These are the categorisation schemes which define the specific tags for individual items of data (such as "net profit").  National jurisdictions have different accounting regulations, so each may have its own taxonomy for financial reporting.  Many different organisations, including regulators, specific industries or even companies, may also require taxonomies to cover their own business reporting needs.  A special taxonomy has also been designed to support collation of data and internal reporting within organisations.  This is the GL taxonomy. 

Ordinary users of XBRL may be largely or totally unaware of the technical infrastructure which underpins the language. However, software companies, such as accountancy software providers, need to take account of XBRL and its features when producing their products