What Extensible Business Reporting Language Is - Research Paper Example

? XBRL Research Paper What is XBRL and how does it work? XBRL or eXtensible Business Reporting Language is open, freely available and global standardfor business information exchange. It is a technology platform that allows preparing, analyzing and exchanging of business information. It allows semantic meaning that is required for reporting financial and non financial information of businesses. This technology uses XML based language. The main objective of XBRL is to prepare and exchange financial information for further usage of it like analysis of financial information for investment decision making. It is a standard way to communicate with the stakeholders of the businesses through sharing financial information. Specification of standardization of information is developed and published by XBRL International Inc. The information on the XBRL platform can be freely downloaded especially the financial statements can be downloaded as spreadsheet format so that it can be easily used for further analysis (AICPA. 2012, p.1). The information will also be available in multiple languages to meet the purpose of mass target audiences. The professional users of financial statements of business like the security analysts can analyze the company’s financial information by comparing with other competitors very easily. This will be assist by getting automating filling of business information which can be easily compared with the previous financial figures. Again this helps analysts to increase speed along with high level of accuracy of data. The XBRL platform also provides the relevant definition of each reporting concepts and the relationship among various financial parameters and reporting concepts. XBRL facilitates the preparers of financial information of the companies to utilize freely accessible software to tag quarterly and annual financial information within taxonomy. This information is accomplished in an Instance Document that can be easily accessible by the target audiences. This information can be electronically exchanged and also can be validated in computers and also can be readable by the users from any part of the world. XBRL has published guideline for the users in its websites to help the preparers of financial statements (FFIEC, 2006, p.2). What information is required to be provided in XBRL? Requirement of information XBRL has been revised but there is no major change in the basic format of disclosed information in the periodic report or registration statement for new XBRL requirement. One minor change is that the companies have to provide financial statements along with the statement schedule and footnotes. The companies do not need to provide information about executive compensation and statistical disclosure of financial performance in a specific financial year. The companies must have to provide quarterly earnings reports, transition reports and annual reports. XBRL wants to extend the contents of Form 8K which will be revised and updated version of the previous financial statements of the companies duly filled with only SEC. XBRL also needs registration statement of limited security act which will update information about change of price range at the time submitting quarterly or annual financial report by the companies. Previously the companies need to provide amended at each time of filling in XBRL platform. For merger and acquisition of business registered with XBRL, it needs the detailed information of revised financial structure of the company and details of the acquisition value. XBRL data need registration statement of securities act which must include financial statements like Form S1 and Form S3. This incorporates the financial information provided by the company (SEC, 2009, p.23). What are the perceived benefits of XBRL? Are there any risks and/or drawbacks? XBRL is perceived to be beneficial for both the preparers and the users of financial statements. Financial analysts, regulatory bodies and investors gain more efficient and faster access financial data. This information is also available in required format for analysis like spreadsheet format. This would facilitate the users for analysis on the same file. The information can be easily putted in any analysis tool for faster analysis. Another perceived benefit of XBRL is that XBRL provides reliable data than any other commercial websites because standardized regulations and laws are involved with it. Quality of data is improved due to automation of exchange of information between multiple software applications. XBRL allows automatic validation of data at the time exchange of information by the preparers of financial statements. Through XBRL, auditing of financial statements can also be improved because it provides standardized format of information. The data platform can be used in any operating systems and can be imported in any analysis tool or software application. Reports can be created once and can be used seven times for analysis purpose. Transparency of auditing of financial information in XBRL is improved. User access to financial information has been increased greatly than earlier days when most investors depend on recommendation of some analysts. This helps to more exchange of financial information among the users. Use of XBRL information aid to meet reliability obligation of financial information Sarbanes-Oxley Act, 2002 which ensures about real time reporting of financial statements. Though there are several perceived benefits of XBRL, it also has some limitations. XBRL cannot use tags, charts, graphs and formulas. Some users also prefer multimedia data for presentation in through multi-dimensional format. XBRL data is not available in multimedia format. XBRL data also poses security risks due to free online availability of data. There is several numbers of intermediaries in XBRL supply chain. Again, XBRL automates financial data exchange which involves high possibility of variety of complaint systems. Generally accountant report ensures the feasibility of financial information and it is included in quarterly and even annual report of a company. XBRL data provide only the information which does provide any assurance about quality of the report and it does not have internal control over the financial information as it ac as exchange of information (IAASB, 2010, p.3). What are the ramifications of this mandate on companies and on readers of the financial statements? Preparing and reporting error filled financial information through XBRL might not be that much detrimental as reporting through company websites as SEC. To counter adverse regulatory doldrums and unethical business sustainability, the companies registered with XBRL needs to ensure about high reliability of financial information. XBRL data follows Sarbanes-Oxley Act, 2002 which protect the investors and readers interest regarding reliability of financial information published by public limited companies. Therefore, along with the companies XBRL is also responsible for this mandate. The internal audit committee needs to periodically revise the bookkeeping by the accountants and managers. This will help to fix errors in initial stage of financial reporting. XBRL also need to review the data periodically with original data published by the companies in their official websites. What will companies need to do in order to meet this new requirement? The companies need to conduct some activities in order to meet new requirements of XBRL. They need to upgrade the internal systems for producing XBRL based financial statements. They also need to continue reporting of financial statements with the previous years so that there will not be any gap between the order way of reporting financial statements and new platform. Companies should focus on the time and cost of XBRL financial statements as these are the two most important objectives financial reporting (Deloitte, 2009, p.11). Offer an opinion on whether you personally feel the mandate will be worth the cost to companies. According to SEC, first submission of XBRL financial statements need 125 internal hours more to tag footnotes, schedules and financial face. Therefore, the companies need to develop XBRL team which looks after this up-gradation of financial reporting. This team will includes representative from various fields like accounting, technology and also management. In this way, operational cost of this entire team can be easily evaluated and controlled by the companies. References AICPA. (2012). XBRL Basics - How does it work?. Retrieved from http://www.aicpa.org/interestareas/frc/accountingfinancialreporting/xbrl/pages/howxbrlworks.aspx. Deloitte. (2009). XBRL Frequently Asked Questions. Retrieved from http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/AERS/us_aers_xbrlfaq_090109.pdf. FFIEC. (2006). Improved Business Process Through XBRL: A Use Case for Business Reporting. Retrieved from http://www.xbrl.org/Business/Regulators/FFIEC-White-Paper-31Jan06.pdf. IAASB. (2010). XBRL: The Emerging Landscape. Retrieved from http://www.ifac.org/sites/default/files/publications/files/xbrl-the-emerging-landscape.pdf. SEC. (2009). Interactive Data to Improve Financial Reporting. Retrieved from http://www.sec.gov/rules/final/2009/33-9002.pdf. Read More