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Role of a Chartered Accountant as a preparer of XBRL

CA RAHUL RAY 
on 15 May 2014

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We as accountants need to understand how to interpret the taxonomy, which does not necessarily include understanding XML language and its semantics. As accountants we should be able to appropriately link each element of the financial statements to the relevant element in the taxonomy. In case suitable taxonomy elements are not available, company specific extensions have to be created within the taxonomy customized for the company, if permitted by the relevant regulator. Generally software are available for facilitating the linking of the financial statement items to the relevant elements in the taxonomy, which alleviates the need of hard coding by accountants. After tagging the financial statement items, the file is validated against a set of predefined XBRL validation rules and an Instance Document (XSD) is generated with the help of tagging software.         

XBRL conversion process

XBRL is only a method of presentation or reporting. It does not attempt to make any changes in the content to be reported. The idea behind XBRL is simple. Instead of treating financial information as a block of text – as in a standard internet page or a printed document – it provides an identifying label (tag) for each individual line item of data. This data then becomes computer readable.

Step 1.Gathering Information-

The company sends you the annual return. Assuming it is in non HTML format, you need to convert it to HTML format. Simultaneously you ask the company for a lot of details which are NOT to be found in the pdf format that they have sent you. This generally includes details like

1. Company PAN No.

2. Qualification of directors

3. Shares held by directors

4. Details of Auditor with PAN and Membership No.

5. All text documents in word format:

(Auditor report, Director Report &Significant Accounting Policies with their Annexure)

6. All tables in Excel Format:

(Balance sheet, Profit & Loss A/C & Schedules)

7. Details of Principal Products and Services along with ITC Code & Turnover.

8. Hard copy of Audited Annual Report of the Company

9. Shareholding Pattern in percentage

10. SRN of Form23B related to Auditor

11. PAN No. of Directors

12. Complete details of Joint Venture, if any

13. Details of Subsidiaries, if any

14. Board report date of previous year in which annual accounts were approved.

15. SRN of Form 66 (current year), if applicable

16. Directors Remuneration, if any

Step 2.Tag the financial statements in the published taxonomy

This is then loaded to software which will help you in the tagging. Once you convert the financial accounts into HTML format, you start the tagging. Tagging refers to the creation of an XBRL instance document where each piece of financial information is “associated” with the most appropriate taxonomy element as identified during Mapping. An XBRL instance document is an XML file containing financial facts associated with tags from a standardized taxonomy of accounting terms. If any financial fact cannot be associated with any element in the standardized taxonomy of accounting terms, it is possible to create extensions to the taxonomy.

Then you tag the Auditor’s Report, Director’s Report and the Notes on Accounts – these are a little easier than the accounts.

General XBRL Filling Errors-This is the fourth year of MCA xbrl filing in India. In the first phase of operations the MCA was very liberal and may not have prosecuted bad / poor filing. However, it does not mean that they were happy with the quality of work done by professionals. In fact they have issued a circular 16th October, 2012 (available on the MCA site) where they have said that they are not happy with what has happened. They have done a few test check cases and come to some conclusions like the following:

For this visit our Blog CAGLOBAL BLOG SITE

Step 3.XML conversion

Once the tagging is over, the document is converted into XBRL format, it can be sent to the client. However, the client will not be able to read it, so a human readable format has to be created for the same. This could take the form of pdf or excel.

A Real Life Example

Let us now describe the whole process with a real life example. Say the name of the company is Iamca Pvt.Ltd.

The audited Balance Sheet of Iamca Pvt.Ltd., which we will convert into XBRL format, is given below:

Now as described above the Balance Sheet needs to be tagged for the purpose of creation of an XBRL instance document where each piece of financial information is “associated” with the most appropriate taxonomy element as identified during Mapping. To accomplish the Task let us use an EXCEL template as given below-

Here you can observe how each piece of financial information is “associated” with the most appropriate taxonomy element. Compare the Balance Sheet items and the template items to understand the correlation between them.

Now the third step is to convert the document in XBRL format. However, you will not be able to read it, so a human readable format has to be created for the same. This could take the form of pdf or excel. Let us take a look at the pdf view of the XML file created for the above Balance Sheet.

Your task is over if the above Balance Sheet is flawless. It’s time to raise the bill. A couple of days ago I went through an interesting observation in one Internet Blog which is worth mentioning. The main theme was the pricing of a XBRL work. The author is saying “My estimate of the time frame is as follows: Getting the pdf, converting to Html, etc (0.5 day), Setting up, building, tagging ( 20 hrs (3 days)),Completing( 0.5 day),Sending, coordinating etc( 1.o day).Totaling about 5 days – let us say 2 days of a CA earning Rs. 75k a month (CTC) + 3 days of a graduate (earning Rs. 15k a month).Without costing the price paid for the software, it is Rs. 6000 + 1500 = 7500 + overheads. Now if you are doing this as a business, you realize that there will be some additional costs like courier, etc. Also there will be some marketing and selling expenses for doing any business. So logically no sensible company which wants to make money can afford to price these services at anything less than Rs. 15-30,000 for a reasonably sized company. However there are companies who are ringing up saying ‘we can do it for Rs. 1500 PER COMPANY…I keep wondering how and why…What is the credibility of such an offer (is this an offer at all?)…The questions to ask are:

1. How can you do any work at all for Rs. 1500

2. Can you explain the whole process of converting?

3. Can you give me the CV / cell number of the people doing the work?

4. If you wake up on 25th November and tell me it is not passing through the validator, what should I do?

5. Have you converted any document for anybody in any country and passed it through a validator?

6. I am in Mumbai, you are in Delhi how do I trust that you will not just run away with my money?”

I will not draw any conclusion rather I will left the task on readers. We hope you find this document useful. If you have any other questions or require further information, please do not hesitate to contact us.


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