amulya krushna nayak (B.Com., ACA, ACMA) (125 Points)

10 June 2011  


Compiled by: Amulya Krushna Nayak
Sources of this article: MCA website, SIRC newsletter, XBRL.org, RBI & ACEC website
XBRL-eXtensible Business Markup Language in INDIA
1)       Why the need of XBRL?
Today’s regulators are not challenged by Technology, but by enomority of data. For MCA (Minstry of Company Affairs), it is more than 60 e-forms, 100s of data fields, 850000 companies and cores of pages of PDF documents & attachments. The complexity with respect to processing & analysis of e-data before different Regulators viz., SEBI, RBI & MCA & IT department are montrous. Internationally, XBRL is the proved to be an effective solution.
2)       Notification by MCA?
MCA has mandated certain class of companies (refer below) to file BS & P/L alongwith Director’s Report and Auditor’s report for the year 2010-11 onwards by using XBRL Taxonomy vide circular no.9/2011 dated 31/3/2011 and circular no. 25/2011 dated 12/05/2011.
Coverage in Phase 1:
The following class of companies have to file the financial statements in XBRL form only from the year 2010-11
1)       All companies LISTED in India and their Indian subsidiaries.
2)       All companies having a paid up capital of INR 5 Crore and above
3)       All companies having a turnover of INR 100 crore and above.
However banking companies,insurance companies, power companies and NBFC are exempted for XBRL filing till further orders.
Additional Fee exemption for Phase 1 companies above. In other wards, whose BS are ADOPTED in the AGM held before 30th Sept 2011 are permitted to file upto 30th Sept 2011 without any additional fee. If AGM hel in Septemeber month then they will file the BS within 30 days from the date of adoption in AGM as per section 220 of Companies Act,1956.
The SEBI has introduced Clause 52 in the equity listing agreement, requiring listed companies to file information with the exchange only through Corporate Filing and Dissemination System (CFDS)
a XBRL-enabled common platform for listed companies to fi le such information, statements and reports as may be specifi ed by BSE and NSE in a phased manner like MCA.
Now question comes,
3)       What is XBRL?
Like telugu is local language, Hindi is national language & English is international language similarly XBRL is Business Reporting Language.
              It encompasses financial reporting. Extensible means usability, adaptability & flexibility in reporting          
               language. XBRL is set to become the standard way of recording, storing and transmitting business financial                                                                                                                                                                    
                 information. XBRL is simply a language for transmitting information. It must accurately reflect data reported under different standards – it does not change them. Any entity can use XBRL to encode its business information such as fi nancial statements,annual reports, tax returns and so forth. XBRL is a member of the family of languages based on XML, or Extensible Markup Language, which is a standard for the electronic exchange of data between businesses and on the internet. Under XML, identifying tags are applied to items of data so that they can be processed efficiently by computer software. It basically provides a standard mechanism for computers to understand and compare fi nancial data. It basically provides a standard mechanism for computers to understand and compare fi nancial data. XBRL also does not change or add to IND-AS & SEBI fi nancial reporting disclosure requirements; it is strictly a method of transmitting fi nancial information in a way that leverages computer technology. The idea behind XBRL is simple. Instead of treating fi nancial 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 is computer readable. XBRL increases the re-usability of fi nancial statement information. Eventually the need to re-key fi nancial data for analytical and other purposes should be virtually eliminated. This has the potential to reduce manual errors, and give companies the ability to proof and control their own data.
Despite all this XBRL is not a substitute for the fi nancial accounting systems, controls,procedures, and related managerial oversight required to prepare GAAP compliant financial statements.
Now then XBRL how managed in India?
XBRL-India (an ICAI initiative) is a Company registered under Section 25 of Companies Act, 1956, incorporated for managing the affairs of Indian Jurisdiction of XBRL International. XBRL International is comprised of Jurisdictions which represent countries, region or international bodies and focus of XBRL in their area. XBRL Indian Jurisdiction is an established Jurisdiction of XBRL International.
How efiling with regulators done at present and how it will be after XBRL implementation?
*EDIFAR- Electronic Data Information Filing And Retrieval System. EDIFAR is discontinued by SEBI with effect from 1st April 2010 and a new portal has come i.e. CFDS (Corporate filing & Disemination System).
*ORFS—Online Reporting Filing System of RBI efiling portal where commercial banks /FI/authorized dealers & NBFC etc files their returns.
*ACES—Automation of Central Excise & Service tax of CBEC (Central board of excise & service tax) . Here Central excise returns & service tax returns are e filed.
What are the potential uses of XBRL?
XBRL can be applied to a very wide range of business and financial data. Among other things, it can handle:
§ Company internal and external financial reporting.
§ Business reporting to all types of regulators, including tax and financial authorities, central banks and governments.
§ Filing of loan reports and applications; credit risk assessments.
§ Exchange of information between government departments or between other institutions, such as central banks.
§ Authoritative accounting literature – providing a standard way of describing accounting documents provided by authoritative bodies.
A wide range of other financial and statistical data which needs to be stored, exchanged and analysed.
What are the benefits to a company from putting its financial statements into XBRL?
XBRL increases the usability of financial statement information. The need to re-key financial data for analytical and other purposes can be eliminated. It will also meet the requirements of regulators, lenders and others consumers of financial information, who are increasingly demanding reporting in XBRL. This will improve business relations and lead to a range of benefits.With full adoption of XBRL, companies can automate data collection.
For example, data from different company divisions with different accounting systems can be assembled quickly, cheaply and efficiently. 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.
Where to get software to use/create XBRL?
Several software vendors are developing such tools in India and the companies are free to choose the one that suits them to create XBRL document.
Does XBRL benefit the comparability of financial statements?
XBRL benefits comparability by helping to identify data which is genuinely alike and distinguishing information which is not comparable.
Now question comes how MCA compliance be done with the use of XBRL,
1)       XBRL ‘instance document’ creation software has to be purchased from the software vendors in the market. This software is used to create XBRL instance documents that would be uploaded on the MCA portal. MCA21 system shall provide a facility for validation of the instance document and filing of the same. MCA is not recommending any specific XBRL software.
NOTE: Existing Form 23AC and 23ACA shall continue to be there for filing by companies to which XBRL filing is not applicable; and for filing of earlier year’s documents.
2)       How to retype ‘Notes to Accounts and Statements’ in XBRL format?
This shall be catered by the XBRL instance document creation software
NOTE: Subsidiary of listed company is required to file in XBRL format, irrespective of its paid up capital.
STEPS for filing Financial statements in XBRL form in MCA 21 system
Step 1 – Creation of XBRL instance document:
Step 2 – Download XBRL validation tool from MCA portal
Step 3 – Use the tool to validate the instance document
Step 4: Perform pre-scrutiny of the validated instance document through the tool
Step 5: Attach instance document to the Form 23AC and Form 23ACA
Step 6: Submitting the Form 23ACA and Form 23ACA on the MCA portal
In summary:
A. Map company’s each financial statement element to a corresponding element in published taxonomy
Companies have the option to create their own XBRL documents in house or to engage a third party to convert their financial statements into XBRL form.
The first step in creation of an instance document is to do tagging of the XBRL taxonomy elements with the various accounting heads in the books of accounts of the company. This would create the mapping of the taxonomy elements with the accounting heads so that the accounting information can be converted into XBRL form.
Mapping is the process of comparing the concepts in the financial statements to the elements in the published taxonomy, assigning a taxonomy element to each financial statement concept.
Selecting the appropriate elements for some financial statement elements may require a significant amount of judgment. For that reason those in the company who are most familiar with the financial statements should be involved in matching financial statements concepts to taxonomy elements. The mapping should be reviewed before proceeding further as the complete reporting would be dependant on the mapping.
B. Create instance document for Balance sheet and Profit and loss Account-
Once the tagging of financial statement elements with the published taxonomy elements is done, the next step is to create the instance document. An instance document is a XML file that contains business reporting information and represents a collection of financial facts and report-specific information using tags from the XBRL taxonomy.
Separate instance documents need to be created for the following:
(i) Stand Alone Balance sheet of the company
(ii) Stand Alone Profit and Loss Account of the company
(iii) Consolidated Balance sheet of the company
(iv) Consolidated Profit and Loss Account of the company
The instance document should contain the financial information for both the current as well as the previous financial year.
Step 2 – Download XBRL validation tool from MCA portal
There shall be a tool provided at the MCA portal for validating the generated XBRL instance document. Validating the instance document is a pre requisite before filing the balance sheet and profit & loss account on MCA portal. You are required to download the tool from the MCA website and validate the instance document before uploading. There shall also be a facility to view and search the taxonomy.
Step 3 – Use the tool to validate the instance document
Once the tool has been downloaded, the next step is to validate the instance document. The following validations shall be performed by the tool-
§ Validating that the instance document is as per the latest and correct version of taxonomy prescribed by MCA
§ All mandatory elements have been entered
§ Other validations as per taxonomy
Step 4: Perform pre-scrutiny of the validated instance document through the tool
§ Once the instance document is successfully validated from the tool, the next step is to pre-scrutinise the validated instance document with the help of the same tool. For pre-scrutinizing the instance document, a working internet connection shall be required. In the Pre-scrutiny, the server side validations (i.e. validations which are to be validated from the MCA21 system) shall be performed.
§ Also, there shall be a feature provided in the tool to verify the appearance of the generated XBRL instance document using the built in Viewer. It is imperative that the company should use this feature to verify the accuracy of the instance document.
Step 5: Attach instance document to the Form 23AC and Form 23ACA
§ There shall be a separate set of Form 23AC and Form 23ACA available on the MCA portal for filing in XBRL form. First fill up the Form 23AC and Form 23ACA. Thereafter, attach the validated and pre-scrutinised instance document for Balance sheet to Form 23AC. Similarly, the instance document for Profit and Loss account is to be attached to Form 23ACA. Separate instance documents need to be attached w.r.t. Standalone financial statements and consolidated financial statements.
Step 6: Submitting the Form 23ACA and Form 23ACA on the MCA portal
§ After the forms are filled, you are required to perform pre-scrutiny of the form, sign the form and then upload the same as per the normal eForm filing process. It shall be validated that the attached instance documents are validated and pre-scrutinised from the XBRL validation tool.
Viewing of balance sheet and profit and loss submitted in XBRL form on MCA portal:The XBRL instance documents submitted along with Form 23AC and 23ACA are in machine readable format. Therefore, for viewing the same in a human readable format, these shall be converted into human readable format by the MCA21 system. For viewing the same on MCA21 portal and for taking certified copies of the same, these converted documents shall be made available.
Taxonomy:is an electronic dictionary of the reporting concepts. It’s a rule book as well as a year book (will be updated annually as regulations are updated). It is a classification listing, a catalogue, nomenclature or categorization of elements of financial/business statements.
Taxonomies may represent hundreds or even thousands of individual business reporting concepts, arithematical
and definition a l relationships among them, along with text labels in mu l t i p l e languages, references to authoritative literature, and information about how to display each concept to a user. Banks, Insurance, NBFC, etc., will be subjected to distinctive taxonomies. Taxonomies are based on the regulatory requirements and standards which are to be followed by the companies. Accordingly, depending on the requirements of every country, there will be country-specifi c taxonomies. Public taxonomies such as the MCA’s Final Taxonomy and Business rules for XBRL reporting cannot always meet the precise needs of every individual     fi nancial report. For this reason, XBRL is designed to be eXtensible, allowing preparers to create an extension taxonomy (customised) that adds to the public taxonomy.
Taggingis a symbolic term for assigning coded identifi ers to information. The most fundamental steps in developing an XBRL report are tagging data and applying a style sheet to the tagged data to convert XBRL files into a document that looks similar to the paper reports users of financial statements have been accustomed to. The tagging process is governed by the XBRL Specifi cation (taxonomy), a detailed descripttion of how to go about complying with the XBRL language. Not all information in business reports needs to be tagged. the user’s application would be able to interact directly with the reported data. The tags (ticket, label, mark, card) are read by the computer, by programmers, and by other parties who need or want to see the tags. Users typically get what they need from readable printouts and the interfaces created by their software applications.
Instance Documents:
XML file that contains business reporting information and represents a collection of financial facts and report-specific information using tags from one or more XBRL taxonomies.
An XBRL instance document is a business report in an e-format created according to the relevant taxonomy i.e. rules of XBRL. It contains facts that are defined by the elements in the taxonomy it refers to, together with their values and an explanation of the context in which they are placed.
XBRL Instance document creation
Tag:The elements as defined in taxonomy are also referred as XBRL tags or only tags. Mark-up languages such as XBRL and XML use tags to describe data < opening tag & > is closing tag. In between, elelements/data are given.
FACTS:The values included in the instance document, which correspond to the concepts included in the taxonomy, are called as facts. These facts can either be numeric (monetary, shares or other numeric information) or non-numeric (string, date or text block). E.g.

Intangible Assets
Name of subsidiary
Sample company ltd.
Date of board meeting
Earnings per share

XBRL components (items, domain members, dimensions, and so forth). The representation of a financial reporting concept, including: line items in the face of the financial statements, important narrative disclosures, and rows and columns in tables.
An element is a business or a financial concept which is defined in the taxonomy according to XBRL specifications. Each element has a type, is identified by name and may have a set of attribute specifications as per the XBRL standards. E.g. SourcesOfFunds, InterestCharges etc.
Face of the financial statements: Financial statements without the notes or schedules.
XBRL Implementation Options for Phase 1 Companies
The degree of proficiency required with regard to the technology would depend on the area of specialization that a CA intends to focus viz. developing Taxonomies and Extension would require a significant
degree of expertise in related tools. ICAI members need to evaluate the various opportunities that will present themselves in XBRL reporting and develop their own professional roadmaps.