Introduction of Xbrl, Its Uses and Drawbacks

XBRL

XBRL (eXtensible Business Reporting Language) is a dialect in which the terms of the report are characterized, and these terms are utilized to represent the contents of the financial statements articulations and work reports in a created way. XBRL can help accountants, decision makers, analysts and regulators to prepare, exchange, extract and analyze financial reports. Also, it helps move information between organizations quickly. It is called "Reporting Bar Code", which allows the linking of tags to the reported regulations. XBRL depends on the trading of exchange data through a progression of reports and the trading of business reports, for example, financial statements. It allows tagging that can be aggregated in reports. These data analyses a separate system for large quantities of the data. This development helps the clarity and accuracy of information. Digital Reports works on simplifying the method of using, analyzing, and adding value to data. XBRL is used in many companies to prepare financial statements and structured evidence needed by regulators and analysts.

XBRL Programs

XBRL uses software to tag all elements of financial reports on business items within the Taxonomy. This is achieved through an instance document that can be electronically exchanged and validated between computers or displayed in a readable format.

Taxonomy: it is a gathering of money related ideas in which every idea is characterized. Furthermore, the scientific classification characterizes the connections between the ideas inside the gathering. In this manner, on the off chance that we are working with a monetary record thing, for example, Cash, the scientific categorization would incorporate the meaning of Cash and would likewise show how Cash may identify with other accounting report things. and it protected by XBRL.

Taxonomy Extension: he X in XBRL remains for eXtensible. Consequently, if a specific idea does not as of now exist in an open scientific classification there is the capacity to add to or change the components to address the organization's issues; called broadening the scientific categorization. This extensibility is a standout amongst the most vital parts of XBRL in light of the fact that it takes into consideration wide adjustment and employments of XBRL.

Tagging: Tagging is the process of applying financial data to elements within a label. Marks are created during the creation of an instance document.

Instance Document: An instance document is a file that includes the company-specific business reporting information in a structured manner that computers can intelligently recognize and exchange. It is expected that instance documents will be created for individual financial reports (annual reports, earnings releases, submissions to creditors). The instance document is an XML file where everything comes together.

5. Rendering: an example report is an XML record that is computer readable. Rendering is the procedure in which XBRL programming will make an interpretation of an example report into an intelligible configuration can be read by people.

Advantages of XBRL over other alternatives

Before the digital reporting, when you have to send some reports for the company, you have to collect all the data manually and if you want to analyse and compare the data, you have to read all the paper based reports which gives high possibility for errors. This is why digital reporting is used nowadays more and more, but everyone is using different software. This way is still difficult to compare these reports. That's why the global standard (XBRL) is going to be mandatory very soon and everyone has to use it. There are tremendous benefits from using such a kind of language. On different levels, the technology provides users such as regulators, investors, and the enterprises an assistant in the interpretation of the information that presented in the financial reports. These benefits can vary from Standardization, Machine-readability, Automation, cost saving, more reliable and accurate handling of data which results in better quality of the analysis and the decision making process. Using XBRL would allow the producers of the financial information to switch their effort from entering the data again to analyze the information since the previous step done in short time now. XBRL expected to provide the user with full support for extensive, integrated definitions. An addition to what mentioned previously, the reporting tool has a main mission which is continuously checking the errors that would happen in regard to the accounting logic like the currency, the stocks and flows. Sometimes, by a mistake the accountant would enter a data two times. XBRL makes sure that such a redundancy will not happen. XBRL would support any sophisticated multi-dimensional reporting including any type of reports. Such a kind of reporting tool has the ability to increase the efficiency and the effectiveness of the accountant. There are different reporting tools that can be used. However, XBRL can easily be the superior among them. Here is a brief comparison of this electronic reporting tool among its alternatives.

HTML

Comparing to XBRL which can be shifted to systems, HTML does not support that. In the case of flexibility, XBRL is more flexible in the term of the type of report that it can work with which is the opposite of HTML. This mark-up language is not the right choice for sophisticated reports that prepared for the company as XBRL does. HTML could be a great alternative, but this reporting without any extensive programming, would be useless in the preparation for definitions. The tags usually are predefined in HTML and it's defined by the user in XBRL which gives better specification. The components vary between the two. HTML has tags only and XBRL contains specification, taxonomy, instant documents, and tags.

XML

The digital reporting tool is supportive to complex reports as XBRL, but that does not mean it's preferable for companies use. XML may offer a lot of benefits but, it cannot reach the capabilities of XBRL. The reporting tool cannot deal with sophisticated units of reporting as XBRL. Things like shares and the currency being used in the report, they can be supported by XBRL but not XML. Furthermore, it doesn't support the use of some concepts in accounting like debit and credit as XBRL.

Drawbacks and shortcomings

XBRL aids in near real time disclosure which has its benefits. However, it brings emphasize on short term results on the expense of long term objectives.

High error rate and inconsistency due to companies not choosing the right tag from a taxonomy, which decreases the reliability of the information reported to users. In fact, according to Wang (2015), more than 1. 4 million errors had been reported as of August 2013. Many found that the taxonomy was difficult to use and requires time to fully learn it. Wang (2015) stated “this caused fillers to create extensions (custom elements) if they could not find what they were looking for or if the tag didn't exist”. Companies did not realize that if they select the correct element, the element's description can be modified to agree with their account description.

A common reporting language requires learning and conforming to its standards. That means companies must acquire a software that will produce the data in XBRL format. In addition, along with the developing XBRL standards comes changing specifications that requires companies to update their Accounting software frequently.

Having to conform to XBRL includes devoting employees time to learning, training, and software updates. All of these changes has associated costs that organization must bear.

Conclusion

XBRL is a solution that provides efficiency, clarity, accuracy and ease to many aspects of business and financial reporting. Such as, Preparing and exchanging financial report, as well as conducting comparative analysis between them. Such as everything in life, it has its benefits and drawbacks. However, it has the superiority over other alternatives such as HTML and XML. Nowadays, XBRL has become mandatory in many parts of the world, especially in equity markets.