Are you ready for XBRL?
As per The Ministry of Corporate Affairs (MCA), India’s circular dated April 1, 2011 posted on its website, certain class of companies (Phase 1) requires to file balance sheets and profit and loss accounts for the year 2010-11 onwards by using XBRL. The financial statements required to be filed in XBRL format will be based upon the taxonomy on XBRL developed for the existing Schedule VI and non-converged accounting standards notified under the Companies (Accounting Standards) Rules, 2006.
The Ministry is primarily concerned with the administration of the Companies Act, 1956 and other allied Acts and rules & regulations framed there-under mainly for regulating the functioning of the corporate sector in accordance with its laws and regulations.
XBRL (eXtinsible Business Reporting Language) is the new generation financial and operational reporting offshoot of eXtensible Markup Language (XML), which enables regulators and other users of information to quickly use data without the need for tedious, time consuming and error prone transcribing process. XBRL is a global initiative revolutionizing business reporting around the world.
For several years, momentum has been building towards the establishment of a single digital financial reporting standard.
eXtensible Business Reporting Language (XBRL) is an open technology standard which makes it possible to store business and financial information in a computer-readable format. Many countries and/or financial regulators have approved, or are in the process of implementing, requirements around XBRL as the electronic financial reporting standard. These include the US, Japan, UK, Netherlands, Australia & China to name a few.
As per the MCA’s circular, following class of companies will be considered as Phase 1 and will have to file their Financial Statements in XBRL from the year 2010-11:
- All companies listed in India and their subsidiaries, including overseas subsidiaries
- All companies having a paid up capital of INR 5 Crore and above or a turnover of INR 100 crore or above
However banking companies, insurance companies, power companies and Non-Banking Financial Companies (NBFCs) are exempted for XBRL filing, till further orders.
This represents a significant change in the manner in which companies are required to share financial information with regulatory authorities. XBRL will facilitate the transmission of data in electronic form between companies and different regulatory agencies in India, and has the potential to increase comparability and transparency of financial information.
Companies have very short period of time, just few months – to convert financial statements into the new format, which means that technology solutions need to be put in place very swiftly and finance teams need to swiftly get to grips with the XBRL terminology and taxonomy. Given the short timeframe, initial solutions are likely to be ‘bolt-on’ rather than ‘bottom up’ in nature.
MCA’s circular on XBRL is welcome in the industry, and now publication of the taxonomy and further clarification on a number of questions rose, to enable companies to put in place the necessary technology and processes to produce robust XBRL data are awaited.
The government has the largest database of more than 8,00,000 companies, including the private companies, and XBRL is expected to provide significant benefit to the various users of business data, including governments, regulators, economic agencies, stock exchanges, financial information companies and also those who produce or use it, including accountants, auditors, company managers, financial analysts, investors and creditors.
You can read the MCA’s circular on Filing Balance Sheet and Profit and Loss Account in XBRL mode along with the annexures containing the Frequently Asked Questions (FAQs), framed by the Ministry for information and easy understanding of the stakeholders here: http://www.maia-intelligence.com/pdf/XBRL-MCA-Circular.pdf