Total Number of Subscribers: 464   

  Date: 4th Sep 2009

 Compiled by: M Sathya Kumar  

                            XBRL — Nuts & Bolts

Modern accounting was created centuries ago when the only method of recording business transactions was pen on paper. Fourteenth century Italian merchants are credited with developing double-entry bookkeeping, the system of recording each business transaction twice, that’s still used today. Ledgers were heavy books that recorded all significant entries of a business. At the close of business, the ledgers were summarised into a general ledger, and financial statements were prepared — the process is not very different from what’s done today. A quick peek under the covers of accounting software packages will reveal that most are recording little more than the same debits and credits that were handwritten into the books of the merchants of Venice.

Modern accounting systems record transactions into relational databases that smoothen the way for quick retrieval of the data for further processing. But this improvement doesn’t address the problem of bare-bones data in our accounting systems. We get bare-bones data when an accounting application strips away the supporting information from a business transaction, the presence of which could lead to a richer, fuller explanation of that transaction. [most modern accounting applications allow for documentation of transactions natively within the applications. Once pulled outside the application by query or by a report writer, however, the data is typically stripped of all supporting information and becomes just a number]. Analysis of the how and why for a particular number on a subsequent financial report becomes an exercise of going back to the original software application and hoping that enough identifying information still exists inside the application. Accounting applications tend to keep supporting data in ways that are unique to each application, complicating both the business reporting process and subsequent internal control and audit routines. This is where standards like XBRL are going to play a pivotal role.

The advances in computer processing power, storage capabilities, and the development of more ways to add information to data have paved the way for a radically new approach to collecting, storing, retrieving, and reporting business information : to build an entire information system around data, not around the applications. Traditionally, we have always conducted our audit around the system, now we have the means which eliminates the need to go around the system. Data that’s treated with additional information — i.e., further information about the data frees up the organisation and the user of the information to not only use and reuse the data multiple times, but it offers an additional advantage of being able to drill down into the data to better understand its origins. The world of extensible mark up languages, such as XBRL, allows companies to add supporting data to the base transaction. For example, a transaction fed to an inventory application program for a shipment to a customer may contain identifiers regarding customer name, date, method of transportation, invoice data, sales classifications, and more. Most of the facts (some of which we talked about, capable of adding richness to the data are usually lost when data is shared outside the originating software application. If the data had been subject to a business rule check, such as a test for a valid customer or a test for duplicate shipments, the results of these tests most often remain solely in the software application. If the data from that same transaction had the ability to carry additional identifiers outside the inventory software application, the data’s usefulness is greatly enhanced. Think of it as a nugget of data coated with extra information that helps explain exactly where it has been and what tests it may have been through. Internal audit could quickly check to see if the data is in compliance with the corporate governance, internal control framework. Managers wanting to check up on performance data could drill down to the data level to check out a problem without having to enter the application program that originated the transaction, provided the data contained additional information about the data, i.e., meta-data, wherever it travelled in the business information system.

Although the task will not be easy, it is also not unprecedented. The unique element of XML and thus of XBRL is the ability to tag individual concepts (text or numbers) with context, so that financial reports, available over the Internet or elsewhere, can be searched quickly and accurately. For example, the word ‘bank’ can refer to a financial institution, the side of a river, or what an airplane does when it begins a turn. XML will permit each of these words to be given a tag that will signal to a search engine exactly which meaning the word has in the context in which it is used.

XBRL is a member of the family of languages based on XML, or Extensible Mark up Language, which is a standard for 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. XBRL is a powerful and flexible version of XML, which has been defined specifically to meet the requirements of business and financial information. It enables unique identifying tags to be applied to items of financial data, such as ‘net profit’. However, these are more than simple identifiers. They provide a range of information about the item, such as whether it is a monetary item, percentage or fraction. XBRL allows labels in any language to be applied to items, as well as accounting references or other subsidiary information. XBRL can show how items are related to one another. It can thus represent how they are calculated. It can also identify whether they fall into particular groupings for organisational or presentational purposes. Most importantly, XBRL is easily extensible, so companies and other organisations can adapt it to meet a variety of special requirements. Such information can be converted into XBRL by suitable mapping processes or generated in XBRL by software. It can then be searched, selected, exchanged or analysed by computer, or published for ordinary viewing.

(The reader may be able to relate it to the ETDS report preparation utility, which converts the data in Excel sheets, accounting software in a typical text format which is uploaded by the TINFACs)

Fig. 1

What does XBRL look like ? ? ?

Key points :

(1) Data is the core of the system

(2) Tagging of data imparts additional information (meta-data) to the data

(3) Checks and audits are routine for all transactions

(4) All reporting comes from the same numbers; one version of the truth.

So far we have gone on and on that XBRL is this, it is that so on so forth, surely by now you must be at the edge of your seat and pulling your hair-wanting to know how this ‘easy’ XBRL looks like. Well, you can check out Fig. 1 (what XBRL looks like ?) and Fig. 2 (what does the code represent ?). A sure-shot reaction is going to be of horror, it looks worse than our ETDS text file. But not to worry, because many of our Indian (Accounting software and more) companies are talking to XBRL International, the organisation (group) which is spearheading the movement. In the last write-up, some names were mentioned (International-Microsoft, Oracle, etc., National-apro Tally, Sify among others), they will be doing the needful to implement the standard, whereas we will be reaping the benefits of the same.

Fig. 2

What does the above picture represent ? ? ?

However, when dealing with XBRL, we will have to acquaint ourselves with some more concepts (beyond relying on third party solutions). Some of these concepts have been highlighted below :

Specifications provide the fundamental technical definition of how XBRL works. New implementations of XBRL follow the latest version of the main Specification, version 2.1.

Taxonomies are the dictionaries used by XBRL. They define specific tags for individual items of data (such as ‘net profit’). Different taxonomies will be required for different financial reporting purposes. Many different organisations, including regulators, specific industries or even companies, may require taxonomies to cover their own business reporting needs. National jurisdictions may need their own financial reporting taxonomies to reflect their local accounting regulations. A special taxonomy has also been designed to support collation of data and internal reporting within organisations. This is the GL taxonomy.

Instances and Reports The XBRL files which represent the data in financial reports are known as Instance. How financial reports should be put into XBRL.

Labels are human-readable text that describes the concept. Typically, labels are used in XBRL software when displaying the concept.

References are additional information that identifies authoritative literature related to the concept. For example, it may include the chapter and section numbers to the GAAP literature.

Link Role Registry provides a set of standard technical features which may be used in XBRL taxonomies and instances.

We have seen a simple example as to how an XBRL document would look like. Let’s take another practical instance as to how the XBRL can be read (without an XML viewer). Refer to Fig. 3.

                                      Fig. 3

Line numbers are not normally contained in the instance document. They are used here to provide an easy reference to each line as it is explained.

This line is the required beginning line for every XML document, irregardless of its type. Additional data can be inserted, but this is the bare minimum. It signifies that it is an XML document based on XML Recommendation 1.0. As a minimum, it must be included exactly as shown, else nothing will work.

is the name of the root (first) element. This element name is required under XBRL Specification 2.0 (2001, p. 22). The second entry indicates that this is an XBRL instance document.

The xmlns at the beginning of the line indicates that we are creating an XML Namespace (xsi) and that the location we are referring to is the web address found within the quotation marks. Any future reference to contents from this site will be prefixed with xsi : (see line 7 for an example). A namespace reference is made up of a number of parts : xlmns referring to a web location and/or document : Separator between xlmns and the namespace name xxxx= The characters before the ‘=’ sign represent the name allocated to the namespace. All elements referring to this name-space are prefixed by this name, so that it is ‘obvious’ where the element or role is defined.

"http://... Location of the file to which the namespace reference refers.

This is another namespace reference. Anything referring to the role of link bases within XBRL is defined here and any reference to it will be prefixed with ‘link:’.

Line 5 — Location of XML Links :

Similar to the above, except that it refers to the roles of link bases specified within the XLink specification.

Line 6 — Taxonomy Namespace Reference :

Another namespace reference that indicates that any elements from this location are prefixed with the words ‘sample:’. If this were not present, then all of the elements’ names would have no namespace prefix. (See Line 9 to see how the namespace prefix works). If this line was omitted, then line 9 would read as :

1157

This line indicates where the Taxonomy/Schema file is located. The term schemaLocation is prefixed by ‘xsi:’, which was previously defined as a namespace in line 3. This means that this attribute/element is defined at the website specified in line 3. ‘sample.xsd’ indicates the name of the file that is being used as the taxonomy/schema for this instance document. Since the file has not preceded a web address, it means that the taxonomy file is located in the same directory as the instance document. If it is located on a web site, then the full http:// address would need to be included.

The details for each element consist of a number of required parts : sample refers to the namespace assigned to the taxonomy in line 6

ast.cur.cce the element name

numericContext=‘numCont1’ a context attribute is required for all elements.

The details for this are specified further down in the document (see lines 11-23) 1157 the fact value for the element. The name assigned to the attribute numericContext (‘numCont1’) is defined by the instance document creator. This could have been any name. For example, in the Specification example it simply uses ‘c1’.

If you were reporting values for more than one accounting period, you would need to have more than one numeric context. The numeric context contains information about the date(s) that relate(s) to the amount. Therefore, ‘numCont1-1999’ could be a valid name for the attribute.

Details ‘numericContext’ is an element defined in the XBRL schema and is the name that must be used for the instance document to be valid. ‘id’ is an attribute of numericContext and must agree with the entry on line 9 where the numericContext element is referred to in the element details for ‘ast.cur.cce’. Hence its name is ‘numCont1’. ‘precision’ refers to the maximum number of significant decimal digits for all elements using this numeric context. The ‘18’ indicates that there can be up to 18 significant digits in this amount. In order to count the number of significant digits, you start with the left-most digit and count to the right. If a number in the instance document was greater than 18 digits, then the accuracy is only guaranteed for the first 18 digits. ‘cwa’ refers to an attribute called the Closed World Assumption. If this value is set to ‘true’, it means that it is safe to use this number in calculations and that all the details are contained within the instance document. If it is set to false (probably a good default condition), it means that any calculations using that element (or elements) are at the risk of the user of the instance document rather than the preparer.

These 3 lines indicate the minimal details about the organisation for which the instance document has been prepared. The scheme attribute could be omitted, but it is best to retain it if it is available.

Obviously, ‘Company A’ is the name of the organisation for which the instance document has been prepared. Rather than record it elsewhere, it is recorded here. Reason for this might be that a particular instance document has been prepared to compare the same elements for two different companies. There would then need to be two numericContext entries — one for each company. The numericContext details would indicate to which company an element value belonged. Note that the elements have been correctly nested.

The period element can contain one of 6 different elements. The one used here is the ‘instant’ element, indicating the values using numericContext ‘numCont1’ in this document are for one specific date. If the document contained data for a statement of financial performance (profit and loss statement), then the ‘instant’ element could be replaced by two required elements — startDate and endDate.

This line tells the reader the unit of measure for the facts using numericContext ‘numC1’. It takes its meaning from ISO4217 and is measured in Australian dollars.

Financial data can consist of many different types — actual, budget, restated, proforma, etc. This optional element indicates to the document reader that the value(s) stated using this numeric context are actual values. Actual and budgeted values could be used in the same document, but would require the use of an additional numeric context to indicate which items are actual values and which items are budgeted values.

This line should be self-explanatory. It is the end tag of the numericContext entry.

This is the final line of the instance document. Therefore, it is the closing tag for the root element — group.

By now I am sure that you must be equating XBRL with our ‘simple’ tax laws like FBT and Service Tax. But I assure you that there is a method behind this madness. Its simplicity is in its complexity. To know more, be sure to catch the 3rd and the concluding part of the series.

Article by Samir Kapadia, a renowed Chartered accountant

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