XBRL or eXtensible Business Reporting Language is an XML dialect developed for business reporting purposes. It is increasingly becoming the standard for communication of information between businesses on the internet.
XBRL identifies financial data by tagging it. These tags apart from identifying the financial data can also be used to define other characteristics of the financial information. For example in ‘<Asset>1000</Asset>’, ‘<Asset>’ is considered as a tag and the computer understands that the tag ‘<Asset>’ takes the value of 1000. The programmer has to further program the system to understand that Assets should have monetary value (and not fractions) and a debit balance. These further attributes are called metadata or data about data. Besides, XBRL can also be programmed to show the inter-relationships between two items. Thus the XBRL taxonomy has two components: the schema which contains definition of elements and linkbases which provide the relationship between the elements.
XBRL can be used for the following purposes
- Financial reporting for both internal and external purposes
- Financial information reporting to regulatory authorities such as income tax
- Filing of loan applications and credit risk assessments
- Assembly of information from various group companies or divisions at a centralized location.
- Exchange of information between government departments and other institutions like banks etc.
Benefits of XBRL
- Efficient handling of business data
- Standardisation of financial reporting
- In-built flexibility to support all aspects of reporting in different countries and industries
- Elimination of data re-entry improving data usability and thus saving time
- Usage of software to validate and manipulate XBRL information
- Better quality of information to support decision-making
XBRL developed by an international non-profit consortium of major companies, organizations and government agencies would become the standard way of recording, storing and transmitting business information in the future saving huge costs, time and improving processes of the organization using it.
For more information see https://www.xbrl.org
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