XBRL is an electronic language for financial reporting that is freely licensable, and based on XML framework. It acts as the standard in the financial circles for preparing, publishing in various formats, extracting and automatically exchanging financial statements of publicly-held companies and the information contained in them.
XBRL filing requirements enhance the usability of the current accounting standards through digitizing business languages without creating new accounting standards and do not need further disclosure from firms to outside audiences.
XBRL Tagging provides the basis for how it works. It refers to the process by which any financial data is tagged with the most appropriate element in an accounting taxonomy (dictionary of accounting terms) that best represents the data in addition to tags that facilitate classification/identification (such as reporting period, the unit of measurement, enterprise, reporting currency, and so forth). Because all U.S. SEC reports use the same GAAP taxonomy, numbers affiliated with equivalent elements are comparable irrespective of how they are defined by those releasing the financial statements.
Benefits of using XBRL
- Using producers of business reports, financial information and XBRL financial reporting, firms can automate data collection process. For example, when using XBRL reporting, data that has different accounting systems collected from various company sections can be quickly and cheaply assembled.
- It supports transparency and increases capital markets efficiency by helping users of business and financial information and analysts find relevant information.
- XBRL facilitates the confluence of accounting standards by the ability to align financial concepts among public taxonomies.
- It allows CPAs to achieve their fundamental function in protecting public interest by increasing access of investors to the capital markets and increasing coverage of both large and small firms by analysts through a reduction in the cost affiliated with covering a firm.
- For CPAs who have auditing, information technology and financial management roles, XBRL streamlines the preparation of financial and business reports for external and internal decision making. It significantly improves the ability of CPAs in financial management to precisely publish and direct financial information to analysts, lenders, investors, regulators, and other key stakeholders.
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