XBRL

XBRL – Way Forward – Part II (An insight on Taxonomy, Tagging & Assurance)

XBRL – The Ministry of Corporate Affairs newest Scepter

Change is the only permanent thing particularly in professional life. Gone are the days of scanned documents of financial statements in PDF (Portable Document Format) to be attached for MCA e-filing of Financial Statements for Phase I companies. Enter the world of XBRL e-filing now. It is the new age data-entry of structured information in digital format to generate XSD (XBRL Instance Document). Its more than 4 years since XBRL is in India for various regulatory requirements (For instance, in 2006, BSE/NSE launched the ICERS [Indian Corporate Electronic Reporting System], facilitating the corporates in sharing with exchange their corporate announcements through XBRL mode e-filing. Yet another instance, in 2008, RBI-XBRL based ORFS [Online Return Filing System] facilitates rationalization of number of returns to be submitted by the banks, reducing the reporting burden on banks, RBI could bring down the number of returns from 291 to 225). Better late than never, now is the time to unlearn, learn and re-learn. As a neophyte let's initiate how to go about in a step-by-step manner.

Professionals' stepladder to XBRL Graduation

Step	Level	Facts
1	Easy	ü       Check for Applicability of mandatory XBRL filing for your company with MCA
2	Easy	ü       Discover the fundamentals of XBRL
3	Easy	ü       To decide on outsourcing / In-house creation of Instant Documents
4	Difficult	ü       Appreciate Taxonomy
5	Difficult	ü       Familiarize with the process of Tagging
6	Difficult	ü       Validating the Instant Document provided by the MCA soft tool
7	Challenge	ü       Attesting the Validated Instance document by a CA/CWA/CS
8	Easy	ü       Fill the XBRL version of Form 23AC and Form 23ACA and attach the Validated and attested Instant Document & Upload

STEP 1: Applicability of Mandatory XBRL e-Filing

Generally corporates take either of the two sides whenever there is any new change. One group is for and the other against. Corporates in Phase I who are for XBRL choose their year ended as 31^st March 2011, others may choose to close their books of account on or before 30^th March 2011 (as permitted by MCA in its Circular No: 43/2011 dated 07.07.2011).

Further, there are few exempted categories of corporates viz. NBFC, Banks, Insurance and Power Sectors who are not presently covered under Phase I who need not file their financials in XBRL mode. But, there is a paradigm shift in bringing the exempted corporates under the scanner of the other regulators viz. RBI, IRDA where already the Banking and NBFC taxonomy is ready to take-off and Insurance Taxonomy is under development currently. As per MCA, the exempted categories also will be covered in the coming financial years.

Figure 1: Applicability of XBRL

Technically, all the subsidiaries (including subsidiary of a subsidiary of a listed company) of a listed company in India need to file their financial statements in XBRL this year, irrespective of their capital or turnover. Further, if holding company is exempted entity and subsidiary is satisfying the criteria of XBRL filing, the subsidiary has to comply and vice versa.

Step 2: Discover the fundamentals of XBRL

The starting point is erudition. XBRL India's website (an ICAI initiative) http://www.xbrl.org/in/ contains rich contents starting from need for XBRL, taxonomies fundamentals, info on training programs, CPE Teleconferencing details, link to XBRL international, etc., The best part of the learning is keeping yourself abreast with latest developments especially happening changes in http://www.mca.gov.in/XBRL/

XBRL is a means to an end; it is not the end itself. It's the beginning of an evolution, not a revolution, most likely. We have to understand one thing here that, we are at the embryonic phase of XBRL. We are in the process of learning the fundamentals as to how to do the data entry/ conversion from one format (PDF, Word, Excel, etc) of financial statements to another format (XBRL) of Financial Statements. Post data conversion in XBRL, automated data analysis will be done at the back office of MCA to pull-out any aberrations and the notice to companies and directors including independent directors (maybe in batch processing) shall be sent to the official e-mail-id.

As professionals, let's not look at XBRL as a mere compliance, but as a mechanism of providing good, validated and error free data.

Step 3: To decide on outsourcing / In-house creation of Instant Documents

MCA is certain in not offering any e-filing tool for creation of instant documents, only validation (check) tool is available (for verification of instant document) in the website for the users to substantiate whether such instance document created corroborates with the business & general rules published by MCA. The major question now before the corporates is whether to create the instant document in-house or outsourced. Majority of decisions are taken based on past performance and its successes. Corporates choice on outsourcing / in-house creation of ID is in a predicament not for the procedure or cost involvement, but for the absence any precedence or success stories on its substance.

Figure 2: Best Option for Instant Document Creation

XBRL instance document creation software has to be purchased from the software vendors in the market. This software is used to create XBRL instance documents that would be uploaded on the MCA portal. MCA21 system shall provide a facility for validation of the instance document and filing of the same. MCA is not recommending any specific XBRL software as of now.

Step 4: Appreciate Taxonomy

When a new accounting/auditing/costing/secretarial standard is prescribed we read that, go through it, deliberate on it, attend various CPE programs and understand it practically. The same is with taxonomy. Let's start reading this manual called taxonomy; it's the start and the end of the XBRL.

What is it? Taxonomy (a.k.a classification, nomenclature, catalogue, categorization, arrangement, and organisation) is a classification system that can be considered as an electronic dictionary for financial statement terms. We all know a language dictionary has two sides, left side is the word and the right side is the meaning of that word. In taxonomy it is a listing of all the financial elements (terms) on the left side and its relationship with financial statements are mentioned on the right side.

Figure 3: Taxonomy – The Financial Statements Dictionary

How many so far: The financial statements are normalised and standardised based on industry specific / sector specific / statutory specific standards. Therefore, taxonomies are also industry specific suiting the needs of the requisite industry or statute. Following are few of the available taxonomies.

Taxonomies	Source
MCA Taxonomy (existing Schedule VI)	http://www.mca.gov.in/XBRL/pdf/Final_taxonomy.zip
IFRS XBRL Taxonomy	www.iasb.org/XBRL/IFRS+Taxonomy
IFRS for SMEs Taxonomy	http://www.iasb.org/XBRL/IFRS+Taxonomy/IFRS+for+SMEs+Taxonomy.htm
US Taxonomy	http://xbrl.us/taxonomies/Pages/US-GAAP2009.aspx
ICAI XBRL Taxonomy	http://icai.org/post.html?post_id=3591
Power Sector Taxonomy	Under Development
Insurance Sector Taxonomy	Under Development
Bank Sector Taxonomy	Developed – Under Approval
MCA Taxonomy (Revised Schedule VI)	Proposed to be released in First Quarter of 2012
NBFC Taxonomy	Developed – Under Approval

Special feature of taxonomy is, it is dynamic. It has to be updated on need basis. The principal role of professionals involved in corporate audit and assurance is to keep themselves updated with the taxonomy released from time to time.

What are Business Rules in Taxonomy?

Figure 4: Taxonomy Business Rules

Business Rules articulates the relationships of elements viz. their calculation, their presentation, their relationships between different elements in the taxonomy. Taxonomies Business Rules are of two types Specific Business Rules and Generic Business Rules. Specific Business Rules are financial element specific viz. Paid up capital minimum for a Private Limited Company is Rs: 1 Lakh and the Maximum Paid up capital cannot exceed the Authorised Capital. Generic Business Rules are universally applicable for entire taxonomy viz. date entered in the instance document should be greater than date of incorporation (subsidiary companies date of incorporation / Date of Birth of Directors).

Few other Generic Business Rules are:

1.       Inclusion of images/ charts/ graphs etc. shall not be allowed in the instance document.

2.       In case element for number of shares is entered then corresponding elements like face value, total value, value etc. should be mandatory to enter and vice-versa.

3.       If any financial element is entered in current year then it shall be mandatory to enter corresponding previous year. This rule shall not be applicable in case of the balance sheet/ profit and loss account in respect of first financial year of the company. In case any financial element is entered for the previous year then corresponding value for current year should be entered.

4.       In elements having data type as 'Monetary'; values upto maximum 2 decimal places shall be allowed (depending on XBRL software either rounding off or truncation to two decimals)

5.       Reporting currency should be INR in case of all financial elements except for the elements in details of subsidiary.

MCA's XBRL Taxonomy

The MCA issued the final taxonomy and business rules for commercial and industrial enterprises in May 2011 (was in the public domain for few days during April 2011 for due comments). This taxonomy is based on the Indian GAAP and existing Schedule VI requirements (For revised schedule VI new taxonomy will be issued next year). It covers the entire annual financial statements and quarterly filings as per clause 41 of the SEBI listing agreement and goes beyond into certain aspects of business information's including directors' report and auditors' report and further including clauses as per CARO.

MCA's Taxonomy consists of 3076 elements (a.k.a labels) of financial terms grouped under 53 headings (a.k.a extended links). Out of 53 extended links 30 are prescribed both for presentation (disclosure) format and calculation (quantitative) format, balance 23 are exclusively for presentation. The taxonomy for financial statements (GAAP elements) is covered in three different modules covering the Balance sheet, Income Statement and Cash Flow respectively. Each module contains a schema sheet as well as other sheets that depict, among other things, the relationships of the elements with each other (the linkbases).

Figure 5: MCA's Taxonomy

Step 5: Familiarize with the process of Tagging the Taxonomy

The most significant part of tagging is selecting the right and appropriate tags for mapping with the financial statement elements. That's why this step requires professional acumen.

Tagging (synonym labelling, grouping, and mapping) is the process of relating the final audited /prepared financial statements individual elements to Classified MCA taxonomy. Alternatively, it is a process of normalising/standardising the prepared financial statements to the needs and requirements of the recipient of Financial Statements (i.e. MCA).

XBRL documents filed by the companies should include the following information reported by the companies as per the existing provisions of law: (i.e. the following documents must be tagged to create instant document)

1.       Information disclosed in the Annual Report

a.        Balance Sheet, Profit and Loss Statement, Cash Flow Statement

b.        Schedules related to Balance Sheet and Profit and Loss Statement

c.        Notes to Accounts

d.        Statement pursuant to Section 212 of the Companies Act, 1956 relating to subsidiary companies

2.       Disclosures specific to MCA requirements

a.        Auditors Report

b.        Directors Report

c.        Signatories to Balance Sheet

d.        General Information about Company and document submitted

Figure 6: Minimum (Mandatory) Tagging

Levels of tagging:

The financial information should be captured / tagged in the instance document at the following two levels:

a.       Block Text tagging – Capturing group of information as one single fact, using one single tag from the taxonomy: (Example: The complete related party disclosure can be captured by the company in the instance document using a string tag. This type of tagging is called 'block text tagging').

b.       Detailed tagging – Capturing the granular fact (numeric or textual) (For Example: The company may also want to capture individual figure values viz. Rs: '12,345.67' can be a figure value associated with Sales. This type of tagging is called 'detailed tagging').

Minimum Tagging:

Further 'Minimum tagging requirement' are the mandatory tagging prescribed by MCA for various information elements given. The company may at its discretion include information in addition to the minimum tagging requirements laid down in this section.

Minimum tagging requirement (prescribed by MCA) are given in MCA website [http://www.mca.gov.in/XBRL/pdf/tagging_mcataxo.pdf] which lists the information that need to be captured in the instance document, if reported by the company under the existing provisions of law. Further, MCA has formulated validation rules to ensure that the companies submit valid instance documents. These validation rules require that some of the elements (given in the minimum tagging requirement) be mandatorily captured.

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Step 6: Validate the Instant Document using the MCA Validation Tool

Once the instance document is prepared, either using the XBRL software or by outsourcing, it needs to be ensured by the professionals that the instance document is a valid instance document and all the information has been correctly captured from the source document into the instance document. There is a tool provided by the MCA portal for validating the generated XBRL instance document.

Validating the instance document is a pre requisite before filing the balance sheet and profit & loss account on MCA portal. We have to download the tool from the MCA website and to validate the instance document before uploading. There shall also be a facility to view and search the taxonomy. Once the tool has been downloaded, the next step is to validate the instance document. The following validations shall be performed by the tool:

·          Validating that the instance document is as per the latest and correct version of taxonomy prescribed by MCA

·          All mandatory elements have been entered

·          Other validations as per taxonomy

Perform pre-scrutiny of the validated instance document through the tool

–         Once the instance document is successfully validated from the tool, the next step is to pre-scrutinise the validated instance document with the help of the same tool.

–         For pre-scrutinizing the instance document, a working internet connection shall be required. In the Pre-scrutiny, the server side validations (i.e. validations which are to be validated from the MCA21 system) shall be performed.

–         Also, there shall be a feature provided in the tool to verify the appearance of the generated XBRL instance document using the built in XBRL Viewer.

–         It is imperative that the company should use this feature to verify the accuracy of the instance document.

STEP 7: Attesting the Validated Instance document by a CA/CWA/CS

To give an idea to readers, below given are summary version of assurance expected to be given by a Chartered Accountant to corporates. (Presently, ICAI is working on it to bring at the earliest a technical guide on Assurance of an Instance Document)

The structure of XBRL instance documents makes it natural to decompose the risk of deficiencies analysis into the data deficiency and meta-data deficiency parts. The former refers to the possible deficiencies of the facts that are marked up in the XBRL instance document, while the latter refers to the possible deficiencies of the mark-up itself, including both the deficiencies of the mark-up in the instance document and deficiencies of the XBRL taxonomies.

Possible data deficiencies in the XBRL instance document include:

·         Omissions of relevant data from the traditional format documents – Completeness

·         Insertions of data not present in the traditional format documents – Existence

·         Erroneous element values and / or attribute values (such as context, unit, etc.) - Accuracy

The content of an audit assertion is the claim that a specified set of deficiencies affecting the audit subject matter is not present. Therefore, XBRL assurance process should be driven by assertions stating that the possible deficiencies identified above are not present in the XBRL report under examination.

Based on the risks of deficiencies identified above, we present below a set of assertions that we propose for assuring that the XBRL instance document "is a true representation of the electronic document (ASCII or HTML) filed with the MCA". Figure 7 provides a schematic representation of the proposed assertions and sub-assertions. The main assertion is true if the following assertions are true:

Assertions about business facts in XBRL instance document

Completeness: the XBRL instance document has no omissions of relevant facts / data from the traditional format document.

Existence: the XBRL instance document has no insertions of facts / data not present in the traditional format document.

Accuracy: All element values and / or attribute values (such as context, unit, etc.) accurately represent the facts in the traditional format document. Thus, this assertion has two sub-assertions: Element Accuracy, and Attribute Accuracy.

Assertions about meta-data in XBRL instance document

Well-formedness: The XBRL instance document is well-formed, i.e., it complies will all XML syntax rules.

Validity: The XBRL instance document is valid, i.e., it complies will all rules of XBRL and referenced XBRL taxonomies prescribed by MCA

Proper Representation: The XBRL tagging in the instance document properly represents the facts in the traditional format document of financial statements.

Assertions about meta-data external to XBRL instance document

Proper Taxonomies: The XBRL instance document references appropriate general and industry specific XBRL taxonomies.

Proper Linkbases: The linkbases in the XBRL taxonomy extensions referenced by the XBRL instance document are appropriate.

Figure 7: A Conceptual Framework of Assurances for XBRL Instance Document

Step 8: Submitting the New Form 23AC and Form 23ACA on the MCA portal

All companies falling in phase I (except exempted companies) can file their financial statements on or before 30^th November 2011 or within 60 days of due date whichever is later. [Circular no: 57/2011 dated 28/07/2011]. The way MCA is marching ahead (devoid of a lucid roadmap) leads a trail that the due-date will be extended till March 31^st 2012. If the exam date is postponed, it does not mean that the learning/preparation should be postponed.

The two new e-forms after being filled and attached with validated instance documents are pre-scrutinised online and then digitally signed for uploading the same as per the normal e-form filing process.

Figure 8: Submitting XBRL forms to MCA Portal

Regulators ahead:

SEBI has set up a comprehensive reporting, filing and dissemination system for filing of information reports in XBRL by listed entities, registered intermediaries and other entities. The new system, called SUPER-D (SEBI Unified Platform for Electronic Reporting - Dissemination), is already in place that it is capable to manage simultaneous filing of 500 documents on normal days and have peak-period capacity to handle 15,000 simultaneous filings.

BSE/NSE-XBRL reporting, RBI–ORFS, MCA-Phase I, SEBI-SUPED-D, etc. is only a beginning. The future is calling the Chartered Accountants to understand the new hymn XBRL for propelling ahead.