How XBRL Works

As seen XBRL is a member of the family of languages based on XML, or Extensible Markup Language, which is a standard for the electronic exchange of data between businesses and on the internet. 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 has the ability to “tag” or code each element on a financial or business report with information such as description, units, currency, etc., so that it is easy to identify and understand for users of the 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. All the elements are grouped together into a collection of financial and business reporting terms called “taxonomy”. XBRL is extensible, meaning that the terms available for use can be customized so that companies using XBRL can create their own elements – called "extensions" – to describe a unique reporting situation.

The rich and powerful structure of XBRL allows very efficient handling of business data by computer software.  It supports all the standard tasks involved in compiling, storing and using business data.  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.

 

 XBRL Taxonomies, are the vocabularies or dictionaries which the language uses. These are the categorisation schemes which define the specific tags for individual items of data (such as "net profit").  National jurisdictions have different accounting regulations, so each may have its own taxonomy for financial reporting.  Many different organisations, including regulators, specific industries or even companies, may also require taxonomies to cover their own business reporting needs.  A special taxonomy has also been designed to support collation of data and internal reporting within organisations.  This is the GL taxonomy

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Ordinary users of XBRL may be largely or totally unaware of the technical infrastructure which underpins the language. However, software companies, such as accountancy software providers, need to take account of XBRL and its features when producing their products.

XBRL is not an accounting standard and will not change what is reported, only how it’s reported. The XML tagging means that the information in a business report is computer-readable and can be more easily extracted, searched and analyzed by users of that information.

XBRL is like a bar code for the financial statements.  In XBRL, financial data is tagged so that it can be easily understood by machines. Example <Sales >500</Sales>. The word Sales together with brackets <and> is known as a tag. XML distinguishes opening and closing tags by providing a </> for a closing tag. In between the tags there is a value. XBRL allows each element of a financial statement to carry certain properties with it so that when the reader of the financial statement reads an XBRL compliant financial statement he can read along with the properties. The genesis of XBRL goes back to XML with which we are familiar, because of the hyper texts and the hyper links. XBRL is also XML-based, it’s an XML (Extensible mark-up Language) dialect developed for business reporting purposes.