Why should you file in XBRL format?
Why is XBRL the format in which MCA needs financial statements? Learn more about advantages of XBRL for the regulator, filers and consumers.
Why should you file financial statements in XBRL format with MCA?
India is one of the early movers in Asia Pacific region to adopt eXtensible Business Reporting Language (XBRL) for qualifying reporting entities to submit their annual financial statements (AFS) to the Registrar of Companies (ROC)
Historically ROC accepted the latest approved annual financial statements in PDF format via email or uploaded to their website and manually analyzed them. This process was extremely slow and prone to errors.
On June 7, 2011 the Ministry of Corporate Affairs (MCA) mandated the filing of the annual financial statements in XBRL format for all the financial statements prepared for the period starting from 31st March 2011 (i.e. from the financial year 2010-11).
To facilitate acceptance of XBRL report MCA has set up the MCA21 system that will allow data automatically entered into systems without the need to re-key, re-format or introduce other "translation" efforts.
The ease of doing business and particularly reducing the regulatory burden for businesses received a boost with the XBRL reporting. Essentially, XBRL will lead to a dramatic reduction in costs by automating routine tasks; the quick and automatic identification of problems with filings; the analysis and comparing of data much more quickly, efficiently and reliably; and the monitoring of data and activities, allowing for judgements to be reached with far greater speed and confidence.
Advantages for the regulator
XBRL filing allows for greater transparency as data can be sliced and diced almost immediately for analysis with software tools. This affords a far wider scope and complexity for business analytics than manual comparisons of financial statements.
The new reporting system will allow the MCA to determine industry trends and gain a high-level understanding of business in India. By identifying various trends, MCA will be able to pinpoint issues relating to the financial soundness of individual operations. MCA will also be able to compare companies with companies and industries with industries over different periods.
Advantages for the user and consumer
Companies can also tap on XBRL enabled data to enhance their business decision making process. With more companies filing in full XBRL, analysis of business data can be more efficiently generated and made available to the business community. Enhancing the availability and accessibility of such information also promotes greater transparency in the marketplace which is crucial for sustainable business growth.