XBRL in India – Unchartered territories!
XBRL provides a language in which reporting terms can be authoritatively defined, facilitates the creation of reports against those authoritative terms, enables definition and execution of validation rules to ensure data quality, offers highly stylised customised presentation as well as a standard tabular representation of reports. The XBRL reports make automatic consumption possible without the need to rekey the data.
More than 180 projects have adopted XBRL across more than 60 countries. Securities regulators, stock exchanges, business registrars, central banks top the XBRL implementation list. XBRL adoption in India ticks these popular categories, with the Reserve Bank of India starting the first XBRL implementation in 2008 for Basel II reporting. In 2011-12 Ministry of Corporate Affairs had mandated public companies above a threshold to submit their annual report in XBRL and designated companies to submit their cost audit report in XBRL. BSE had started to collect financial results and other corporate governance data in XBRL since 2015. In 2018 following the advice from the Securities and Exchange Board in India (SEBI), the nationwide exchanges BSE, NSE and MSE shifted towards a unified XBRL taxonomy to enable easier filings and the consumption and comparison of resulting digital disclosures.
“In 2018 following the advice from the Securities and Exchange Board in India (SEBI), the nationwide exchanges BSE, NSE and MSE shifted towards a unified XBRL taxonomy to enable easier filings and the consumption and comparison of resulting digital disclosures.”
There are avenues to explore where India can implement XBRL beyond the usual suspects and leverage the benefits. A few of those areas are discussed in this article to steer ideas for potential XBRL implementations.
Sustainability Reporting
The recently introduced Business Responsibility and Sustainability Report (BRSR) applicable to the top 1000 listed companies from the financial year 2022-23 should be the next logical stop for digital reporting in India. The much in focus (rightly so) efforts to mandate non-financial reporting should leapfrog to the digital mode with XBRL. The benefits are pretty straight forward, enabling companies to produce a high-quality digital sustainability report.
Investors, analyst, data aggregators, policymakers are all looking for sustainability data. It becomes imperative to make the data available in a usable format. The machine-readable XBRL reports should solve this problem facilitating automatic consumption and analysis without the need to rekey and reimagine data from the PDF reports.
“Here it is worth noting the recent proposal of the European Commission to adopt the Corporate Sustainability Reporting Directive (CSRD) to improve the flow of sustainability information in the corporate world. The directive requires companies to use Inline XBRL (XBRL variant), making sustainability reporting more consistent so that stakeholders can use comparable and reliable sustainability information.”
Here it is worth noting the recent proposal of the European Commission to adopt the Corporate Sustainability Reporting Directive (CSRD) to improve the flow of sustainability information in the corporate world. The directive requires companies to use Inline XBRL (XBRL variant), making sustainability reporting more consistent so that stakeholders can use comparable and reliable sustainability information. It is also worth underlining the focus on the need to eventually shift towards relevant international disclosure standards.
Municipality Reporting
Local and national government leaders and officials, researchers, policymakers and wider stakeholders all rely on municipality data for a range of information. Open Government Data Platform does make municipality data accessible; however, the question remains how effectively the data can be used for aggregate and drill-down analysis. For example, the same underlying concept “Residential Property Tax Collection” is referred as “_2017_18_property_tax_collection_in_crores_residential” in one municipality and in other as “residential_collection_in_cr“. Another notable difference is that elements are created for each reporting period in the first case, and in the second case, a separate file for each period is available with the period mentioned in the title. A significant normalisation effort is required before one can start using the data meaningfully.
Why XBRL Solves Municipal Reporting Chaos:
A common dictionary definition using XBRL can be a good starting point for municipal reporting. XBRL provides a framework to define the reporting requirements unambiguously; it also provides a standard approach to report meta-data such as period, accuracy and currency for each data point. The data definition variation in the above example is because of the absence of any standard that XBRL can easily bridge. XBRL also enables defining machine-executable rules to ensure the data collected meets predefined quality criteria.
Efforts are underway in the US where the Comprehensive Annual Financial Reporting (CAFR) and other reporting requirements are being developed as an XBRL taxonomy demonstrating how comparable data standards could benefit all of those involved in reporting, from local governments to bond issuers, analysts and investors.
Here in India, while the Municipal Bond market is still relatively new and relatively immature, the use of standardised digital reporting at a state and municipal level offers a unique opportunity to underpin the enhancement of needed infrastructure across our communities.
Insurance Supervision
The Insurance Regulatory and Development Authority of India (IRDAI) plans to introduce a new risk-based solvency system and strengthen risk-management rules. This should be a good juncture for them to consider supervisory data collection using XBRL. A number of XBRL specifications are especially suited for supervisory data collection, including multi-dimensional data model, definition of complex validation rules, and standard tabular representation of data. It is also now possible to represent XBRL data as CSV, making it easy to collect granular, high volume, large datasets. The collection in a digital format backed up by a detailed taxonomy would accelerate data analysis for IRDAI.
“Many European insurance and pension supervisors collect Solvency II data from their regulated entities in XBRL for submission to the European Insurance and Occupational Pensions Authority (EIOPA).”
Reporting requirements and rules shared with the Insurance companies in a machine-readable format would facilitate automatic, high-quality creation of required reports. Similar implementation? Many European insurance and pension supervisors collect Solvency II data from their regulated entities in XBRL for submission to the European Insurance and Occupational Pensions Authority (EIOPA).
Utilities and other reporting
Reporting in XBRL is not restricted to financial reporting as commonly understood. It can be extended to collect operational information related to all kinds of business information. For example, utilities and allied agencies such as power generation distribution, sewage treatment plants, water boards, regional transport office, pollution control boards. A reason to consider XBRL here is to enable smooth data collection across the network of regional offices. The frequency of reporting and the huge number of distributed entities makes it necessary to have a standard for digital data exchange.
Data publication is a vital function for these agencies as it supports a considerable socioeconomics and environmental research. With XBRL, the aggregation and publishing of data collected becomes easier as the reports are digital and consistent. Moreover, the well-define data dictionary would be helpful for stakeholders to precisely understand the definition of published data. A similar effort to note is that Colombia’s Superintendency of Residential Public Services has recently launched a project to collect XBRL data from entities and companies that provide domiciliary public services of the aqueduct, sewerage, cleaning, energy and gas.
Re-purposing existing filings
Financial statements are an essential document sought by credit rating agencies, banks and industry-specific regulators. Currently, these are submitted as PDFs or in other proprietary templates/formats.
“One of the perceived benefits of XBRL is enabling the reuse of the report created. It will be prudent to ask the companies to resubmit XBRL reports filed with MCA.”
One of the perceived benefits of XBRL is enabling the reuse of the report created. It will be prudent to ask the companies to resubmit XBRL reports filed with MCA (the optimum would be to obtain it from the regulator – that is a conversation for another day). It will immensely benefit from accepting already digitally structured report as the collection agency can immediately use the report in their monitoring/analysis model without requiring rekeying of information or other transformation. From the companies’ perspective, it leads to ease of doing businesses as they need not spend their resources to create financial statements for each agency.
One such example of report reuse is BSE permitting companies to file their XBRL Annual Report submitted to the MCA as part of their Annual Returns. An interesting project to note here is SBR Nexus in the Netherlands, aiming at the cross-sectoral exchange of (financial) company data between entrepreneurs, companies, and governments. In the Netherlands, and now in Germany, the reuse of digital private company annual reports to make credit allocation decisions, and to support the efficient allocation of capital within banks, is becoming a key driver for SME company loans.
“In the Netherlands, and now in Germany, the reuse of digital private company annual reports to make credit allocation decisions, and to support the efficient allocation of capital within banks, is becoming a key driver for SME company loans.”
The XBRL Toolbox & The Road Ahead
It goes unsaid that these are sample use cases and not the only areas in which XBRL can be implemented. XBRL is built typically to solve the problem associated with collecting business/performance data across entities for monitoring, analysis, or publications. XBRL is a “toolbox” of specifications offering a wide range of features to support digital data supply chain requirements. It is backed up by a global network of software and services – including a range of leading players from right here in India -- that means that it is easy and increasingly cheap to ensure that disclosures of all kinds can go digital with accurate, timely, comparable XBRL in a surprisingly short time, helping analysis of all kinds.
“XBRL is a ‘toolbox’ of specifications offering a wide range of features to support digital data supply chain requirements.”
In the era of data transparency, data must be collected and shared in the most useful way, which XBRL aims to achieve. The way forward should be adopting a digital standard without requiring reinventing of the wheel.
“In the era of data transparency, data must be collected and shared in the most useful way, which XBRL aims to achieve. The way forward should be adopting a digital standard without requiring reinventing of the wheel.”