It is always a challenge to track the accuracy, to analyze and revise complex business data. The financial data, such as annual financial reports, statistical financial reports, etc., are full of data the totals of which must be correct at the end of the accounting period.
An electronic format for the exchange of financial statements – XBRL (eXtensible Business Reporting Language) can be of great help with this.
Below is an example of a fictitious Dutch company’s International Financial Reporting Standards (IFRS) statement instance file:
It has been in use for many years, and it began to be used even more widely in more economically developed parts of the world. The EU has introduced the mandatory use of the XBRL language for all issuers of securities listed on the EU regulated market. As of 2022, they are obliged to submit consolidated financial statements according to the prescribed schemes of the XBRL standard. Therefore, the beginning of the application refers to all reports for 2021 submitted in 2022.
XBRL has a number of advantages in all phases of business reporting (primarily financial reporting) and in the analysis of the company's financial operations. There is also an improvement in the quality of information necessary for decision-making. Controls on the filling of the main elements were gradually implemented to introduce complete data consistency control, with vertical and horizontal control.
This means that the data in one report, after checking that they exist, should have the range and quality that is expected after being aggregated according to certain conditions, and must provide the same information as other consolidated reports. Initially, before putting into effect the entry of mandatory applicants, a tolerance of 1 (one) euro was allowed. Now, for reports from 2021, the tolerance is 1 (one) cent.
Advantages of using XBRL
• Data transparency
• Expense reduction
• Ease of analyzing, transforming and comparing data
• Revision of equality
• Vertical and horizontal control
A large amount of XBRL data can be easily transformed into other formats, such as Excel or SQL. This enables simpler and faster data analysis. The conversion to a database is especially useful, where later queries can be made and virtually all possible data can be extracted. Also, investors have a tool they use to analyze and compare financial statements of companies.
In this example, I will use publicly available data on the Lazio region, Italy, which has been reporting in XBRL format for almost 10 years. The data is from 2020, submitted in 2021. All the data shown here is completely public, which means that every Italian citizen with the appropriate knowledge can find it published on the website of their Ministry of Finance.
First, download the prescribed scheme from the institution:
As shown in the image, the basic scheme has only 3kB and literally about 10 lines,
and further development has schemes of 13MB each, which is again an enviable amount of data for a text file.
In the first image, we can also see two directories (cal and pre) which, in our example, have 46 and 54 additional XML schemas, respectively. The directory cal (calculation) contains calculation controls, and the directory pre (prerequisites) contains formal controls of individual syllables that must be satisfied in the final XML (XBRL) document. The final document for submission is the most common XML document, i.e., a structured document that meets the prescribed conditions from the given schemas. These XML documents are either single values with associated attributes, or whole syllables with more or less repeating tags (tuples).
Apart from extremely short xmls, we will not use just any text editor, but one of the tools that will make our work easier. Of course, there are many tools to select from, but in this example the free tool Arelle was used. The final documents are text files of about 5MB, with about ten thousand XML tags, which Arelle loads into memory, so an average computer will take about 10 seconds to do more difficult validation operations.
Presentation of the simplicity of working with Arelle
And the same code via the Arelle tool:
We can see that through the tool there are individual functional categories in the corresponding tab, there are data for one or more periods (each period in its own column) and localized data (each reader has data in their own language if the developer of the structure made the effort to write it).
Also, there are labels printed with functional (in this example economic) categories or with real names in the program/database (very useful during development):
Through the corresponding point in the menu, we can also validate the XML file, and if it encounters an error in the same IDE, we can also receive a corresponding error/inconsistency message:
Even if the validation is successful, that does not necessarily mean that our document will be received because the body that receives the document can also have internal validation through external programs. In this case, when refusing to accept the document, you usually get a validation error message.
From all the above-mentioned advantages of XBRL, we can conclude that it is an advanced technology, both for financial and other business reports. The data analyzed this way are the most accurate thanks to the horizontal and vertical control. The use of XBRL will become more common in the future due to its simplicity and transparency.