Initially, XBRL filing was brought to bring uniformity in the reporting of financial statements. Different companies followed different methods of reporting their financial data, use of different terms for the same type of transactions, recording similar items under different heads. This not only made the data inconsistent but also inter- industrial comparisons became very tough.
To counter this XBRL filing was introduced in the year 2011, after which certain classes of companies have to file their financial statements as per XBRL format.
As per section 137 of the Companies Act 2013, a certain class of companies has to file a copy of financial statements with the registrar in the prescribed form and manner. The Prescribed form is - e-form AOC-4 XBRL
XBRL reporting did reap many benefits to the transmitters, preparers, and readers of financial statements. As it is paperless reporting, it has also contributed to the go green initiative world-wide.
What are the Challenges faced in XBRL Filing?
1. XBRL Filing requires Deep Knowledge
Filing the financial statement in XBRL format is not an easy task. The personnel doing so should know all the technical terms used, like what is taxonomy, what is the document structure of XBRL, what are the documents required while filing, and how to use the software.
Apart from the technical knowledge the person is also expected to have a deeper understanding of the financial statements, as to which item should be classified under which head, whether the financial statements and all the attached annexures and documents are complete in all aspects.
The person filing the XBRL should also exhibit all the information of the company relating to share capital, directors, and all the minute details required for proper presentation of the financial statements.
2. Process of Filing XBRL Report
The Filing of XBRL is a complex process and combined with inexperience can lead to discrepancies in the financial statements. Incorrect or false financial statements can not only lead to penalties and dis-reputation but can also lead to bad decision-making. All this can make a company suffer in the very long run.
XBRL process along with being complex is also very lengthy. A person before filing it has to understand all the terms and their usage. Each item in the financial statement including its heads and subheads has to be tagged in the format as per XBRL. The person who is ought to file the statement has to be first trained for the process.
These problems can be reduced to a greater extent by using Software at Webtel Electrosoft to file the XBRL, its user-friendly and easy interface makes the process easier and understandable.
3. XBRL Filing is Time Consuming
One of the major challenges faced in XBRL filing is that the process, right from starting till its filing, is undoubtedly a time-consuming process. All the elements in the balance sheet, profit and loss account, cash flow statement including directors’ report, auditor report has to be filed in XBRL. The whole tagging process consumes a lot of time. Also, once all the items have been tagged, they need to be validated using the MCA validation tool.
Also, not to ignore the manual efforts, there are several documented pages relating to the company that a person has to go through before filing for XBRL, which can again be a very exhaustive task.
4. Error Correction
One cannot submit their financial statement even if there is a single error. When the person is not highly experienced or thorough with the XBRL tagging process and the taxonomy, it is very natural for errors to occur. Once any input is wrongly fed, the changes have to be made at multiple places, which is again a very time-consuming task. Also, not once or twice but there can be many attempts before an error- free filing is done.
To overcome this problem, Webtel's XBRL Filing Software Solution can be used for easy mapping and tagging, and also it ensures accuracy and error-free filing by using its in-built validation tool.
5. Dependency on the personnel
Companies have to perform manual entries for the software to convert the data into XBRL format.
But in Web-XBRL, there is an inbuilt facility to import and export required data or information from MS-Excel files, Word Files, or XML files. However, the dependency on the person filing XBRL will persist, as most of the process is manual and not automated.
The person has to be first trained and given adequate knowledge about the process and the company; then only timely filing can be expected.
Maybe in the future with the increased use of Artificial intelligence, things will get more automated and the human dependency will be reduced to a greater extent and thereby saving a lot of time and effort.
6. Outsourcing of XBRL Filing
When a company faces so many challenges, they generally tend to outsource the mapping /tagging part and the conversion of the same into financial statements. However, this involves huge costs and also the data is prone to leakage and theft. To avoid this, companies can use easy-to-go software’s like Web-XBRL which provides 100% data security and also end to end assistance for preparing XBRL report and query solving.
With outsourcing companies will lose the synergy benefit, which can be easily attained if done in-house.
So, to avoid the compliance cost and further fines and penalties, it is advisable for the company to file their financial statement within the due time limit and to switch to the methods and options that are easier and more convenient to use.
In a nutshell, use of Webtel's XBRL Software will lead to much better and faster filing of XBRL. For further information and assistance, you can now schedule a demo for the same by clicking the button below.
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