The XBRL mandate by the Ministry of Corporate Affairs (MCA) in India covers a very large number of companies. XBRL as a data standard is useful only when it is error-free (or more realistically, with very low error-rates). There is a legal liability attached to the XBRL mandate for the companies and its officers in default for submission of inaccurate or false data in XBRL financial statements. This serves to highlight the importance of good quality XBRL.
The following are some of the common errors that show up very often while converting financial statements into XBRL format for MCA filing:
Mapping errors: The mapping between an item on the financial statement with an appropriate taxonomy element is usually very evident. However, sometimes this can become difficult due to certain unique items on the company’s statements or due to a judgement call.
Completeness errors: Sometimes, preparers do not consider the fact that a complete XBRL filing needs to be complete in terms of notes and additional disclosures also.
Calculation errors: These are usually the easiest to spot because they are calculation errors. Any good software for XBRL conversion will ensure that these errors do not happen.
Rendering errors: These errors, such as the date format being non-standard, arise out of a lack of rigour and are very easily avoided when a good software or service vendor is used.
Absence errors: The MCA outlines certain fields to be mandatory. Not tagging these concepts will trigger errors.
Financial information entered for current year but not for previous year: These errors, again, are caused by a lack of care and rigour in the preparation process. For a majority of cases, a company’s line items do not change very often and tagging for various years is often a matter of entering figures.
Validation errors: These are errors that MCAs validation tool throws up and need to be dealt with on a case-to-case basis. They are usually just plain business rules and calculation checks carried out by MCA21. These are also the kind of errors that can take considerable amounts of time to rectify without an XBRL expert.
The thread that connects all these types of errors is that they can be avoided with a combination of expertise and care. Good quality XBRL makes it attractive for investors to use and other regulators to start using it and that, in turn, will lead to cost savings in the long run. Quality is worth investing in.
How Pratham Consultants can help you?
Pratham Consultants is a specialised corporate advisory firm promoted by young and dynamic professionals in the preparation of financial statements in XBRL formats for filing with regulators. Pratham Consultants provides world-class services with its team of certified accountants experienced.
To find out more about Pratham Consultants, visit https://prathamconsult.com or send an email to firstname.lastname@example.org / email@example.com or call (+91) 8866177144 / 8866277244.