The ACRA (Accounting and Corporate Regulatory Authority) in Singapore makes it important for certain companies to submit a financial statement in XBRL Singapore filing formats. If your business falls under this category that ACRA specified, you need to follow the rules and regulations, and then submit financial statements in the mentioned formats. To comply with Singaporean laws, you will need to know the importance of XBRL conversion and filing and how it works.
What XBRL Is
Extensible Business Reporting Language (XBRL) refers to a digital language that is designed for electronic communication of financial and business data. According to experts at BoardRoom, it ensures the data submitted is comparable, transparent, and accurate across various industries and systems. It simplifies the business reporting process and makes it more effective/efficient. It includes the following:
- Digital transformation – Converting financial reports into digital formats enables XBRL to minimize mistakes, reduce the importance of manual entries, and automate data processing.
- Standardization – XBRL helps to standardize how financial details are reported, ensuring businesses in the country use the same language. This standardization also ensures seamless data comparison and exchange, regardless of the systems or software used.
What XBRL Does
The XBRL reports ensure that all facts are tagged digitally so that computer software can recognize, and be analyzed and extracted efficiently by users everywhere. This makes it easier to add any multilingual label to every fact, allowing software users to automatically switch languages and help data across different language barriers. In addition, it incorporates validation capabilities of data, ensuring reports are of high quality. In essence, digital reporting works like barcodes. Barcode application on a tomato can mean it can be identified accurately in a matter of seconds, from factories and warehouses to supermarkets. That is the same way XBRL Singapore tags travel with facts wherever they go. This data travels through different chains of reporting, with accuracy. Moreover, it plays an important role in minimizing information asymmetric, improving capital markets’ efficiency, and increasing the transparency of corporates. When you combine digital reporting with assurance processes and management oversight, you may have confidence in your business data and get insights from it. To file returns in XBRL formats, you will need the following documents, related group charts, balance sheets, loss/profit, and an annual report.
XBRL Features
The key features of XBRL include interoperability and extensibility. An interoperability feature enables users to share financial data between different kinds of software programs. It also helps users to easily integrate financial data into different other systems. On the other hand, XBRL software enables users to create new elements or tags that they can add to the existing taxonomy; thus, making it much easier to adapt to new requirements of reporting. Apart from interoperability and extensibility, XBRL also features international standards, validation, consistency, reusability, granularity, machine-readability, compliance, and cost-effectiveness.
Who Should File XBRL
Knowing who needs to file returns annually in XBRL format is an important step. Here are examples of entities that should comply:
- Private firms with a ≥100 PIS (Public Interest Score) and compile AFS (annual financial statements) internally.
- Private companies with a ≥350 PIS and compile AFS externally.
- Entities with MOI (Memorandum of Incorporation) that prescribe filling of an audited financial statement.
- All state or public-owned firms.
Penalties for Not Filing XBRL Financial Statements
If a business organization doesn’t file financial statements before the due date, it will be fined and get additional penalties for paying some amount of money every day when the delay persists. In addition, the organization’s Chief Financial Officer and Managing Director will be accountable for another penalty, with more penalties if that happens repeatedly.
Benefits of XBRL Filing and Conversion
Businesses that strive to keep up with financial affairs will need a more agile and proactive solution, which can deliver, analyze, and produce financial data. This, in turn, mitigates risks and increases efficiency. That’s where the XBRL report comes into play. It provides a lot of information about items in financial statements, including expenditures, liabilities, or assets. In addition, XBRL improves the capability of managing debt. The powerful and rich structure of the reporting language helps to efficiently manage and handle business data using computer software programs. This supports every standard task, including using, compiling, and storing business data. When such data gets converted into the required format using a suitable solution or software program, you can use it to analyze and track the ratio between the current liabilities and assets. In turn, this helps to maintain short-term liquidity, ensure the highest ROI, adjust processes/workflows, and plan the management of debt in the long term. Other benefits include the following:
1. Cost Savings
Although implementing XBRL for the first time involves some costs, its long-term benefits include more savings in resources and time. Automation minimizes the importance of extensive manual work.
2. Regulatory Compliance
Like other regulatory bodies, ACRA in Singapore has already adopted the reporting language. This, in turn, helps to streamline regulatory requirements.
3. Data Analysis Efficiency
Analysis of automated data is possible with the reporting language, enabling more efficient and quicker processing of large volumes of financial data. With this, analysis may concentrate more on interpreting information instead of spending their time on manual analysis and collection of data.
4. Improved Transparency
XBRL reports improve transparency by simply offering a granular view of helpful financial data. This enables analysts and investors to delve more into specific components of financial statements; thus, gaining a better understanding of how a company performs in business.
5. Consistency and Accuracy
Through XBRL reporting, you can eliminate the importance of entering and re-entering data manually, minimizing the risks that are linked with traditional techniques of reporting. In addition, standardized tags help to ensure reporting consistently, making it much easier for every stakeholder to compare information across different periods and companies.
6. Define Data Models
Standardization provides different options for defining data models. Depending on how you use data as well as its structures, you may choose a suitable technique for modeling. For instance, you can easily model normal list reports as a hierarchical structure.
The bottom line is that you will require an effective software solution so that XBRL can work. Today, you will find different kinds of tools in the market. Some tools enable users to work with taxonomies, like validation, extension, and creations, whereas others specialize in reporting, analysis, and rendering. It is upon you to choose the right tools for your needs.