As the lack of transparency in business reporting emerged as one of the biggest root causes for market failure leading to the global financial meltdown, measures to improve upon this crucial element caught the fancy of regulators, investors and businesses alike. Xbrl (extensible business reporting language), the ‘harbinger of transparency’ in financial reporting, is just what the doctor ordered. The ministry of rporate affairs has mandated that all mpanies listed in India and their subsidiaries, including overseas subsidiaries as well as those with a turnover of R100 crore or over, file their financial statements in the xbrl format for the year ending March 31, 2011. Although the deadline to implement xbrl, September 30, 2011, draws closer, its mechanism, uses and implementation remain a bit of a mystery. First off, since xbrl is not an acunting standard but a language for the electronic mmunication of financial data, this mandate will not change any requirements pertaining to the preparation of mpanies’ balance sheets and P&Ls. It will only reflect a change in how the data is transmitted to regulators. Using xbrl, reported figures will be anised by giving each item of data a mputer-readable identity tag, which, in turn, will improve the auracy and reliability of data by eliminating manual re-entry and mparison.

But what does tagging data have to do with increasing transparency? Instituting a single data standard for firms across the board leads to a rction in the time and effort required to identify anomalies in reported data, an effective tool in making them easier to catch. A study by Myiris vering mpanies in the manufacturing and services sectors found that the financial results of over 209 listed Indian mpanies have discrepancies. For example, in MTNL’s nsolidated financials, the sub-total for sundry debtors as at March 31, 2009, does not tally with the sum of the line items—there is a discrepancy of R2,927.5 million. This is because MTNL’s standalone financial report has an additional line item ‘Inme Arued from Services’, which appears to have been bed with the line items in the nsolidated debtors schle for FY2008 but not for FY2009, explaining the sub-total error. Such errors, indicative of an attention deficit rather than fraud, can easily be caught using xbrl. That said, xbrl’s mandate doesn’t extend to fraudulent reporting. It does, however, rce the risk of fraud by making it harder to pull off. Via its tagging mechanism, another potential use of xbrl uld be in anti-money laundering reporting, extendable to track terror financing. Since suessful implementations of xbrl have been witnessed in the US, Japan and Australia among other untries, implementing this standard makes great sense.