Common Challenges in XBRL Filing and How Services Address Them
XBRL (eXtensible Business Reporting Language) is an XML-based tagging system for financial reporting. Many Singaporean businesses face problems with it. Here are a few common challenges in XBRL filing that you should know about.
Common XBRL Filing Challenges in Singapore
Lack of Understanding about Uses of Data Collected Using XBRL Format
Many business owners think of XBRL filing as an additional burden in terms of time, workload and overhead cost. However, the XBRL format brings uniformity to corporate financial reporting in Singapore. It makes it easier to collect uniformly structured data.
With XBRL format, financial data collected is easier to store, retrieve, and process. Experts analyse it to get a deeper understanding of trends and the Singaporean ecomomy. It helps in planning and resource allocation.
Regulatory Compliance
If you have recently opted for a company incorporation Singapore to start your business activities, you need to know about your compliance obligations. All Singaporean companies, limited or unlimited by shares, must file a full set of Financial Statements (FS) in XBRL format. They have to use the prescribed taxonomies, tags and elements to execute the task as per the ACRA’s norms which creates XBRL filing challenges for them.
However, they may lack technical expertise and trained human resources. They also may not know the document structure of XBRL, the documents required for filing, and how to use the XBRL software, taxonomy, data elements, and tags to populate the data and may not be able to cope with the task.
In addition, they may also fail to understand the financial statements fully and may make mistakes in classifying items and which head or subhead they go under. They also may fail to identify whether or not these statements and all the submitted annexures and documents are complete. They also may not have access to information about share capital, company directors, and small but important details that go into the proper presentation of these statements.
Failing in regulatory compliance due to lack of information, understanding, and expertise is one of the common challenges in XBRL filing for Singapore companies and may hamper their compliance.
Many companies hire XBRL filing services to do the task. These firms employ accountants and CPAs who are aware of the changes in the regulatory environment. Many a times they also have the experience of serving businesses in your industry and niche.
They assist you update your books and streamline your reporting procedures, minimise manual work and errors. This improves data accuracy which ultimately, ensures accuracy of your XBRL filing.
Error-free Data Mapping, Tagging, and Conversion
Accuracy is one of the common challenges in XBRL filing. Many companies struggle to file error-free XBRL reports, as not even a single mistake is tolerated.
Since, many of them are not fluent in the XBRL taxonomies and tagging, mistakes happen. When items in the financial statements are wrongly tagged, they have to be corrected at various places. So they have to do it multiple times. It is very manual and time-consuming.
What really gets them is the time they waste in tagging items and correcting errors. That is why many companies outsource the data mapping, tagging and conversion to XBRL experts.
Failing to File Proper XBRL Report
XBRL filing is a complex and time-consuming task. If the person executing it is inexperienced, the errors and discrepancies can creep into your financial reporting. And these can hurt your reputation and earn you penalties and fines. Inaccurate financial documents can also give false impressions and may lead to inaccurate financial decisions on your part.
XBRL report filing is a lengthy process and the executor must understand the software and the terms used. They must also know how to treat and tag items and the heads and subheads they fall under correctly. XBRL filing services have experts who understands each step of this process and can deal with it competently leaving no room for mistakes.
XBRL Filing Takes Time
Many sole business owners simply have no time for XBRL filing. You must have accounting knowlege to update books, prepare financial reports, understande taxonomies, and uses data elements and tags to do it efficiently and accurately. Mastering the process means investing time, efforts, and mental focus to keep up with the regulatory changes, software, Etc.
You also must be able to understand how to use XBRL format to translate each element in the financial statements like balance sheet, cash flow and profit and loss. You also need to treat the directors’ and auditor’s report to file an accurate XBRL report.
You have to manually tag each elements in these documents. And you need a lot of time to do it correctly. And then you have to use the right tool to validate these elements. All in all, XBRL filing is an exhaustive task better left to experts who have the knowledge and experice to do it accurately and efficiently.
Data Quality
To make sure that your XBRL filing is accurate, you need high-quality data. You can ensure it only by doing your bookkeeping and accounting accurately. It means you have to update your books regularly and digitise each of your business’ financial transactions accurately.
Classifying each transaction is a tedious, time-consuming and complex task. Appointing an accountant for it is the only way to ensure data quality. It is why many businsses outsource the task to bookkeeping services. These professional firms have the updated compliance related knowledge, expertise, and tools to execute the task with a high degree of accuracy.
These firms process the digitised financial data to prepare various financial statements and management reports for your annual filing. They also use these financial documents for your XBRL filing and can ensure its accuracy.
Outsourcing of XBRL Filing
ACRA holds company directors responsible for the their company’s compliance. It is why they have to take active interest in ensuring the accuracy and timely filing of their XBRL reports. It is why they need hire professional XBRL filing services to properly map, tag and the convert the items in financial statements into the XBRL format.
Yes, automating the validation of the report using tools helps. However, they cannot substitute the expertise that the XBRL professionals bring to the XBRL reporting process. They overcome common challenges in XBRL filing by switching to easier methods and options. They help you keep the overhead costs down, and by generating error-free XBRL reports, they enable you to avoid fines and penalties.
Contact us at info@sbsgroup.com.sg to know how or experts can help you overcome common challenges in XBRL filing for your Singapore company.
Also Read: How to do XBRL Filing in Singapore: Essential Guide
