The objective of financial reporting is to provide quality information to the users. Comparability a key...

The objective of financial reporting is to provide quality information to the users. Comparability a key qualitative characteristic of financial reporting has always been an issue. Do you think XBRL is an answer to this issue?

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Expert Solution

Financial reports are prepared by every organization at the end of a financial year. This is useful for the organization in many ways. It tells the financial position of the firm as well as it is used for comparing previous years results of the company with the current result. Also it us used to compare the estimated results with the actual results. The difference in figures shows the growth in the organization.

Hence it is very important to have these reports very proper and accurate so as to compare and get on to conclusions and accordingly steps would be taken for improvements.

So it is always a challenge for an organization to make correct financial reports.

If we talk about XBRL, it stands for eXtensible Business Reporting Language. Definitely it has improved the issue of compatibility in financial reporting. It is a technology which is search facilitating which has helped in reducing the cost of searching information and has also contributed in increasing the information processing efficiency.

We can say that the quality of financial reporting has been improving by this XBRL as when we give a look to the balance sheet and the cash flow statements we can see the convergence they provide in structure of the financial statements which are significant, which proves that compatibility has definitely improved after implementing XBRL.

XBRL has tags which are used to identify each and every information in a unique way and every information can be processed by different softwares as per their requirements.

Therefore it can be said that informations obtained are very accurate and hence favourable for comparing purposes.

ekkarill92 answered 1 year ago

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