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How does XBRL work?

What does XBRL stand for?

XBRL stands for Extensible Business Reporting Language and is designed to exchange financial information on the internet. XBRL provides consistency of financial statement classification across companies

How does XBRL convert financial statements?

Below are the basic steps of converting financial statements to XBRL formatted financial statements:

Step 1) Accountant takes companies financial statements and uses tagging to assign financial statement items to various taxonomies (classification of financial items).

Step 2) Once the tagging process is complete, the instance document is generated, which is financial data in XML format. XML formatted data is tagged financial information, but it is not readable.

Step 3) The instance document is transformed to readable financial data by the general public through XBRL software. This process transforms the instance document into a human readable format.

How XBRL works

Example of XBRL

XBRL provides consistency of financial information across companies. A company’s financial statements may use different terms for what essentially means the same thing. XBRL requires a company to tag financial line items to a consistency taxonomy.

For example, the three different companies below all have different terms for what essentially means net revenue. With XBRL, the financial data for all three companies will all be net revenue, which provides consistency.

What are the benefits of XBRL?

XBRL provides a number of benefits, which includes comparability of financial information across companies, transparency of financial information, consistent reporting for the company, reduces errors, and useful to regulators and the investor community.

What is a taxonomy in XBRL?

Taxonomy refers to have financial statement data in XBRL is structured. For example, a taxonomy could be assets on the balance sheet, and underneath assets, you would have cash, inventory, accounts receivable, etc. A taxonomy provides a consistent financial statement format, regardless of how the company has tagged financial data.

What is an instance document in XBRL?

An instance document is generated by the company when internal financial data goes through the tagging process and is tagged based on a taxonomy. An instance document is in XML format, which is very difficult for humans to understand. An instance document goes through XBRL so that the document is in a format that is readable by humans.

What is rendering in XBRL?

Rendering is the process of converting an instance document to readable financial information for humans.

How is XBRL different from HTLM?

XBRL focuses on how financial information is defines, while HTML focuses on how information appears visually.


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