Cost audit reports to come under the ambit of XBRL

XBRL is a global standard for easy exchange of business information between different government departments and regulators under which financials are filed in a XBRL syntax as an .xml file instead of uploading the records in .doc or pdf format.

"This is a welcome move by the MCA and demonstrates their commitment to an internationally recognized standards-based approach to the way in which corporate information is collected, analyzed and disseminated," said N. Venkatram, Partner, Deloitte Haskins and Sells.

Last year about 20,000 companies had submitted their balance sheets with the ministry in this new format.

XBRL uses an electronic glossary of business and financial terms known as taxonomy and helps in easier and more standardized financial reporting.

A company can prepare the cost records in any format but ultimately these will have to be mapped to fit in the taxonomy that has been developed by the Institute of Cost and Works Accountants of India in consultation with Ministry of Corporate Affairs.

Further, it is not likely to increase the compliance costs for companies since most of the companies covered under cost audit are already filing their financial statements in XBRL mode.

"Notably, it entails a very limited increase in costs of compliance for companies, while substantially improving efficiency, accuracy and reliability of financial information." Venkatram added.

Moreover, given that cost audits help in streamlining processes of production and sales in the most cost effective way, this move is likely to get thumbs up from companies as it will enable them manage their internal data in standardized format for optimizing management efficiency.

"Companies will now consider incorporating xbrl internally as it will lead to automation, cost savings and better quality of information and decision making, thereby realizing that xbrl is good for them and not a burden after all," said S. Swaminathan, IRIS, Business Services.

The move will also help regulators as apart from bringing in transparency, it enables faster, more accurate handling of data and improved sectoral analysis based on economic activity as efficient cost audits help in better pricing strategies among other indicators. (Economic Times)