What’s Missing in Your Transactional Reporting?

January 7, 2016by Team IRIS CARBON0

Transparency in financial reporting is almost always equated with providing more granular data. And while the drive for transparency in financial reporting may seem like an unnecessary overhead at times, the movie might be a blessing in disguise.

The shift to reporting more granular information has to be a steady process to ensure an accurate and complete representation of an entity’s financial health.

That’s where XBRL GL finds its place – In providing the next level of granularity in business reporting.

XBRL Global Ledger (GL), introduced a decade ago, represents information found in a chart of accounts, journal entries, and/or historical transactions.

An accounting system is based on a storehouse of the day-to-day transactions of an entity. Each transaction, the most basic unit of an accounting system, is then grouped based on similarities such as expense, income, etc., and consolidated in ledgers. The information in the ledgers is then culled and consolidated and finally makes its way into documents for financial reporting. However, reports thus prepared at a consolidated level lose their connections to the actual ledger accounts and therefore the granularity within. XBRL GL is the standard that allows the granularity of the information to be retained and controlled till the last level of financial reporting.

Governments all around the world, such as Turkey, Indonesia, the USA, and Brazil are increasingly adopting XBRL GL, to ensure efficient and transparent service quality. While the current focus of the implementation is the collection of the data, the real idea is to assess the businesses at the transactional level.

Electronic ledgers in XBRL GL

An electronic ledger (e-ledger) consists of a set of electronic entries of all the granular information stored in a company’s enterprise resource planning (ERP)/ accounting and/or operations-related applications. XBRL GL specifies rules for these entries to be recorded in a manner compliant with applicable accounting laws and policies. Companies maintain their monthly/weekly or fortnightly journals and ledger data in XBRL GL format (which ensures cleaner data from scratch) and file either the data or a summary document to the tax regulator. E-ledgers find use not only in external reporting but also in setting up internal control mechanisms. They also help in decision-making by standardizing data at the most granular level.

Data might be structured, but is it accurate?

XBRL GL implementations across the world have ensured standardization of the ledger data for companies covered under the mandate through a global data standard like XBRL. However, this still does not address another fundamental challenge: ensuring the integrity of data recorded in accounting systems.

Complex accounting and tax laws, adjustment entries, manual bookkeeping, human errors, and accounting application limitations are often the cause of erroneous and poor-quality data getting recorded in e-ledgers. Regulators who are only concerned about collecting the data today might soon shift focus to analyzing the data, looking for any inconsistencies along the way. With an electronic bookkeeping mechanism in place, it becomes imperative for companies to ensure that the appropriate governance and compliance structures are put in place before submitting data to the tax authorities.

IRIS’ e-Audit Application

IRIS has built an e-audit application that allows companies to audit the ledger and journal record files for compliance before submission. The application not only validates the XBRL files and business rules established by the regulator but also provides for performing internal custom business rule checks. The custom rule engine comes with a business rule library of over 50 rules which companies can choose from, based on their internal audit rules and regulations. The application focuses on basic rules such as checking period opening and closing dates, as well as high-end consistency and continuity checks in various parts of the document. The application has been designed in a modular manner allowing companies to run audit checks on specific parts of the document and/or for specific rules. The validated output is displayed as a report with transaction details and direct links to view the ledger. User and role-based access provide the flexibility and control required by the business. The application is available as both on-premise and cloud-based models.

How e-Audit Can Benefit You for Internal and External Reporting

The solution’s ability to control and audit the accounting records in a company has found favor with the CFO’s office in both large and small companies. The ability to set up custom rules simplifies internal audits since reliable data is available in the decision-making framework from the very beginning. This makes it easier to take strategic decisions that are more sustainable. At the same time, external reporting also becomes easier because the data is clean fundamentally.


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