How to do XBRL tagging for financial reports in 2024

Prophix Imageprophix Apr 29, 2024, 8:00:00 AM

Diving into the world of financial reporting can be daunting, but XBRL tagging has transformed it into a streamlined and efficient process.

Understanding how to accurately tag your line items in your financial reports is crucial. This blog will guide you through everything, from the basics of XBRL tagging, to selecting the best software for your needs.

Keep reading to master XBRL tagging and take your financial reports to the next level.

O que é marcação XBRL?

XBRL tagging, also referred to eXtensible Business Reporting Language, is a global standard for tagging business information in reports with a standard set of taxonomy, to aid in the distribution and analysis of financial statements. XBRL tags are read by finance software for the purpose of regulatory reporting, financial analysis, and decision-making.

A taxonomy is like a dictionary of tags. For example, to create a report that is in accordance with US GAAP, you would use the US-GAAP taxonomy.

What does XBRL tagging accomplish?

XBRL tagging, and the standardized use of taxonomies, ensures that business information is consistent and comparable across financial statements for various organizations in different jurisdictions. XBRL tagging allows auditors, regulators, and internal teams to easily view, analyze, and understand data variances and trends.

Who requires XBRL tagging?

XBRL tagging is often part of the regulatory reporting process and is required by several government agencies, depending on where your company is located and the industry you operate in. For example, companies submitting financial statements to the Securities Exchange Commission (SEC) in the United States are required to use XBRL tagging. In contrast, companies submitting reports to Canadian Securities Administrators (CSA) are not required to use XBRL tagging but may do so voluntarily.

What kinds of financial reports should I be tagging with XBRL?

The most common type of financial report tagged with XBRL is those submitted to regulators, including balance sheets, cash flow and profit and loss (income) statements.

To determine whether you should tag your financial reports with XBRL, you must understand where you’re required to submit your reports (like the SEC in the United States or the CSA in Canada), the format of these reports, and the information you’re required to include. Once you understand these requirements, you can begin adding XBRL tags to your business information. It’s worth noting that regulatory requirements extend beyond North America, and there are specific requirements for the UK, Europe, and Asia.

XBRL tagging requirements

As we discussed above, XBRL tagging requirements depend on where your company is located, and the requirements of your respective jurisdiction.

XBRL tagging requirements in Canada

Canadian securities laws (governed by the CSA) do not require companies to submit XBRL-tagged reports, however they may do so voluntarily.

XBRL tagging requirements in the US

In 2018, the SEC began a phased approach to requiring companies to submit financial statements and fund risk/return summary information with Inline XBRL (iXBRL) tagging. This applies to operating companies and mutual funds, however, the requirements for each differ.

XBRL tagging requirements in the UK

Legislation was introduced in 2010 requiring companies to submit Company Tax Returns to His Majesty's Revenue and Customs (HMRC) with iXBRL tags. While the initial mandate focused on tax filings to HMRC, there have been discussions and moves towards expanding the use of iXBRL for other regulatory filings, including submissions to Companies House. This is required for all companies in the UK, and services are available online to help businesses translate their reports into the appropriate format.

XBRL tagging requirements in the EU

In 2020, the European Securities and Markets Authority (ESMA) introduced an electronic reporting format called the European Single Electronic Format (ESEF), which requires companies listed on regulated markets to submit consolidated financial statements tagged with Inline XBRL (iXBRL). This tagging requirement initially focuses on the primary financial statements and will extend to the notes to the financial statements in the coming years. ESEF is closely aligned with the International Financial Reporting Standards (IFRS) as adopted by the EU, and the taxonomy used for tagging is updated regularly to reflect changes in these standards.

How to do XBRL tagging for financial reports in 2024

Now that you’re familiar with what XBRL tagging is, and the requirements for each jurisdiction, let’s discuss how to do XBRL tagging for financial reports in 2024.

Do it yourself: Use dedicated commercial software for XBRL tagging

In this blog, we’ve outlined some of the most popular software choices for XBRL tagging, including Prophix One, a Financial Performance Platform.

Dedicated commercial software for XBRL tagging, designed with finance needs in mind, can significantly shorten the process, eliminate the risk of errors, and make it easier for auditors and regulators to review your reports. This approach not only ensures precision but also empowers your team with direct control over the tagging process, offering a chance to deeply understand your financial data.

Outsource your XBRL tagging needs

Outsourcing your XBRL tagging is also a possibility, but it comes with its own set of risks. First, it can be expensive to hire external consultants and get them up to date on your financial data. Second, without manually reviewing all the data yourself, which eliminates the benefit of hiring an external consultant, there’s no way to validate the tagging and the accuracy of your financial reports.

The key in choosing your approach is weighing the balance between control, cost, and confidence in the accuracy of your financial reports. For many, the benefits of using specialized finance software—such as built-in automation and data validation—outweigh the advantages of outsourcing, ensuring your financial statements are tagged accurately and efficiently with XBRL.

XBRL tagging example

XBRL tagging enables financial accounts and figures to be machine-readable in a standardized way. Each tag is a unique label that provides information about the timing of when an accounting event occurred, and more about what it materially represents.

For example, specific tags are used to represent sales revenue. A tag could indicate that the sales revenue number is specific to a month or perhaps an aggregate of the year-to-date (YTD) months in a fiscal year. The tag also informs you about the taxonomy it belongs to.

Some examples of taxonomies include accounting standards, such as US Generally Accepted Accounting Principles (U.S. GAAP), or disclosure requirements, such as for SEC Filings (SRT). However, the list of available taxonomies is exhaustive. Therefore, with a set of specific tags, you can create an income statement that follows IFRS and represents YTD for 2024.

Other types of reports that can be created using XBRL tagging include cash flow statements or balance sheets. Using a cash flow statement as an example, with a set of specific XBRL tags, you can create sections for cash flows from operating activities, investing activities, or financing activities. Tags for operating activities can include “CashPaidToSuppliersAndEmployees” and “InterestPaid”, while tags for investing activities can include “ProceedsFromSaleOfEquipment” and “DividendsReceived”.

Advantages of XBRL tagging

As more countries introduce requirements for XBRL tagging, the more beneficial it is. Let’s look at some of the advantages of using XBRL tagging for your financial statements.

Reduces the chance for errors in financial reporting

Since each data point must be individually tagged with XBRL, which standardizes the presentation of financial data, this reduces the chance of errors in financial reporting. In addition, since XBRL-tagged reports are often reviewed by auditors, regulators, and internal teams, you’re more likely to identify any discrepancies after multiple people have reviewed, improving the reliability and accuracy of your financial reports.

Improved transparency

When companies in different industries and jurisdictions all tag their reports with XBRL, it improves transparency by standardizing the presentation of financial statements. This ensures that anyone with finance software can easily view, analyze, and understand financial statements. The standardized taxonomy also guarantees companies are presenting their data in the same way, and that industry or regional differences, are not affecting how data is interpreted.

Faster financial reporting and compliance

By standardizing the presentation of financial statements and how data is tagged, companies can expedite their financial reporting and compliance, making it easier to distribute the necessary reports to stakeholders, auditors, and regulators. And because XBRL tags require finance software to be readable, the adoption of this type of solution can offer the ancillary benefit of automated workflows and data validation.

Advantages of XBRL tagging

Challenges of XBRL tagging

Much like any finance process, there are some challenges associated with XBRL tagging. Let’s discuss what you need to be aware of when preparing your financial statements.

Establishing data integrity might require a lot of legwork

For XBRL tagging to function correctly, the data provided by companies must be accurate and auditable. However, the process of establishing data integrity will require a lot of manual work from your finance teams and can be a cumbersome process on top of other strategic priorities. The benefit of finance software is that it can speed up this process by automating data entry and validation, alleviating some of these challenges by streamlining the initial stages of XBRL tagging.

High learning curve and can be expensive if you don't already have in-house knowledge

Since XBRL tagging has its own taxonomy, and different requirements depending on your jurisdiction, it can be difficult to learn everything needed to submit compliant reports. And if your finance team is unfamiliar with compliance more generally, it can be expensive to hire external consultants to support you. This is another area where finance software can be beneficial – the best vendors offer extensive customer onboarding and support to help you create XBRL-tagged reports, without needing to hire external experts.

Technical limitations, including compatibility with existing software

XBRL tagging is only valuable if you have the software to create both human- and machine-readable reports. For many organizations, Excel’s limitations hinder the creation of compliant reports, and can make validating and distributing insights challenging. With dedicated finance software for XBRL tagging, you can overcome technical limitations and create compliant reports that can be read in multiple different formats.

Best XBRL tagging software

Now that we’ve discussed the advantages and challenges of XBRL tagging, let’s look at some of the best XBRL software on the market.

What does XBRL tagging software accomplish?

XBRL tagging software helps facilitate the process of assigning an XBRL tag to each data point included in financial statements, like balance sheets, cash flow and income statements. XBRL tagging software helps finance teams accomplish more in less time, by automating data entry, validation, and tagging.

What to look for in XBRL tagging software

When searching for XBRL tagging software for your business, you should look for a solution that can help you:

  • Meet regulatory reporting requirements in your jurisdiction
  • Simplify and streamline report creation and distribution
  • Improve collaboration between internal and external stakeholders
  • Support multiple languages and currencies
  • Validate your data and establish an audit trail

You should also prioritize choosing a vendor that provides resources and support for onboarding and learning more about XBRL tagging.

1. Prophix One

Prophix One logo

Prophix One, a Financial Performance Platform, simplifies and transforms processes for the Office of the CFO, including account reconciliation, disclosure management, financial planning & analysis, intercompany management, and financial consolidation.

Best for: The Office of the CFO in mid-sized organizations.

Features: Prophix One has several applications, including: Account Reconciliation, Intercompany Management, Integrated Business Planning, Financial Consolidation, and Financial Planning & Analysis. The platform is also equipped with capabilities such as Anomaly Detection, Artificial Intelligence, Data Integration, Workflow, and security.

Prós:

  • Offers cloud-based environment with version control and in-app commenting for seamless collaboration.
  • Centralized data with audit trail and integrated validator for error-free filings.
  • 24/7 expert team for guidance, ensuring compliance and consistency in reporting.

Contras:

  • Can be challenging to narrow down which area of finance you’d like to focus on in your initial implementation

Integrations: With Prophix One Data Integration, it’s easy to integrate our platform with any of your data sources.

Pricing: To learn more about Financial Performance Platform pricing, visit Prophix’s pricing page.

2. Workiva

Workiva

Workiva is a vendor of XBRL and Inline XBRL software and services.

Best for: Accounting, finance, and legal teams in large, multinational corporations with extensive compliance and disclosure requirements.

Features:

  • Integrates financial statements, sustainability reporting, audit processes, and risk assessment in one platform.
  • Incorporates preset regulatory standards for effortless financial disclosures.
  • Automatically synchronizes data across various reports, ensuring accuracy and consistency.
  • Employs machine learning for efficient and precise XBRL tagging.

Prós:

  • Intuitive disclosures
  • User-friendly design
  • Robust features for managing document versions.

Contras:

  • Onboarding your team to proficiently navigate the platform may require some time.
  • Performance dips have been observed by some during peak filing periods.
  • Handling supplementary documents can occasionally feel cumbersome.

Integrations: Workiva integrates with Box, Drive, OneDrive, HubSpot, NetSuite, ServiceNow, Aurora, MySQL, and more.

Pricing: Workiva does not have pricing information available online.

Workiva vs. Prophix One
While Workiva is a platform dedicated to disclosure and compliance, whether that’s for financial disclosures or ESG filings, Prophix can manage the same processes while allowing you to optimize and streamline every other essential process the Office of the CFO is responsible for. That makes Prophix a more reliable platform in more situations.

3. DFIN

Dfin lgog

SEC filing and ESG reporting software from the leading SEC filing agent. Faster, smarter, and more secure, ActiveDisclosure enables real-time collaboration and accurate XBRL SEC reporting.

Best for: Public and private companies, mutual funds, and other regulated investment firms.

Características:

  • Centralize your ESG and simplify your financial reporting
  • Accelerate your proxy report with design on demand & automated workflows
  • Digitally file Section 16 & Form 144 forms with efficiency and accuracy

Prós:

  • Creates legally compliant disclosure reports
  • Facilitates real-time collaboration

Contras:

  • Focused on SEC filings, which applies only to the United States
  • Initial setup can be difficult

Integrations: DFIN does not list their integrations on their website.

Pricing: There is no pricing information available online for DFIN.

DFIN vs. Prophix One
While DFIN's ActiveDisclosure offers a robust platform for SEC filing and reporting with an emphasis on automated processes and expert support, Prophix stands out for its comprehensive financial performance management capabilities, including advanced XBRL tagging.

FAQs around XBRL tagging

If you still have questions about XBRL tagging, let’s answer them now!

What is tagging in XBRL?

Tagging in XBRL is the process of adding standardized tags from a taxonomy to each data point in your financial reports, including your balance sheet, cash flow statement, and your income statement. These tags enable the data to be machine-readable and facilitate the automated exchange and analysis of financial information across different systems and platforms.

How many XBRL tags are there?

There are roughly 17,000 tags in XBRL, depending on your jurisdiction.

What's the difference between XBRL tagging and iXBRL?

XBRL (eXtensible Business Reporting Language) standardizes financial information for electronic sharing, focusing solely on making data machine-readable. In contrast, iXBRL (Inline XBRL) enhances this by embedding XBRL data within an HTML document, enabling the information to be both machine-readable for data analysis and human-readable when viewed in a web browser.

Is XBRL the same as XML?

No, XBRL (eXtensible Business Reporting Language) is not the same as XML (eXtensible Markup Language), although they are closely related. XBRL is a specific application of XML designed for enhancing the communication, processing, and analysis of business and financial information.\

What are XBRL tags and taxonomies?

XBRL tags are identifiers applied to specific items of financial data within a document, such as revenues or assets. These tags are part of a taxonomy, which acts as a comprehensive dictionary of financial reporting terms. This taxonomy not only provides a standardized list of categories for organizing and classifying financial information but also defines each tag and its attributes, including the relationships among them.

Can you convert a PDF to iXBRL?

To convert a financial report from PDF to iXBRL, the data within the PDF needs to be extracted and then tagged according to the relevant XBRL taxonomy.

Conclusion: XBRL tagging with Prophix

As we conclude our discussion on XBRL tagging, it’s clear that mastering this standard is essential for anyone involved in financial reporting.

From understanding the foundational elements of XBRL tagging to leveraging Prophix One, one of the best finance platforms, we've equipped you with the knowledge to proficiently tag your financial reports.

Given the challenges and advantages we’ve outlined, you now have the tools to significantly improve your reporting processes.

Embrace XBRL tagging to unlock a new level of precision and efficiency in your financial reporting efforts, ensuring accuracy and compliance in an ever-evolving financial landscape.

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