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Accounting is a vast world of standards, principles, and reporting languages businesses use to transfer information from one group to another. Two of the most common types of accounting principles and reporting language are IFRS and XBRL. The former is the gold standard for international accounting standards; the latter is an electronic method by which companies can transfer accounting information through digital exchange, drawing a connection between IFRS and XBRL. IFRS represents a national accounting standard for many different international countries with the desire of creating a single reporting standard for financial information. XBRL is a fast-evolving digital exchange method where companies transfer data in order to build a large area of business intelligence.
Globalization is the driving force behind the use and future requirements for IFRS in private and public environments. IFRS replaces the older international accounting standards, which was a large conglomerate of guidelines in use by international companies. As many companies began operations in multiple countries, however, the need for standard international accounting principles became clear. IFRS is currently required or in use by 100 countries worldwide, easily making IFRS the biggest set of accounting standards. In order to transfer information quickly among multiple parties, IFRS and XBRL are used most widely.
XRBL is an electronic method of tagging information in a company’s financial statements with easily searchable terms. The financial statements go into an easily accessible digital exchange where individuals and companies can access the data for future use. The IFRS and XBRL exchange often helps international companies file other financial documents outside of financial statements, such as tax documents. The interactive data format allows public or government agencies to review the data for other purposes, such as compliance and tax reasons. Along with the connection between IFRS and XBRL, other national accounting standards can use XBRL, such as generally accepted accounting principles (GAAP), which are the accounting standards for the United States.
In order to properly use XBRL, a company needs to have the software and hardware in place to handle these additional business tasks. Additionally, an individual usually needs training in order to properly use XBRL. Large companies are the most likely users of XBRL, regardless of the use of IFRS or GAAP. In some cases, the use of IFRS and XBRL are two separate implementation issues, though a company can create an environment where the two go hand in hand in terms of implementation. This can enhance the use of both IFRS and XBRL.
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