Introduction to XBRL: Understanding the Basics

In the digital age, where data flows as freely as water and with global markets becoming increasingly interconnected, the need for standardizing financial information has never been more critical. eXtensible Business Reporting Language (XBRL) stands at the forefront of this revolution, transforming the way financial data is communicated and analyzed.  

This blog aims to unravel the complexities of XBRL, offering a clear understanding of its workings, origins, and fundamental components. 

What is XBRL?

XBRL is an open international standard for digital business reporting, managed by a global not-for-profit consortium called XBRL International. It enables the encoding of financial and business data in a way that is machine-readable, making it easier for companies, investors, regulators, and other stakeholders to access, share, and analyze financial statements and other business reports.  

Think of XBRL as the digital DNA for financial information, providing a language through which disparate systems can communicate effectively. By using XBRL, organizations can automate the processing of business information, reduce the risk of errors, and improve the reliability and efficiency of their reporting processes. 

How XBRL Works?

The essence of an XBRL report lies in the digital “tagging” of each piece of information, enabling its identification by computer programs, thus facilitating smooth extraction and analysis by users globally. Incorporating multilingual labels for each data point is straightforward, supporting automatic language transition for software users and aiding in overcoming linguistic obstacles. Additionally, the XBRL standard integrates features for data verification, contributing to the enhancement of report accuracy and reliability. 

These tags act like barcodes for each piece of data, providing context such as what the number represents (e.g., revenue, assets), the period it covers, the currency used, and more. These tags follow a standardized framework, allowing different systems to understand and process the information consistently. The key components of this framework include: 

  • Element: These are the individual items of data, such as revenue, expenses, or net income. 
  • Schemas: These define the data structure of different elements. 
  • Linkbase: These define the relationship between different elements such as their presentation, calculation, validations etc. 
  • Taxonomy: These are the dictionaries of elements and their corresponding linkbase, which vary by industry, country, or specific regulatory requirements. 
  • Instance document: These are data reports containing elements and the tagged reporting data. Every instance document must conform to the Taxonomy. 

When a financial report is created in XBRL, each data point is tagged with relevant information from these taxonomies, making the report both human-readable and machine-readable. This structured approach ensures that data can be easily validated, compared, and analyzed. 

Origins of XBRL

The development of XBRL began in the late 1990s, driven by the need for a more efficient way to handle financial reporting in an increasingly digital world. The initial idea was to leverage XML (eXtensible Markup Language), a flexible text format derived from SGML (Standard Generalized Markup Language), to create a standardized method for exchanging business information. 

The concept gained momentum with the formation of XBRL International in 1998, a consortium dedicated to developing and promoting the XBRL standard. The organization brought together experts from accounting, finance, and technology to collaborate on creating a comprehensive framework that could meet the diverse needs of global financial reporting. 

XBRL International

XBRL International is the global authority on XBRL standards and plays a crucial role in maintaining and advancing the framework. The consortium comprises members from various sectors, including accounting firms, software vendors, regulators, and financial institutions. XBRL International’s primary functions include: 

  • Developing Standards: Ensuring that the XBRL framework remains up-to-date with technological advancements and evolving business requirements. 
  • Promoting Adoption: Encouraging the use of XBRL across different industries and regions to standardize financial reporting globally. 
  • Providing Support: Offering resources, tools, and guidance to help organizations implement XBRL effectively. 

By fostering collaboration and innovation, XBRL International ensures that the standard continues to meet the needs of its diverse user base and remains a vital tool for financial transparency and efficiency. 

Understanding XBRL Fundamentals

To fully grasp the power and utility of XBRL, it’s essential to understand its core components: Element, Schemas, Taxonomy, and Instance document. 


Taxonomy are the dictionaries or catalogs of XBRL element and their corresponding Linkbase. They provide the standardized definitions and rules for how data should be tagged and organized. Different taxonomy exist for various industries, regulatory bodies, and regions, reflecting the specific reporting requirements and practices of each context. 

For example, the International Financial Reporting Standards (IFRS) taxonomy provides a comprehensive set of elements and linkbase for companies reporting under IFRS guidelines. Similarly, the US GAAP taxonomy caters to entities reporting under Generally Accepted Accounting Principles in the United States. 

Taxonomy are essential for ensuring that XBRL reports adhere to the appropriate standards and regulations, enabling accurate and consistent financial reporting across different contexts. 

Components of Taxonomy:

  • Schema: Defines the element structure and properties. 
  • Linkbases: Provide relationships between elements.  


An XBRL schema is an XML Schema Definition (XSD) that specifies the structure and constraints of an XBRL taxonomy. It includes the definitions of elements (data points), their types, attributes, and relationships. The schema ensures that instance documents conform to a standard format, allowing for consistent data representation and validation. 


  • Elements 

In XBRL, element represent individual pieces of data that are reported in financial statements. Each element is defined by a unique tag, which provides context and ensures consistency in how the data is interpreted. For example, the concept of “Revenue” might be tagged with specific attributes that describe its nature, such as the period it covers and the currency in which it is reported. 

These tags enable automated systems to recognize and process the data correctly, regardless of the underlying software or reporting format. This standardization is crucial for accurate data aggregation, comparison, and analysis across different entities and jurisdictions. 

Data Elements: Represent individual pieces of data, such as financial statement line items (e.g., “Revenue”, “Net Income”). Each element is uniquely identified by a name and associated with a specific data type. 



<element name=”Revenue” type=”xbrli:monetaryItemType” substitutionGroup=”xbrli:item” />  

  • Important Attributes 

ID: A unique identifier for the element. 

Name: The name of the element. 

Type: Defines the data type (e.g., monetary, string, date). 

Substitution Group: Specifies the element’s role in the XBRL hierarchy (e.g., item, tuple). 



<element id=”rev” name=”Revenue” type=”xbrli:monetaryItemType” substitutionGroup=”xbrli:item” />  

  • Linkbases 

A linkbase is an XML file that contains a set of extended links. These links define relationships between elements within an XBRL taxonomy. The linkbase specifies how these elements are connected, how they should be presented, how calculations should be performed, and how they should be labelled and referenced. 

The primary purpose of linkbases is to provide a structured and comprehensive way to describe the relationships and additional properties of the elements defined in the schema. This ensures that financial data is presented accurately, consistently, and meaningfully. 

  1. Label Linkbase: Provides human-readable labels for elements in different languages or contexts. 
  2. Presentation Linkbase: Defines the hierarchical structure for presenting elements. 
  3. Calculation Linkbase: Specifies arithmetic relationships among elements. 
  4. Definition Linkbase: Provides additional relationships and context for elements. 
  5. Reference Linkbase: Links elements to authoritative literature or standards. 

Instance Document

An Instance Document is an XML-based file that encapsulates the actual financial data of an entity, tagged with XBRL elements (concepts) as defined in the relevant XBRL taxonomy. It follows the structure and relationships outlined by the taxonomy to ensure that the data is accurately represented and understandable. 

The primary purpose of an XBRL Instance Document is to provide a standardized, machine-readable format for reporting financial and business information. This standardization facilitates the efficient exchange, analysis, and comparison of data across different systems and jurisdictions. 

Benefits of XBRL

The adoption of XBRL offers numerous benefits for organizations, regulators, and other stakeholders involved in financial reporting: 

  • Enhanced Transparency: XBRL improves the clarity and accessibility of financial information, making it easier for investors, analysts, and regulators to understand and evaluate company performance. 
  • Increased Efficiency: By automating the processing and exchange of financial data, XBRL reduces the time and effort required for reporting, minimizing the risk of errors and improving overall efficiency. 
  • Improved Comparability: Standardized tagging ensures that financial data can be easily compared across different companies, industries, and regions, supporting better decision-making and analysis. 
  • Regulatory Compliance: XBRL facilitates compliance with various regulatory requirements by providing a standardized framework for reporting and validating data. 
  • Data Interoperability: XBRL’s structured format enables seamless integration with other systems and technologies, enhancing data interoperability and enabling more sophisticated analysis and reporting capabilities. 

XBRL represents a significant step forward in the world of financial reporting, offering a standardized, efficient, and transparent method for exchanging business information. By understanding the basics of XBRL and its core components—elements, schemas, and taxonomy—organizations can avail the full potential of this powerful tool and enhance their reporting processes. As XBRL continues to evolve and integrate with emerging technologies, it promises to play an increasingly vital role in shaping the future of financial communication and data management. 



IRIS Business Services (Asia) Pte. Ltd., Singapore

IRIS Business Services, LLC, USA

Atanou S.r.l. (Italy)

IRIS Logix Solutions Private Limited, India

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