With the growing proliferation of XBRL across various jurisdictions in the last few years, more and more companies have had to deal with the requirements of corporate reporting mandates and delegate appropriate resources to ensure the high-quality production of XBRL annual statements. For eligible companies, there are several factors that need consideration when complying with the various XBRL regulatory mandates in place across the globe.
Producing high-quality XBRL corporate reports is extremely important for organizations for a variety of reasons. Apart from regulatory repercussions, the inability to make an accurate electronic corporate document has several far-reaching implications on everything from poor operational decisions to eventual economic loss and reputational damage owing to a dip in shareholder sentiment among other factors.
For these reasons, corporate reporting is an extremely critical activity for all qualifying organizations and one that they are bound to take extremely seriously. Due to the nature of any economic activity that a publicly listed organization is involved in and the number of people it subsequently affects, producing reports that accurately reflect its financial positions is not only a matter of financial accountability but also broader societal responsibility.
With a steady rise in the number of countries that are starting to adopt electronic reporting, there has been an exponential rise in the sheer amount of data that exists today. Structured data formats like XBRL have made great strides in not only promoting and enhancing transparency and comparability of corporate data but also making ingesting, processing, consuming, and analyzing it extremely easy.
All of these benefits however are entirely contingent on the accuracy of the data that is being put forth by participating companies. While a lot of organizations may continue to find the shift to XBRL reporting daunting and stressful, the right tools and guidance can go a long way in ensuring that complying with electronic reporting regulatory mandates is smooth and stress-free.
In a bid to make the entire XBRL/iXBRL compliance process simpler for companies, we provide 10 actionable insights that companies can use to ensure timely and accurate filings with their respective regulators.
10 Actionable Insights for Hassle-free XBRL/iXBRL Compliance
1. Understand the Mandate and its Phases
Driven in part due to the dynamic nature of the standard itself and various other local and international factors, XBRL reporting mandates are always evolving. Having a team that is abreast of the latest goings-on in the world of XBRL and associated electronic reporting mandates can prove to be extremely beneficial to companies looking for hassle-free regulatory compliance. There are many resources available directly from the creators of the standard as well as third parties who are involved in consultations to evolve the standard along with those who are on the implementation end of things. These resources can take the form of webinars, town halls, blogs, conferences, case studies, and lots more to nudge companies in the right direction. Ideally, your trusted software vendor of choice for report creation can provide you with vital information that is relevant to your organization and guide you accordingly. This is the norm at IRIS CARBON® and we make a lot of resources available to everyone for free in the broader common interest.
2. Plan in Advance
Like with any other undertaking, planning ahead of time to tackle XBRL/iXBRL compliance is absolutely critical for organizations looking to file without incident. As reporting is a time-critical activity, any delays from any of the parties involved in it can not only lead to hefty penalties for the offending organization but also result in regulatory sanctions and lost goodwill which is priceless. Since an annual report consists of multiple sections that require XBRL/iXBRL tagging, the necessary teams should begin working on relevant sections as soon as they can. In our experience, most companies adopt this working style and begin updating tags as soon as the financials and notes are final. Other parts of the report are then worked on based on internal priorities set by the organization.
3. Do Not Underestimate the Importance of Dry Runs
Most regulators allow companies to file dummy reports to ensure their submissions meet the requisite guidelines. This allows companies to iron out any kinks that may prevent them from filing their corporate reports satisfactorily and on time. It is extremely crucial for companies to leverage professional knowledge when proceeding with a dry run to understand the finer nuances of the submission process. This not only allows them to maintain a high level of accuracy when live filing but also ensures deadlines are met in an efficient manner. The added resources in terms of manpower and time that mistakes cost companies are cumulative and can amount to staggering inefficiencies resulting in permanent financial and reputational losses. A trusted and reliable filing partner can mitigate most if not all niggles that companies routinely face during the filing period while also advising them on the right processes that need to be followed to preclude such errors in the future.
4. Roll Forwarding Can Save Precious Resources
Since we have already established how time critical the filing process can be for organizations, being detail oriented and efficient with reporting processes is not only wise but also ineluctable. Having briefly touched upon the importance of collaborating with a strong filing partner, it is important for companies to ascertain the tangible benefits that can be brought in to conserve precious resources. Most software vendors today offer a smorgasbord of features aimed at expediency and user-friendliness. However, their adaptability to an organization’s special needs and subsequent implementation may leave a lot to be desired. One such feature is the Roll Forward. When done right, roll forwarding seamlessly allows companies to carry over a previous year’s fully tagged XBRL/iXBRL report to the current year and only edit or add those line items that need updating. This allows companies to save enormous amounts of time that they would otherwise have to spend retagging facts that have already been tagged correctly in the previous year. This has a cascading effect on all the steps involved in reviewing and validating said line items as they can now be ratified in no time.
5. Get Visibility and Control
One of the many advantages of the XBRL standard is the control and transparency it affords filers in terms of process efficiency and collaboration respectively. Where reporting teams have worked with static reporting formats for years, painstakingly trying to ensure all the facts and figures tie in neatly with each other, the arrival of a dynamic reporting standard like XBRL has proven to be a game-changer. With SaaS report creation tools like IRIS CARBON®, members from multiple teams are able to define their roles and work together on different sections of the same document. As changes are updated in real-time, it ensures everyone is always on the same page and improves overall efficiency manifold. It also allows project managers to assess the pace at which a task is progressing. This is invaluable to end users and a highly sought-after feature for many prospective and existing filers.
6. Get Familiar with the Filing Process
Before companies employ the services of third-party software vendors to produce XBRL reports for them, internal teams directly or indirectly involved in the filing process should take time to examine the XBRL/iXBRL reporting process and understand its finer nuances. As this process can change based on the jurisdiction and local regulatory laws, there’s no universal way to go about it. Most companies also define internal reporting processes differently and so, working closely with your software vendor of choice is absolutely imperative. When companies want more control over the processes involved in XBRL reporting, they generally opt for an in-house solution where we train users to work on our cloud-based SaaS product. In these training sessions, our team will typically spend time not only explaining a particular mandate but how it will apply to your company specifically. At a very high, geo-agnostic level, it involves uploading the report to your chosen platform choice, creating a new document, reviewing the data, validating it, and finally submitting it to your respective regulator.
7. Understand Industry Best Practices
The beauty of an open data standard like XBRL is the ability for anyone to download corporate reports from the appropriate regulator’s website and see how they have been prepared. Larger companies with more established and standardized processes can be used as a benchmark by others to produce their own XBRL reports. This can potentially ensure a high-quality output and aid companies in complying with the respective regulatory mandate more efficiently and effectively. XBRL International (XII) routinely publishes guidance that allows companies to understand various best practices such as whether taxonomies should be reused. It has a Best Practices Board (BPB) that sets priorities for the collection, compilation, and development of implementation guidance material and together with the XBRL Standards Board ensures that all business process guidance material produced is of uniformly high quality. Understanding material published by these bodies can prove hugely beneficial to companies looking to produce top-quality XBRL/iXBRL corporate reports.
8. Be Aware of Validation and Business Rules
Validation rules can increase the data quality and accuracy of XBRL reports and are backed by requirements from the underlying business domain or driven by the technical requirements of the filing system. Business Rules indicate the disclosures that are to be mandatorily reported for the preparation of a valid XBRL/iXBRL instance document. Given the importance of these rules and the purpose they serve, companies need to ensure that they are cognizant of them and not in breach as it can potentially lead to unnecessary issues that may consume a lot of valuable resources to fix at a later stage.
9. Mediate Between Auditors & Software Vendors
Auditors have an essential role in ensuring that the digital disclosures accurately reflect the content and meaning of the report, but they should not get bogged down in syntactic or technical details. Automated validation by XBRL Certified Software like IRIS CARBON(R) will ensure that reports are technically sound. Audit professionals, meanwhile, provide real value to digital disclosure because they understand the business that is making the disclosure, they understand the accounting standards and their appropriate application, and the taxonomy that models those accounting standards. In examining compliance, audit teams should focus their time and attention on making independent judgments about the appropriateness of tag selection in terms of meaning and comparability. Companies, therefore, need to be proactive when it comes to playing the role of an intermediary between what auditors expect and how their chosen software vendor can deliver.
10. Target a Suitable Submission Date
Companies dealing with XBRL submissions are always advised to prepare well in advance and leave enough room as a buffer to accommodate last-minute changes that may come from auditors and regulators. This ensures that there is enough time to make suitable changes and the final filing is 100% error-free. Time management is crucial as leaving everything to the last day of submissions can eventually lead to missed deadlines and not only attract penalties but also lead to reputational loss.
Now that we have a better understanding of some of the actionable insights for companies looking to file their corporate reports in XBRL/iXBRL in a smooth and hassle-free manner, let’s briefly take a look at what we found when we studied a small corpus of iXBRL submissions and why it matters to produce high-quality reports.
One of the key findings from the 2021 ESEF Quality Study done by our experts was that over 50% of all the companies filing with their respective regulators had at least one mistake (error or warning) in their iXBRL document. This statistic shows the importance of the right knowledge, processes, and approach for streamlined reporting and compliance. These actionable insights will not only help you make your existing iXBRL compliance process stronger but be future-ready for the changes the mandates will be bringing up.