When the CIPC passed the mandate making it compulsory for all qualifying entities to file their Annual Financial Statements (AFSs) in iXBRL format from July 1st, 2018; companies were understandably confused. It required a major overhaul in their financial reporting process.
As the trusted partner for iXBRL implementation in South Africa, we dealt with many questions ranging from how to get started with iXBRL reporting, who needs to comply with the mandate, and many more like how to file the AFSs.
Senior Manager,
Corporate Compliance, and Disclosure Regulation, CIPC, We are very thankful to IRIS for implementing the CIPC iXBRL reporting platform even amidst time constraints. This helped us achieve operational efficiency, increased data validation, accuracy and transparency thereby reducing the reliance on PDFs which required manual interventions.”
A common question that most companies asked was related to XBRL tagging. As most iXBRL solution providers promised hassle-free and quick AFSs filing, companies had a tough time choosing a partner who would do the tagging the right way.
In our previous blog, we discussed in detail how companies must choose an iXBRL partner and why it’s important to choose a partner who does on-document tagging over one who does template-based tagging. While the other parameters are self-explanatory, we are going to tell you why on-document tagging is better than template tagging.
However, before we dive into it, let’s understand what XBRL tagging means.
XBRL tagging is a process where the information reported in a financial report is mapped or linked with the most appropriate element in the taxonomy (taxonomy is a dictionary of financial concepts provided by the regulator which defines the scope of which information needs to be reported in XBRL). As a rule, information present in an annual report needs to be always tagged to an element if there is an appropriate element available in the taxonomy.
A tag is a unique identity attributed to each financial data such as Net profit, assets, liabilities etc. It enables the company to report data in a machine-readable format.
Here’s an example of how a tagged XBRL
the document looks like.
XBRL is super machine-friendly but it is not human readable. In order to solve this problem, there is a next-gen format of XBRL named Inline XBRL (iXBRL) available.
When you click on any of the highlighted values, you will find detailed information about what the value refers to in XBRL, you can see the XBRL tag associated with it, and other properties such as the date when it was reported, the currency, etc. These figures can be read both by computers and humans.
Therefore, for the iXBRL document, the format of the annual report is very important for different stakeholders such as investors, and market analysts to read and it is important that the XBRL tags are embedded on the face of the document/annual report.
We see that since iXBRL is a new reporting format, a lot of filers and software providers adopt one of the following two ways for XBRL tagging.
Template-based tagging: In template-based tagging, the user has to manually key in the data for the whole document. In this tagging approach, the format of the annual report is not maintained and the data that gets tagged goes into a hidden section, thereby making the report only machine-readable and not human readable.
On-document tagging: In on-document tagging, the user needs to apply the XBRL tags on the AFS document itself. In this approach, the format of the document is maintained as it is. This makes the entire document not only highly machine-friendly but also readable by humans, thus making it more understandable and meaningful.
From our experience in various markets and research on both filers and software providers, we see that with iXBRL, both filers and software providers are in the early stage of understanding the requirement of this format and how to go about tagging such documents.
The most important question to ask is- how is your tagging been done? Is it on the document or using a template?
If your solution provider is using a template-based tagging methodology, you are NOT fully complying with the iXBRL reporting requirements.
What makes on-document tagging better than template-based tagging?
iXBRL is an HTML-based reporting language. On-document tagging ensures that whatever data you have on your AFS is what you report in your XBRL. In Template-based tagging, a lot of data goes in the “hidden section” which denies you the ability to reference the data in your AFS. This is a highly error-prone way of preparing your XBRL and results in your XBRL being misaligned with your AFS.
The core idea of using the iXBRL format is to encourage companies to have flexibility in the manner they want to report their financial information. Every company has its own way of reporting its financial statements (eg: Company A may report Sales, Company B may report Revenues). iXBRL allows companies to report AFS the way they want to. However, the advantage of XBRL is that it can map Sales/Revenue values to a standard tag in the XBRL taxonomy.
With on-document tagging, you have the flexibility to use any reporting labels that you desire. However, in template-tagging, there is very little scope for flexibility since the template has a pre-defined set of labels/reporting line items for each disclosure, and such templates do not give a clear indication of what you have reported in the AFS.
In template-based tagging, the reporting data has to be entered manually, amounting to more man-hours. The entire process can get quite cumbersome especially when it comes to paragraphs that need to be tagged. In on-document tagging, you just have to apply the tags from the XBRL taxonomy to your AFS.
Now that you are aware of the advantages that on-document tagging has over template-tagging, it should be easier for you to pick your iXBRL solution provider. Remember, do not compromise on the quality of your AFSs, it could pose problems to the CIPC when they scrutinize your AFSs. It could dilute the very purpose of passing the mandate, which is to standardize financial reporting.
IRIS CARBON® functions on the approach of On-document tagging. Several Fortune 1000 companies have trusted us with their CIPC compliance reporting.
