On 1st July 2018, The Companies and Intellectual Property Commission (CIPC) of South Africa mandated the transition of the Annual Financial Statements (AFS) from a PDF form of reporting to a structured data reporting system using an Inline eXtensible Business Reporting Language (Inline XBRL) format. The iXBRL format simplifies reporting of financial information electronically for companies.
Companies will be able to file their annual financial statements in a more structured way with the help of digital reporting in the form of iXBRL. We can say iXBRL is a mode of communication of business information that renders the process of preparing, analyzing, and comparing the Annual Financial Statements.
Benefits Of iXBRL
Switching to an iXBRL format of CIPC iXBRL Reporting holds the following benefits:
- Provides transparency in business and financial information to investors.
- Build upon much richer and more meaningful information.
- Improves efficiency and accuracy in decision-making.
- Saves multiple submissions: Lays out one common standard of reporting for regulators.
- Increases the efficiency of regulators when dealing with high volumes of reports.
- Business Intelligence (BI) technology entails automated quick analysis of the AFS.
- Reduces cost and time associated with compliance.
PI Score Calculator
Public Interest (PI) Score must be calculated and submitted at the end of each financial year, along with the company’s financial statements, to the CIPC. A PI score determines your company’s public interest. The PI Score approach brings South Africa in line with similar practices in other countries and takes into account various matters, such as employees, shareholders, liability, and turnover.
This score is important because it serves two purposes:
- To determine the type of AFS that your company should prepare (audited or independently reviewed)
- The financial reporting standards that apply to your company (IFRS or GRAP)
The calculation must be done before the preparation of the company’s Annual Financial Statements (AFS).
IRIS CARBON® lets you Calculate your PI Score.
The higher the PIS score, the higher the requirement for public accountability, i.e. regulation and oversight through financial statements review and audit, and, where applicable, social/ethics review.
Who Needs To File With CIPC And How?
After you have calculated the PI Score, the next step is to correctly determine what format of financial information is required by your company. In the process of filing, companies have two ways of providing their financial information:
- Submitting an Annual Financial Statement(AFS) in iXBRL format; or
- Submitting a Financial Accountability Supplement (FAS): one-pager online form including minimal basic financial information.
Companies must determine whether they should submit an AFS or FAS.
Here are the criteria that shall assist you:
Your company is required to produce ‘Audited’ AFSs :
- If your company is a public company
- If your company’s Memorandum of Incorporation (MOI) states that the company should undergo a mandatory or voluntary audit of AFS
- If your company, in the ordinary course of primary activities, holds assets in a fiduciary capacity for unrelated persons with an aggregated value of such assets held at any time during the financial year exceeds more than R5 million.
- If your company’s Public Interest Score (PI Score) is 350 or more
But if the Public Interest Score (PI Score) is 100 or more, then you can:
- Submit AFS in iXBRL format if internally compiled; or
- Submit FAS if voluntarily audited or independently reviewed
Understanding The CIPC Taxonomy
Understanding the CIPC taxonomy is crucial. Preparation of iXBRL reports involves tagging your firm’s disclosures with the correct taxonomy concepts or elements in the CIPC taxonomy. A poor understanding of the taxonomy can lead to unnecessary creation and use of extension or custom elements. This can hamper the quality of the CIPC iXBRL filings. Extension elements need to be formed only when appropriate taxonomy concepts cannot be found for some disclosures.
Here is a timeline, showing the development of the CIPC Taxonomy:
|2013||The CIPC XBRL started with the ROSC (Report on Observance of Standards and Codes) by the World Bank.|
|2016||A business case was developed, including a taxonomy aligned with the International Financial Reporting Standards (IFRS).|
|2017||A portal for filing a report was developed.|
|2018||The pilot was launched using high-profile listed companies. Later, launched by the Minister of Trade and Industry.|
|2019||The CIPC implemented updates of IFRS 2017, 2018 and 2019|
|October 2020||Implemented IFRS 2020 and Generally Recognised Accounting Practice (GRAP). GRAP is applied to state-owned enterprises and municipal-owned companies.|
|1 October 2021||The CIPC implemented IFRS 2021 and made GRAP mandatory.
Bringing in a new data quality management (DQM) framework.
Data Quality Management (DQM)
In the recent update that came into effect on 1 October 2021, CIPC has developed a new Data Quality Management (DQM) framework. The purpose of the framework is to improve the regulatory quality of financial data received beyond what automated system validations can guarantee. The quality of filings from Software Service Providers (SSPs) will be evaluated every quarter. Some specific metrics will be used to measure the completeness, correctness, accuracy, and consistency of the information in iXBRL format.
The new DQM has four main criteria for evaluation –
- Completeness: All mandatory data elements defined in the CIPC taxonomy must be submitted. There are additional metrics for hidden tagging, missing reports, lacking current & prior year, and lacking disclosure substance or form.
- Accuracy: In the context of iXBRL filings, the accuracy of the individual data elements lies in the filing as a whole point. It should provide value, meaning, and usefulness to what is reported. There are additional metrics for footnotes not being valid, inconsistent calculation, Companies Act Contraventions, and inappropriate usage of the ‘other’ tag.
- Correctness: It is the freedom from errors. Built-in validations ensure calculations are essentially correct (e.g. totals and balances). There are additional metrics for unresolved warnings, visual display insufficient, abuse of block tagging, technical issues -Zip or XHTML not opening
- Consistency: In the context of XBRL filings, it is observed that the same issues are repeated consistently. It is measured by how often completeness, correctness, and accuracy (or the lack thereof) are repeated as a percentage of total attempted filings. There are additional metrics for multiple duplications of the same tags in different places
Stay tuned! There is more to CIPC iXBRL Reporting.