It’s been a year since the CIPC made it mandatory for all public and qualifying entities in South Africa to submit their Annual Financial Statements (AFS) in iXBRL format.
Since then, the CIPC has reported a dramatic improvement in their ability to quickly detect non-compliance cases, and faster turnaround in their investigation of cases. This has freed up staff to spend more time analyzing financial trends of various industries and the economy per se.
As the CIPC gears up for the second phase, let’s take a look back at the successes of the first phase, and at the role, IRIS has played in the CIPC’s implementation of iXBRL.
Phase 1 – The journey so far
In most parts of the world, where PDF and paper-based reporting still exist, regulators spend most of their time manually checking data, leaving little time for the investigation of non-compliance cases or the analysis of financial information. This is the problem CIPC faced.
With over 1 800 000 companies registered with the CIPC, each generating annual reports with a large number of pages, it was practically impossible for the CIPC to manage its process of governance and oversight efficiently.
In February 2016, the CIPC decided to standardize the financial reporting process by adopting iXBRL, a global digital reporting standard for business and financial information. This meant that once the standard was mandated, all entities filing their Annual Financial Statements in PDF format would be required to submit reports in iXBRL to the CIPC.
To ensure that entities did not face any difficulty in the process of transitioning to iXBRL, the CIPC evaluated software solutions in the market and came up with recommended software solutions that entities could use to convert their AFS’ to iXBRL format.
The CIPC also evaluated software solutions to receive, validate and process iXBRL filings at their end and chose IRIS’s iFile as their own regulatory e-filing platform for all iXBRL filings.
IRIS is CIPC’s trusted iXBRL implementation partner. IRIS iFile and IRIS Validator was selected by CIPC as the common platform to which all entities in SA need to submit and validate their iXBRL filings.
In February 2018, just a few months before the iXBRL mandate’s official start date, the CIPC announced a pilot program for companies. By April 2018, 55 companies had filed their AFS’ in iXBRL as part of the pilot program. Of these, 27 had used IRIS CARBON® IRIS’ iXBRL solution for issuers.
Full implementation of CIPC’s iXBRL mandate
On July 1, 2018, the CIPC’s iXBRL mandate was fully implemented and in effect. All public, state-owned companies, qualifying private entities, and closed corporations were required to mandatorily submit their AFS in iXBRL format before submitting their Annual Returns. The filing deadline was determined on the basis of the entity’s date of incorporation. Closed corporations were given a 60-day deadline and all other entities had to file within 30 business days from their date of incorporation. The new mandate was off to a successful start; however, there were some cases of non-compliance, which brought action from the CIPC.
The Annual Report Hard Stop
A few companies filed their Annual Return (AR) without filing their AFS in iXBRL format. To ensure compliance with the new iXBRL mandate, the CIPC introduced several measures, one of which was Notice 52, which penalized non-compliance with the possibility of fines equal to 10% of the entity’s total turnover or a maximum of R 1 000 000. This was followed on September 1, 2018, by Notice 62, the “AR Hard-Stop” directive, which prevented entities from submitting the AR without submitting the AFS in iXBRL or their FAS statements. The directive was temporarily rolled back on September 4th to include the Annual Report calculator as a part of the new online process. It was re-introduced on October 1st after CIPC’s systems were upgraded to support this initiative.
Improved Validation Rules
For iXBRL tagging, entities are required to tag their disclosures on the face of their AFS documents, so that the XHTML output is both a faithful rendering of their original AFS and also has machine-readable tags embedded in parts of the document, in the true sense of iXBRL. However, some entities took the easier path by tagging information separately in Excel/using template-based tools, and either sticking the entire output of the template on top of the AFS or having all tagged data go into a values users are inputting in an external template is not the same as on the face of their AFS reports. To address this, the CIPC introduced a new set of validation rules that prohibited entities from tagging critical financial information in the hidden section, reinforcing the need to adopt the on-document tagging option.
Phase 2 – What lies ahead?
After last year’s successful launch of Phase 1, CIPC is now going to roll out the second phase by October 1, 2019. This second phase will primarily involve updating the 2016 CIPC taxonomy to include the changes made to International Financial Reporting Standards (IFRS) taxonomy between 2017-and 2019. The CIPC also aims to improve the data quality and bring it on par with global trends followed by the European Securities and Markets Authority (ESMA) and the U.S. Securities and Exchange Commission (SEC).
How has IRIS supported the CIPC throughout the journey?
IRIS is proud to be associated with the CIPC throughout the journey of the iXBRL mandate in bringing digital transformation to South Africa. The CIPC uses IRIS’ flagship product IRIS iFile and also IRIS’ validator – all entities in South Africa are required to submit their iXBRL filings through this platform. These platforms are upgraded continually based on updated taxonomies and business rules introduced by the CIPC.
IRIS has also successfully helped thousands of clients in South Africa such as Nedbank, Bidvest, Allan Gray, Growthpoint Properties, Redefine Properties, and several other large, medium, and small-sized entities to comply with the iXBRL mandate using IRIS CARBON®, our compliance reporting platform for entities. With rich experience working in the U.S., UK, Ireland, Italy, and Indian markets, we are very proud to be part of South Africa’s journey in transitioning from non-standardized financial reporting to standardized reporting. As South Africa prepares for the second phase of the mandate, IRIS will continue to extend its support and expertise to help entities, investors, and regulators in better governance.