The last two articles outlined what you should look for in software that integrates disclosure management with XBRL to help your overall financial reporting process. Now, over the next few articles, we will narrow our focus to the ESEF mandate, which is a great starting point for your quality journey since the regulator requires you to submit an annual report with an XBRL overlay.
First things first: What must you submit to your regulator under ESEF?
Under the ESEF mandate, you are expected to submit your annual report in a digital format to the local regulator. This digital format has two parts – an instance document and a company taxonomy.
The instance document is your annual report in the Inline XBRL (iXBRL) format. An iXBRL document has machine-readable tags embedded on the face of a human-readable document. This makes your annual report under ESEF human-readable and machine-readable at the same time, with the human-readable part retaining all its design and style elements.
Your company taxonomy represents the elements you have chosen out of the ESEF taxonomy or have added as your own customized elements and the relationships between these elements. It represents the structure of your document through four linkbases. These are Presentation linkbase, Calculation linkbase, Definition linkbase, and Label linkbase.
In this article, we focus on the instance document and one of the main contributors to its quality – the task of selecting the right tags.
The quality of your instance document
Creating your instance document entails mapping each line item or disclosure in your report to a relevant concept in the ESEF taxonomy; creating extensions or custom tags in cases where you cannot find appropriate concepts in the ESEF taxonomy to link line items with, and anchoring your extensions to elements with their nearest accounting meaning in the ESEF taxonomy.
Bring quality to your tagging
Tags lend your instance to document its machine-readability. Picking appropriate tags requires familiarity with the ESEF taxonomy as well as your own document.
Here’s an example of how machine-readable tags look — ‘ifrs-full_Revenue’, which is the IFRS tag for revenue, and ‘ifrs-full_CurrentAssets’ which is the tag for current assets. Each tag has three main attributes — data type, balance type, and period type –
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- Data type explains whether the fact being reported is monetary represents shares or a percentage. For example, the data type for the tag ‘ifrs-full_Revenue’ would be ‘monetaryItemtype’.
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- Balance typed notes whether a monetary concept is a ‘debit’ or ‘credit’. For revenue, the balance type is ‘credit’.
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- Period typed notes whether a concept is measured on a particular date or over a period. Balance sheet concepts will have the ‘instant’ period type since a Balance sheet is reported on a particular date. Income statement concepts will have the ‘duration’ period type since items reported on an Income statement are measured over a 12-month period.
Here’s what you need to make sure of as a starting point for quality in your instance document creation process
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- All numbers in your primary financial statements need to be tagged for compliance with Phase 1 of the ESEF mandate. You can voluntarily tag numbers in the rest of your document and you can tag text disclosures as well — that would be the icing on the cake for your stakeholders, and some companies have proactively done this. But as a bare minimum, make sure no number in your primary financial statements is left untagged.
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- In the process of tagging, use concepts from the ESEF taxonomy to the best extent possible. Create custom extensions only when absolutely necessary.
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- The tags you select must have a data, balance, and period type appropriate to the line items in your report.
In summary, quality in creating your instance document requires you to ensure that all your disclosures are tagged, ideally with ESEF taxonomy elements and that the tags you select have data, balance, and period types that correspond with your disclosures. Familiarizing yourself with the ESEF taxonomy is sure to see you through these tasks successfully.
In our next article we will talk about one common pitfall that companies would do well to avoid while creating their instance documents – the issue of reversing signs or values.
