It’s been over a year since the Companies and Intellectual Property Commission (CIPC) mandated that Annual Financial Statements (AFS) be filed in the iXBRL format. While this might appear to be a tall order for any company that has to be compliant with these norms, it is compulsory.
As a company/business owner, shifting to iXBRL may not be something you’re looking forward to. A change like this is labour intensive and a budget has to be set aside to ensure a smooth transition. Unfortunately, tougher measures from the CIPC will not just cause legal trouble for non-compliant companies; it will also translate into fines that will hurt your business (as myth 2 will explain why). So yes, it is better to be safe than sorry.
Also, there are certain undeniable benefits to doing this. Adopting iXBRL may appear to be tedious and expensive at face value, but this format is on its way to being a global standard that will deliver precious data to agencies, investors and business owners to understand, predict and improve the performance of companies and economies.
XBRL/iXBRL is just a regulatory requirement without any real benefits to one’s business
Fact 1: The benefits of XBRL/iXBRL unfold in stages, much like in a play. In the first act, the benefits are experienced by the regulator. Standardized data, pre-validated reports, and machine-readable information make it much easier for regulators to regulate – track companies, detect irregularities, and analyse trends.
However, the same benefits can also be experienced by businesses, once sufficient XBRL/iXBRL data is built and made public, or shared with stakeholders. That is the second act.
The Netherlands, an early adopter of XBRL is a great example of how XBRL benefits businesses. On January 1, 2015, Dutch banking giant ING announced that it was going to offer discounts on loan and credit applications for its Small and Medium-sized Enterprise customers. All they had to do is start providing XBRL versions of financial statements through the Dutch SBR platform. ING could do this because the information in XBRL made their internal processing of the loan application paperwork much easier enabling them to pass on these benefits to businesses.
While it may take time for benefits to flow into businesses, there are enough examples from around the world that prove that they indeed do flow!
Complying with the CIPC mandate is too expensive
Fact 2: If you think the cost of compliance is high, remember, the cost of non-compliance is likely to be higher.
Under the provisions of Section 175 of the Companies Act 71 of 2008, the CIPC can impose administrative fines on companies that do not submit their AFS’ in time. In May 2018, the High Court issued an order in favour of CIPC, and three companies were required to pay an administrative fine of 10% of their turnover during the period they were non-compliant.
The math is simple, 10% of your company’s turnover vs. a few thousand ZAR.
Costs of software ranges from 1,000 to 1,00,000 ZAR. Of course, at the very bottom of the price spectrum, you may need to check for quality and whether you are able to get a complete, valid iXBRL document consistent with best practices. If you decide to go for the higher end, ensure that you are being offered more than just iXBRL creation, and consider whether you need it. Regardless, you will find multiple options at your desired price range in the market.
Also, the new taxonomy released by the CIPC requires companies to submit new data fields which will help CIPC determine whether the AFS needs to be converted to iXBRL or not.
If someone else can take care of my iXBRL and it files with CIPC, I’m compliant
Fact 3: Yes and no. It’s a good first step to make sure your iXBRL document files successfully with the CIPC, but that doesn’t mean you have a complete, accurate document consistent with best practices.
The CIPC states that if there is a concept in your AFS that has a corresponding concept available in the CIPC taxonomy, you should tag it. It is possible to ignore that guideline and tag only the bare minimum mandatory items. A document with just the minimum tags would also clear through the CIPC gateway. However, when the CIPC starts delving deeper into its analysis – or when the data is shared across broader stakeholders who may be potentially interested in your company from a lending or investment perspective, a sparsely tagged AFS will make a bad impression.
Another reason to manage your iXBRL on your own is template-based tagging. Someone could input a few numbers from your report into a template, and generate a file that can be submitted to the CIPC. But this will neither reflect your original AFS nor adhere to best practices. Keep in mind that it is your iXBRL, and you are responsible for it.
Even if someone else works on your iXBRL conversion, stay involved so you can sign off on the quality of the final document. Whether you select a service provider or a software solution, insist on a basic level of training around the mandate, the process, and how to review your document, so you get the quality you deserve.
How can IRIS CARBON® help?
IRIS has 14 years of experience in compliance reporting and Disclosure Management, with a sharp focus on XBRL and iXBRL. IRIS solutions are being used by the CIPC to receive and validate all iXBRL documents in South Africa. IRIS CARBON®, our cloud-based collaborative platform backed by our expert service, is being used by thousands of entities across the world, including in South Africa, to improve their reporting process and to prepare XBRL and iXBRL outputs. IRIS is a member of XBRL International, XBRL South Africa, XBRL EU, XBRL US, and part of various XBRL working groups. For more information on how we can help you meet the CIPC iXBRL mandate, reach out to us at firstname.lastname@example.org.