South Africa’s reputation as a developing business hub was badly hit during the infamous Steinhoff Scandal. It had toppled from number 1 to number 30 in the quality of auditing and reporting standards ranking post the evening of 5th December 2017 when the Steinhoff CEO, Markus Jooste, announced that he would step down from his position and the Steinhoff board announced that the company had become aware of “accounting irregularities requiring further investigation”.
The most well-known scams in South Africa were those in which companies had deliberately committed financial frauds and that ultimately impacted the whole economy. There are cases, however, when companies unwittingly commit financial errors due to simple oversight. While this may seem like a minor lapse in financial reporting, this could have major repercussions when the Annual Financial Statements (AFS) are submitted to the CIPC. The AFS is considered the official report on the financial health of a company and even a small mistake in reporting could lead to misinterpretation or worse yet, misrepresentation.
Is there any way for companies to find out irregularities as well as regulators to detect early signs of malpractice?
The introduction of iXBRL in South Africa
While the CIPC mandate of filing the AFSs in iXBRL format will help the regulators to maintain transparency in the way businesses are conducted in South Africa, the move will also prove to be beneficial for companies as they will be able to present accurate data to the regulators. iXBRL is both human and super-machine readable as the companies are required to report their data in a structured format on the face of their document.
Apart from achieving data accuracy, here are a few ways in which companies can benefit from iXBRL
Easy access to data and comparability
Would you ever compare an apple with an orange? Of course not.
However, you may want to compare two different companies in the same industry or different. Imagine your CFO wanted to do an analysis of mining companies in South Africa and wanted information on several financial parameters of all mining companies in SA. How long would you take? Probably hours… days…weeks?
If you could extract the same data with a click of a button- would you not be happy and also get some brownie points from your CFO?
Here is an example of a Mining Company which has reported ‘Sales,’ let’s see how does XBRL process this information on Sales.
Now let’s take another company in SA, Randgold Resources, which reports ‘Revenue.’ The image to the rights hows XBRL processes the revenue data.
Reduction in workload and improved data accuracy
One of the major benefits of iXBRL is, it will reduce the company’s workload on maintaining different types of reporting for different stakeholders; all the information will be available in a standardized manner. This will also reduce the workload of the employees who have to spend time collecting and processing various types of information through their existing processes.
Even if the human eye is unable to capture the lapse in the data being presented, once the AFS is reported in XBRL format, with validations the XBRL machine will be able to flag mistakes in the AFS. It also enables the companies to present the data in a standardized format.
Practice good governance
One of the major benefits of iXBRL is, that it will reduce the company’s workload on maintaining different types of reporting for different stakeholders; all the information will be available in a standardized manner. This will also reduce the workload of the employees who have to spend time collecting and processing various types of information through their existing processes.
Even if the human eye is unable to capture the lapse in the data being presented, once the AFS is reported in XBRL format, with validations the XBRL machine will be able to flag mistakes in the AFS. It also enables the companies to present the data in a standardized format.
The benefits of moving to iXBRL are aplenty, but as with every new compliance rule, companies may face teething problems while tagging their data in the new format.
Creating multiple reports for different stakeholders can be quite time-consuming as each of them would need a different set of data from the company. By having the data in iXBRL in a standardized format, companies will be able to save time on creating different reports for different purposes. They can easily create different subsets of the data with minimal effort and without compromising its accuracy.
If you do not get your CIPC iXBRL filings right the first time, you may have to face a tough time ahead. If you are yet to start your CIPC iXBRL reporting process and have no clue on how to get started, we are more than happy to help you.
Before you start evaluating any provider make sure you know the right things to ask, this will help you take a decision. Read our blog ‘How to Choose the Right iXBRL Partner’ to get started with your evaluation process in the right direction.
