Jodi Joseph, Divisional Executive, Caseware Africa, highlights the business opportunities waiting for you when you implement the XBRL standard.
South Africa’s journey towards the widespread implementation of the XBRL standard is well under way but are you taking the time to look beyond compliance and rather understand how the adoption of XBRL can benefit your business?
In 2018 one hundred and twenty one JSE listed organisations were invited by the Companies and Intellectual Property Commission (CIPC) to participate in the pilot phase of XBRL roll out. The results were very positive with one hundred and fourteen successful filings of financial accounts being received during this pilot phase. Sixty companies from this invited list successfully submitted multiple sets of accounts – a great achievement.
The purpose of the pilot phase was to test the functionality of both the CIPC’s upload-portal as well as the client-side software used by the invited companies. This initial phase was also used to identify technical development issues and possible taxonomy issues as well as the understanding of XBRL requirements by the pilot companies.
The plan was to finalise the standard by July in order that companies could meet the minimum criteria – as mandated by CIPC, and produce their annual financial statements using XBRL, commencing with the latest set of signed off financial accounts.
The targeted 1 July 2018 go live date was achieved by CIPC and thousands of submissions have been successfully submitted since 1 July 2018. CIPC anticipates 100 000 submissions in the first year of implementation.
The motive behind the implementation of XBRL
The CIPC’s vision for mandating XBRL is to build efficiencies in organisations in order to speed up the process of reviewing financials, improve accuracy and build capacity for people to focus on tasks that require insights and analytical review. Receiving data in this format will enable CIPC to fulfil its mandate in a far more efficient way. Additionally, the standardisation of the submission format will also enable sharing of financial information across regulators.
A successful move to this standard will also ensure that South Africa remains aligned to global reporting trends. However, it is important to note that it would be a mistake to see XBRL simply as an additional regulatory burden. On the contrary it has gained worldwide traction because it offers many benefits to numerous stakeholders across the entire financial spectrum.
Let’s recap - what is XBRL?
XBRL, or Extensible Business Reporting Language, is a global standard for exchanging business information, based on XML (Extensible Mark-up Language) that is used to encode financial documents. iXBRL (Inline XBRL) is a development of XBRL that both people and computers are able to read and analyse. Globally many countries are mandating for the XBRL standard with the numbers of implementations growing rapidly.
Prior to XBRL most companies transmitted their financial information in one or other digital format; for example, PDF – which facilitates easy distribution and storage. However, anyone wishing to analyse data, or to aggregate it with financial, or non-financial data from their own or other companies, would have to transfer the data manually into their own, or third party systems. This process is laborious, technically challenging and introduces the possibility of errors.
The beauty of XBRL is that tags can be read by any XBRL-enabled software and the tagged information (financial and non-financial) is extracted automatically. This means that the data can be passed between computer systems with human intervention only being needed in the case of exceptions. This process reduces the cost of communicating and maintaining data improves: the usability; integrity and compliance of the data. Additionally, if XBRL is used as the standard, data can be retransmitted without having to transform it to other formats or languages – which may be required by further recipients.
Where does Big Data fit into the picture?
The benefits of XBRL can best be summed up under one heading – Big Data. XBRL for an organisation’s financial data can be compared to an older retail technology -specifically barcodes. There is so much more to be learned from viewing a barcode than just price – companies are able to discern consumers buying habits, identify products that sell well together, and so much more. XBRL tagging will create a standardised financial view of company’s financial data. Investors, regulators, revenue services and companies themselves will be able to pick up on revenue trends, plus identify gaps and strategies to exploit in the future.
As data volumes multiply, the ability to create high quality, accurate analysis, requires that the data input is standardised. XBRL tagging provides a format that can be easily used in analytical programmes. XBRL enables standardised line items to be tagged, facilitating the comparison of company data quickly regardless of industry, country or even the language of the company report.
How can a company use this data?
Firstly, it can be used to identify financial trends in its own accounts over the years; it can also compare its own figures with those of peers, locally and internationally. This could be of huge value in pinpointing risks and opportunities.
In the European Union, the first wave of XBRL was implemented 15 years ago. Currently they are using XBRL to develop an array of cross-border applications including the creation of the European Financial Transparency Gateway (EFTG). Using Blockchain technology, the EFTG will provide a way to publicly share standardised financial information for companies across the Union. Another application of XBRL by the Single Resolution board in Europe is to use XBRL data to identify banks at risk of defaulting, in advance.
Big Data will enable companies to reflect a standardised view of their data that serves to put a spotlight on financials that are out of sync with those of peers. This kind of information can assist boards of directors, investors and regulators, with early identification of potential problems.
Is the right data being used?
The move to XBRL will also have benefits in the Social Media Age. Activists of various persuasions are starting to use social media to comment on the financial performance of organisations. While there is little businesses can do to control this, at least if companies apply a common data standard in the format they publish and share data externally, it will create a level of transparency, ensuring that comparisons being made are using the right data with less scope for data interpretation.
The significance of implementing XBRL in South Africa is that we could begin to lead fellow members of the Southern African Development Community (SADC) towards the same path of digitising financial data. This will empower African countries with the ability to apply learnings from other XBRL regions and adopt best practices relating to taxonomies and application benefits of big data. All of this will serve to drive better policies, build stronger companies and encourage global investment in the region.
The bottom line is that when it comes to XBRL it is crucial to look beyond compliance. Dig deeper and you will see the incredible analytical power that you can derive from standardising financial reports across industries and within your own financial reporting systems.
Jodi Joseph, Divisional Executive, Caseware Africa, a division of Adapt IT.
Jodi is a Chartered Accountant (CA) SA with incomparable experience as a financial professional. She completed her articles at Grant Thornton – Kessel Feinstein and thereafter joined Investec in various roles including Divisional Chief Operating Officer and Chief Financial Officer. In 2013 she was appointed Chief Operating Officer of CQS Technology Holdings (Pty) Ltd – which was subsequently acquired by Ada