What is XBRL?
XBRL stands for eXtensible Business Reporting Language. It is a technology standard for the electronic communication of business and financial data, increasingly adopted worldwide. XBRL offers significant benefits in the preparation, analysis, and communication of business information.
It ensures cost savings, greater efficiency, and improved accuracy and reliability for all involved in financial data supply and usage.
The digital reporting format provided by XBRL facilitates the submission of Annual Financial Statements (AFS) in a structured format, moving away from traditional PDF formats. This transition reduces the burden of multiple submissions to different regulators.
The Drive to Digital Era with CIPC
The Companies and Intellectual Property Commission (CIPC) in South Africa has embraced international best practices by implementing XBRL for AFS submissions. Previously, AFS were submitted in PDF format, an unstructured format requiring manual analysis by human analysts, which was prone to errors.
With XBRL, companies can now report their financial information electronically, significantly improving efficiency and accuracy.
From July 1, 2018, CIPC mandated that all qualifying entities must use the digital reporting system. This move not only enhances the ease of submission but also aligns with global best practices.
Introducing iXBRL
CIPC has specified the use of a version of XBRL known as inline eXtensible Business Reporting Language (iXBRL). iXBRL incorporates both machine-readable and human-readable formats, unlike standard XBRL, which is only machine-readable.
The submission of AFS data is facilitated via XHTML files with iXBRL embedded within them.
Objectives of the iXBRL Programme
The primary objectives of the iXBRL programme include:
- Enhancing regulatory compliance and effectiveness with government and other stakeholders.
- Improving operational efficiency.
- Promoting consistent reporting to various government agencies.
- Conducting trend analysis on consolidated data.
- Reducing administrative costs for businesses.
iXBRL helps in reducing duplication and inconsistency in business information reported to different government agencies, making a national taxonomy a necessity.
The ability to analyze individual financials and consolidated data enables the detection of trends in various industries and the overall economy, aiding in investment potential assessment and economic forecasting.
Understanding the XBRL Format
XBRL transforms financial information from a block of text into data with specific identifying tags for each item. For example, “net profit” or “net current assets” would have unique tags understandable by computers.
These tags provide detailed information about each item, including descriptions, values, currency, and whether the amount is a debit or credit.
Taxonomies, which are hierarchical dictionaries used by the XBRL community, group together all elements or tags of financial and business reporting terms. They define specific tags for individual data items and their attributes and interrelationships.
Benefits of XBRL
XBRL offers numerous benefits, including:
- Searchability: Data is easily found due to specific item tagging.
- Accuracy: Enhanced because data does not need to be recaptured.
- Comparability: Facilitated by standard taxonomies.
- Transparency: Enabled by faster and better access to information.
- Efficiency: Significant improvements due to data being captured once and used to populate various required reports.
- Automation: Enhanced as data is captured in a machine-readable format with specific tags.
Entities Required to Use XBRL
The following entities are required to submit their AFS using XBRL:
- All public companies.
- Private companies that are required to be audited.
- State-owned companies.
- Non-profit entities.
- Close corporations and co-operatives that are required to be audited (mandatory from October 1, 2022).
Determining Compliance with XBRL on CIPC
Entities must comply with XBRL submission if they meet certain criteria, including:
- Having a Memorandum of Incorporation that prescribes filing of audited financial statements.
- Holding assets in a fiduciary capacity exceeding R5 million during the financial year.
- Having a Public Interest Score (PIS) of 100 or more (if AFS are compiled internally).
- Having a PIS of 350 or more (if AFS are compiled by an independent party).
Conclusion
XBRL represents a significant advancement in the electronic communication of business information, offering improved efficiency, accuracy, and regulatory compliance. As the global adoption of XBRL grows, entities will benefit from streamlined financial reporting processes and enhanced data transparency.
