iXBRL for listed company consolidated financial statements

The European Securities and Markets Authority (ESMA) have issued the European Single Electronic Format initiative (ESEF) rules, which apply to financial statements of listed companies from January 2020. It’s already a hot topic for preparers of annual reports.

What’s on your mind?

What will change?

A new version of the annual report, prepared in XHTML format and tagged with machine-readable data will be prepared by listed companies governed by EU rules. New preparation arrangement will be required, new software is involved and new processes and controls will be necessary. Investors and other stakeholders will be able to search the consolidated financial statements using computers as well as the human eye.

 

 

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Where do we start?

Before making any updates, improvements or changes to current annual report preparation arrangements, the first step is to become familiar with the new requirements and consider how this may affect your company.

 

 

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Will existing iXBRL tagging arrangements for HMRC provide a solution?

Unfortunately not. There are new rules and taxonomies that require new software. The timeframe for this requirement will be four months after the year end, a much tighter deadline than for HMRC. Any errors will be open to public scrutiny rather than a private matter concerning only HMRC. Tagging consolidated financial statements will be different to existing arrangements.

 

 

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Will the auditors be checking the new tagging?

There may be a mandatory audit requirement, which is for the regulators to decide. If not, it is likely that some listed companies will ask their auditors to check the iXBRL tagging. 

 

 

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What are other companies doing?

Some companies are speaking with the service providers and advisers about their annual reports. Changes to shorten and simplify the annual report in readiness for the new requirement are on the agenda. Software vendors are speaking with current and prospective clients about how new systems and processes addressing iXBRL can be implemented.

 

 

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Will Brexit affect this?

We don't know for sure. The final negotiated terms of Brexit and the timing of the European Union's adoption of the ESEF rules will clarify the position in the coming months. But digitisation of financial statements is a global trend and listed companies plan changes to reporting processes years in advance so we are not surprised at the level of interest ESEF is already generating in the UK.

 

 

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Digitising listed company consolidated financial statements is overdue. The benefits of being able to manipulate the data and compare across a peer group give users of the information new possibilities.

The change doesn’t prompt new information to be produced, it’s about existing information being made available in both human-readable and machine-readable forms. So it seems reasonable to view this as, primarily, a regulatory compliance exercise.

The preparation of annual reports is already a costly and time-consuming exercise. Some will find this a springboard to cost-savings and better processes, whilst others will delay engaging with the new requirement, take differing paths and achieve a range of cost outcomes.

Right now, this will mean getting to grips with the emerging regulation - tasking someone in the organisation to assess the requirement, present the options and devise a plan. Doing it well involves training on the requirements, understanding how existing processes work, knowing where judgements will be involved and entering into discussions with current and potential service providers.

Further ahead, “good” means cost-effective high quality digital information for users of your consolidated financial statements.

How can we help

We have three broad ways in which we can help; training, controls assurance services and our mapping service.

1. Training

Our iXBRL subject matter experts have used their knowledge and experience to design training modules focused on the relevance and impact of ESEF. These training modules will provide clients with a solid understanding of the mandate and give pointers on the key details. As a blended learning approach, follow-up client workshops will be available to those who have licensed the training.

 

2. Controls Assurance

Our controls assurance services advise on the selection of emerging solutions, including the impact of processes, controls and timelines for the preparation of the annual report. Digitising the submission of your consolidated financial statements and operating under the new regulatory guidelines will have an impact on your existing business. You need to consider three key areas, being people, processes and technology.

3. Mapping

As part of our mapping service, we map the relevant parts of consolidated financial statements to the new ESEF taxonomy, using the ESEF rules to provide a blueprint for the execution of the iXBRL tagging. The final product we provide to clients is a document based on their own accounts with line by line analysis of each of the tags required under the new ESEF rules.

 

Contact the iXBRL team

Speak with us and let’s get started.

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Contact us

Jon Rowden

Director - Assurance, PwC United Kingdom

Tel: +44 (0)7715 457 437

Yasmin Gitay

Manager - Assurance, PwC United Kingdom

Tel: +44 (0)7701 296 281

Michalis Georgiou

Senior Manager - Financial Reporting and XBRL, PwC United Kingdom

Tel: +44 (0)7786 911 914

Olive Browne

Director - Digital Change, PwC United Kingdom

Tel: +44 (0)7715 034 895

Charlotte Hoyland

Manager - Assurance, PwC United Kingdom

Tel: +44 (0)7841 567 333

James Russell (CISA)

Risk Assurance Manager, PwC United Kingdom

Tel: +44 (0)7525 282 446

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