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.
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.
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.
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.
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.
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.