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Implementing iXBRL

Implementing iXBRL

KPMG shares some practical tips for businesses dealing with Irish Revenue and UK HMRC iXBRL filing requirements

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John Poole

Partner

KPMG in Ireland

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Irish Revenue and UK HMRC have required businesses to submit their financial statements in iXBRL format as part of their Corporation Tax return for a number of years now, here KPMG shares some practical tips.

XBRL (eXtensible Business Reporting Language) is an open and global standard for exchanging business information. A primary use of XBRL is to define and exchange financial information, such as financial statements, in a computer-readable format.

iXBRL (Inline XBRL) is a development of XBRL in which the XBRL data is embedded in an XML document, such as a published report and financial statements. Typically, iXBRL is contained within HTML documents, which are displayed or printed by web browsers without revealing the XBRL data inside the document.

Why are tax authorities insisting on iXBRL filing?

A combination of improved reporting and analysis capability for tax authorities, as well as reduced related costs, are the main drivers for compulsory iXBRL filing. Revenue authorities have the capability to perform instant analysis of high-value data using their existing computer systems.

The Revenue authorities’ computers will be able to immediately scan and record information from the financial statements. This data can then be compared with thousands of other taxpayers’ data enabling the tax authorities to compare entities of similar size and structure relatively easily.

Transferring statutory financial statements data into iXBRL format

KPMG’s developed XBRL Mapping Engine (XME) imports a Word or Excel document (whichever format the statutory financial statements are prepared in) and allow a user to attach “tags” from a taxonomy (an electronic chart of accounts) to matching items in the financial statements. For example, there is a section in the taxonomy called “Statement of Financial Position” in which are tags for all the items located in a Statement of Financial Position such as receivables, cash, share capital etc. The user transfers the appropriate tag to the appropriate item in the financial statements. The tag attached to the text is usually highlighted to indicate that text has been tagged.

When the Word or Excel financial statements are then converted into a HTML document suitable for submission to a tax authority website – the financial statements are still readable and in the same format as the original Word or Excel statutory financial statements but hidden in the code is information telling the Revenue Online Service (ROS) that the receivables’ value is, for example, €1 million.

Practicalities of tagging a set of financial statements

Typically we have found that clients initially underestimate the difficulties associated with iXBRL. This is primarily because it seems, at first inspection, to be a simple process requiring minimal technical skills. In fact, while the physical process of tagging can be mastered very quickly, there is a real skill in applying the correct tags and the correct dimensions of the tags.  In depth knowledge of financial statements and the associated taxonomies is required.

Some obvious iXBRL errors include:

  • incorrect financial statements tagged
  • using the incorrect taxonomy
  • not fully tagging the financial statements
  • tagging monetary tags as text;
  • getting the scale wrong on a monetary tag;
  • using the wrong time period for a tag;
  • attaching the wrong currency to a number;
  • incorrect use of the negation principal;
  • failing to tag one of the Business Mandatory Tags.

Audit considerations

As noted in the Auditing Practice Board (APB) Bulletin 2010/1, ISAs (UK and Ireland) do not impose a general requirement on the auditor to check XBRL tagging of the financial statements as part of the audit.

Because the XBRL tagging is simply a machine-readable rendering of the data within the financial statements, rather than a discrete document, it does not constitute “other information” as defined in ISA (UK and Ireland) 720 Section A. Accordingly, the requirement of ISA (UK and Ireland) 720 Section A for the auditor to “read” the other information for the purpose of identifying material inconsistencies or material misstatements of fact is not applicable to XBRL tags.

The APB Bulletin 2010/1 notes that, subject to compliance with the ASB’s Ethical Standard (ES) 5 (and specifically the management and self-review threats) and any applicable SEC restrictions, auditors can provide various non-audit XBRL-related services to audit clients. Such services may include:

  • Performing the tagging exercise
  • Providing a service to the directors of the company as to accuracy of the tagging performed by management
  • Providing advice on the selection of tags
  • Supplying accounts preparation software that automates the tagging
  • Training management in XBRL tagging.

Preparing for iXBRL

Plan and do not leave implementing an iXBRL production process to the last minute.  Our clients who reacted quickly and set up processes to incorporate iXBRL as part of the financial statements production process find it a lot smoother than the businesses who try to ignore the requirement until the deadline approaches.

iXBRL filing requires a joined-up approach from both the Tax department and preparers of financial statements to ensure the smooth delivery of your iXBRL financial statements.

Regardless of whether you are tagging your own financial statements in-house using a technology solution or outsourcing the work to an iXBRL vendor to tag for you, you need to give whoever tags the financial statements enough time to do so.  Additionally, it is strongly recommended that someone other than the tagger reviews the tag choices made prior to final submission. iXBRL tagging can be a technically challenging discipline. Reviewing tagged financial statements will help ensure consistency in your tag choices and eradicate the opportunity for unnecessary errors. And remember, tagging is a task for an accountant, not an IT person.

Finally, whichever solution or iXBRL vendor you opt for – make sure that their tool and processes include internal tag validation functionality as standard. Having a tool that performs all the same tests internally that the Revenue authorities will perform at the final submission stage means you can rest assured that there will be no mishaps which could cause you to incur penalties.

How KPMG can help

Our team of experts have developed a suite of iXBRL solutions to help businesses meet their compliance requirements in an easy and cost-effective manner.

KPMG’s iXBRL centre of excellence, with a local unit based in Belfast, converts thousands of financial statements annually using our XBRL Mapping Engine (XME) for submission to Irish Revenue & UK HMRC.

With KPMG, you can have confidence that you’re partnering with the best iXBRL team in the market, with unrivalled experience, insight and commitment.  To find out more about the work we do and how we can help you – get in touch today.

© 2020 2020 KPMG, an Irish partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

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