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Implementing iXBRL

Implementing iXBRL

Following its successful introduction in the UK by HMRC, iXBRL statutory accounts filing is mandatory for a number of Irish Revenue’s corporate taxpayers.

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John Poole

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KPMG in Ireland

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Following its successful introduction in the UK by HMRC, iXBRL statutory accounts filing is mandatory for a number of Irish Revenue’s businesses. KPMG shares some practical tips.

XBRL (eXtensible Business Reporting Language) is a freely available, 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 computerreadable 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 accounts. Typically, iXBRL is implemented 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 will have the capability to perform instant analysis of high-value data using their existing computer systems.

HMRC and Revenue’s 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 and contrast similar sized and structured entities relatively easily.

Transferring statutory accounts data into iXBRL format

Various iXBRL tools are available on the market and they all do the same things. They import a Word or Excel document (whichever format the statutory accounts are in) and allow a user to attach “tags” from a taxonomy (an electronic chart of accounts) to matching items on the accounts. For example, there is a section in the taxonomy called “Balance Sheet” in which are tags for all the items located in a Balance Sheet such as debtors, fixed assets and share capital. The user transfers the appropriate tag to the appropriate item. The tag attached to the text is usually highlighted so as to indicate that text has been tagged.

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

Practicalities of tagging a set of accounts

Typically we 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 no technical skills. In fact, while the physical process of tagging can be mastered very quickly, there is a real skill in being able to select the correct tags for the correct items on the face of your accounts.

Common tagging errors

Some obvious tagging errors include:

  • 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.

Can you choose an incorrect tag?

HMRC and the Revenue opted for iXBRL over pure XBRL because it provides more flexibility. In XBRL, every taxpayer is required to extend their taxonomy so that each and every item on the face of their accounts can be tagged. In iXBRL, the expectation is that 70 - 80% of items on your accounts can and should be tagged.

The 30% of items left untagged are still readable by a Government tax official upon submission, so no information is lost in the process. iXBRL tagging is quicker and less technically difficult than pure XBRL, meaning it can be used more widely by taxpayers too.

The downside to this approach is that while certain tags are obvious, others are less so. To be “best effort compliant” a tagger needs to know when to tag an item, what tag is most appropriate and when to have confidence that there is no appropriate tag available at all. We recommend that a qualified accountant should perform the tagging. The reason for this is that anyone else will invariably struggle to select the correct tag for the correct item on the face of their accounts. It is important to get the tagging right. Partial or inaccurate tagging makes it more likely that a return will be selected for detailed risk analysis leading to a compliance check.

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;
  • and Training management in XBRL tagging.

Preparing for iXBRL

Plan in advance and do not leave implementing an iXBRL production process to the last minute. Our clients who reacted quickly and set up processes and filed early found the overall process far less onerous than the clients who tried to ignore the problem until the last minute. iXBRL filing requires a joined up approach from both the Tax and Accounts departments and getting a process in place to ensure the smooth delivery of your tagged accounts.

Regardless of whether you are tagging your own accounts in-house using a solution or outsourcing the work to an iXBRL vendor to tag for you, you need to give whoever tags the accounts sufficient 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 accounts 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.

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