What you should know about the XBRL implementation?

As of 1 January 2020 all annual consolidated financial statements prepared by issuers of securities traded on the regulated EU market in accordance with IFRS are to be prepared in the European Single Electronic Format (ESEF) with XBRL tags.

XBRL requirements

Following the recent announcement of European Securities and Market Authority (ESMA), as of 1 January 2020 all annual consolidated financial statements prepared by issuers of securities traded on the regulated EU market in accordance with IFRS are to be prepared in the European Single Electronic Format (ESEF) with XBRL tags.

What Is XBRL?

XBRL is a technology for tagging data to identify and describe information in a company’s financial statements. Issuers should include XBRL tags in their XHTML files, i.e. in the format of the consolidated financial statements. The format will be supported by any and all Internet browsers.

Benefits to Using XBRL

The purpose of the format unification is to improve the efficiency of reporting, ease of access thereto and analyses thereof. Ensuring comparability of annual consolidated financial statements is the ultimate goal. Financial analysts use XBRL to rapidly analyze a company’s financial statements and compare it to data provided by other companies as well as to analyze industry trends and other benchmarks and to update their financial models.

What Are the XBRL Requirements?

In the case of consolidated financial statements for reporting periods beginning after 1 January 2020 prepared in the ESEF format, the obligatory presentation is limited to the Primary Financial Statements (statement of comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows included in consolidated financial statements prepared in line with IFRS).
As of 1 January 2022, ESEF reporting shall include notes and accounting policies to consolidated financial statements, which will be block-tagged.

Challenges of XBRL Implementation

With said regulations in force, companies falling within their scope will have to face a variety of challenges related to compliance. ESMA taxonomy was so far subject to many updates; thus the companies did have an obligation to monitor and follow them. New standards and amended regulations mean that the taxonomies themselves may also be updated, and changes to related elements will be successively implemented.

Adam Czechanowski | Deloitte

In reviewing the taxonomy, companies implementing ESMA guidelines should:

  • Consider the need to apply extensions to their own annual financial statements and determine what items in their existing financial statements require extensions. What are requirements regarding such potential extensions?
  • Check whether all necessary financial data can be provided using the existing systems, or whether they need to be provided with appropriate EFS interfaces or special software.
  • Does the process of preparing annual financial statements, including roles, competencies and duties, need optimisation?
  • What other areas have to be considered? Will subsidiaries’ financial data have to be provided in a different format in the future?

What Steps Can Be Taken Now?

To prepare for adoption of the XBRL requirements, a company can:

  • Designate a person in charge or assemble an XBRL reporting team, and determine the technical training required, such as instruction on XBRL and on the regulatory mandates affecting the company.
  • Review ESMA rules and follow information published by i.a. the Polish Financial Supervision Authority.
  • Become familiar with the IFRS taxonomy, including its elements and definitions, and begin selecting appropriate tags for the financial statements and notes.
  • Determine whether management would like to tag and create the XBRL instance document (i.e., the filing formatted according to XBRL rules) in-house or outsource it to a service provider.
  • Consider tagging a mock filing as practice before the requirements are effective.

Potential mistakes

Common mistakes observed include:

  • The creation of extension elements when an appropriate element existed in the standard taxonomy.
  • The selection of elements that were either too narrow or too broad for the associated financial reporting concept.
  • Incorrect (debit or credit side) tagging.
  • Efforts to make a rendered version of the interactive data file look like the traditional financial statements, which may result in the introduction of errors into the data.
  • Problems with dates, decimal points, entities and missing calculations.
  • The lack of relevant control mechanisms in the XBRL reporting process.

Assessing and implementing XBRL

We understand the practical issues in addressing XBRL, and work with our clients to help them prepare for XBRL and implement the rules.

For many, assessing and implementing XBRL is a new process. We can assist clients with:

1. Preparing XBRL tags for consolidated financial statements — for either the primary statements or the full financial statements with notes. Our services in this respect include:

  • identifying IFRS taxonomy elements relevant to the respective items in the consolidated financial statements;
  • mapping the usual items;
  • separating the unusual items in the statements;
  • identifying the place of the unusual items within the taxonomy, with their broader and narrower accounting meaning;
  • preparing a taxonomy extension list;
  • mapping data to the taxonomy used for consolidated financial statements with XBRL tags.

2. Verifying the company’s ESEF taxonomy and extensions used for items in the consolidated financial statements.

3. Dispelling doubts about XBRL mapping through consultations.

4. Choosing the XBRL reporting support tool;

5. Identifying opportunities to improve the annual report preparation process;

6. Providing training on XBRL, together with information concerning updates to the taxonomy. 

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