Are you ready for the CIPC's new reporting standards?
Deloitte's Sumendra Naidoo unpacks the incoming XBRL requirements
The Companies and Intellectual Property Commission (CIPC) has mandated submission of Annual Financial Statements (AFSs) for all qualifying entities (client companies) via the Digital Financial Reporting Standard of XBRL (eXtensible Business Reporting Language). As from 1 July 2018, the CIPC will receive AFSs exclusively in XBRL.
XBRL offers benefits of automation, cost saving, faster, more reliable and more accurate handling of data, improved analysis, and better quality of information and decision-making to both the preparer and regulator.
Sumendra Naidoo, Director of Finance & Accounting Business Process Solutions, Deloitte South Africa, says:
"The CIPC is currently driving an awareness campaign to notify all relevant client companies of the programme, and what the requirements for submission via XBRL entails. As a result of the campaign, the following question arises naturally: ‘What do client companies need to do to ensure compliance?’.”
Naidoo adds that the CIPC believes South Africa should take advantage of the benefits offered by XBRL. As such, the role for CFOs will become ever more important in addressing practical steps to be followed by companies to ensure they are ready for the implementation of XBRL come 1 July 2018, he says.
Naidoo highlights several steps, represented as a high-level roadmap for compliance.
Determine which entities qualify for reporting via XBRL: All companies currently submitting AFSs via PDF files will have to do so via XBRL in future. The scope of financial reporting to the CIPC does not change in terms of regulations in the Companies Act.
Determine which financial aspects are required to be reported on: The CIPC has published a Taxonomy aligned with IFRS incorporating Companies Act requirements and a Data Model, indicating which data elements form part of the taxonomy. The current taxonomy makes provision for more data elements that will be required for the initial roll-out of XBRL, because of a phased approach to be followed by the CIPC over several years. Minimum tagging requirements for initial roll-out, including mandatory data elements for every client company, have been published on the CIPC website. Depending on whether a company is classified as an SME or not, will also determine which data elements in the taxonomy will apply to a specific company. Classification criteria in this regard have also been published.
Determine service provider to assist with XBRL software solution: Three options exist for client companies, as follows:
- Liaise with the vendors of existing software that may already be utilised by client companies (e.g. Enterprise Resource Planning (ERP) software, financial or accounting software, disclosure management software, etc.);
- Engage with software service providers with existing expertise in the field of XBRL to implement existing solutions or develop/customise new XBRL capable software; and
- Choose to outsource their XBRL reporting function completely.
According to Naidoo, the CIPC is in the process of establishing a software service provider panel. “This forum will aim to determine the capability of various software service providers and their software solutions for possible recommendation to client companies,” he says.
Advance planning is required
XBRL reporting will be new to most businesses in South Africa, with the skills not being readily available. The CIPC phased approach for compliance will go some way in easing the burden compared to a big bang approach, but the first few years are going to require some advanced planning to meet the compliance deadlines.
In conclusion, Naidoo says:
“XBRL will improve corporate governance in South Africa and assist in the current direction of creating an e-government. In the long-term, XBRL is aimed at assisting business to reduce the administrative burden of reporting financial information for regulatory compliance and to assist the CIPC to provide usable financial information more efficiently to investors for better transparency.”