As new reporting methods emerge, compliance leaders debated digital financial reporting at the Finance Indaba.
In a session titled “New reporting methods require future-proof reporting standards”, XBRL specialist Hennie Viljoen facilitated a discussion with Cuma Zwane, investigator at CIPC and Nienke Kruger, product manager of financial reporting at CaseWare Africa about optimising digital financial reporting. The discussion focused on the CIPC mandating digital financial reporting using XBRL and it roused lively debate regarding the rollout.
When the CIPC mandated this in 2018, they made history as the first regulator to do so – driving financial compliance in the digital age. The panel delved into the impact this new technology standard has made on financial reporting, while also touching on how to align digital reports with best-practice accounting standards and regulatory requirements. It was ultimately a look at how to contribute to a sustainable economy through sound financial reporting, how automation is spearheading this process and the challenges and benefits therein.
Hennie kicked things off with an overview of the XBRL system and sharing its progress since it was instituted four years ago: “There has been a positive response from the market: we have had over 50,000 sign-ups already,” he said. It is also an efficient alternative to humans having to manually assess and filter PDF reports as was the case in the past, he said: “It limits the 80 checks that the human calculator would have to do."
XBLR is standardised from a reporting perspective and can give an overview of the financial soundness of a company or a sector in the economy. “You can have a high level overview while also drilling down on specifics”, said Hennie.
While the implementation of this is exciting, it is not without its challenges. Nienke outlined how the timing of filing these reports can be misaligned as CIPC requires filing on the anniversary of a company’s registration, which can sometimes be many months away from a company’s financial year end (when these reports are prepared). There is also some resistance amongst other regulators to adopt XBRL. Furthermore, there are various stakeholders at play.
Cuma pointed out that there are a number of benefits CIPC has experienced from using XBRL for digital reporting, including being able to identity anomalies and omitted disclosures, better validation, business intelligence such as being able to use data to corroborate touch points, and getting data that helps inform thought leadership and academia. It also leaves less room for speculation. For example, they have seen a spike in voluntary liquidations through this data and can interrogate that: “We can also pick up common directors and auditors across companies. You can pick up various trends,” he said.
Cuma is pleased that they have been able to optimise what was once a tedious and manual process, with a sophistication that allows for data to be reliable. “XBLR helps us flag irregularities at the entry point. It is good for regulation and more intelligence to make further recommendations such as policy changes,” he explained. This way of monitoring and enforcing compliance has various layers. “It is not just about verifying revenue, but to create an environment that enables the aggregation of numbers for investment,” he noted.
All three panellists engaged in discussion about how digitising financial reporting contributes to a sustainable economy, one of the key nuggets being how a common taxonomy for the ease of reporting and creating a free open-source portal was achievable.