SOUTH AFRICA LEADS THE WAY IN DIGITAL FINANCIAL REPORTING
South Africa has long been a leader on the African continent and is listed second on the African continent, after Mauritius, on the Global Competitiveness Index 4.0 2018 Rankings. To maintain this position and improve our global ranking of 67th, we need to be innovative in the way we operate.
One of the ways of being competitive on the global stage is through transparent financial reporting, and creating easy access to standardised financial data on the economy, for foreign investors.
An innovative technology to fast-track this process is to utilise XBRL – eXtensible Business Reporting Language. This business operating system that has existed for 20 years, as a standard for Digital Financial Reporting, but not widely adopted. More than 50 countries around the world have successfully implemented XBRL for financial reporting to regulators and for data sharing.
The Companies and Intellectual Property Commission (CIPC) have taken a leap forward and launched South Africa into the 21st century by implementing XBRL and iXBRL. The CIPC has mandated filing of Annual Financial Statements (AFS), from 1 July 2018, to be received exclusively in an XBRL format.
Inline XBRL (iXBRL) is a development of XBRL and is the format required for CIPC submission. XBRL focuses on automated machine readability of data whereas iXBRL focuses on delivering such data. While XBRL documents can be viewed only with specialized XBRL viewers, iXBRL documents can be viewed on standard web browsers.
As a business, we complain about the perceived additional administration burden it places on companies, but it is the way of the future and to many of us, change does not always come easy. If we review the current reporting requirements of the various South African regulators, it makes sense to be able to report once and for all regulators to have access to the data and draw the required information. This benefit alone would make XBRL worth the short-term pain.
Well, the CIPC has paved the way for Standard Business Reporting (SBR) in South Africa. SBR envisions all South African regulators and government agencies sharing financial information based on the same core taxonomy (format). This will reduce the burden on companies and reporting entities to file multiple sets of financials to different regulators or agencies in different formats every year.
XBRL is a best-practise technology standard, perfectly suited to achieve SBR. It has already proved its usability in many countries around the world; for example, the United States Securities and Exchange Commission (SEC) already adopted XBRL in 2009 as a mandatory mechanism of financial reporting.
South Africa has now moved into the “big league” of countries already utilising cutting-edge technology for regulation and data exchange.
The benefits of using XBRL include the following:
- The potential of the “report-once-share-many” principle behind SBR;
- Eliminating manual preparation of financials by reporting entities;
- The same “version of the truth” shared amongst government agencies;
- Improved accuracy through elimination of re-capturing of data;
- The potential to introduce full-circle automation from reporting entity, to auditor, to multiple government agencies and regulators (e.g., when digital signatures are combined with XBRL);
- Complete paperless preparation, approval, auditing, and filing;
- Fully automated analysis by regulators and other government agencies for identification of non-compliance irregularities, including preventing fraud;
- Observing trends in the economy for early warning purposes as well as investment advice and economic policy formulation;
- Development of technology skills in South Africa because of more service providers becoming involved in providing services to reporting entities.
The current status of the CIPC project is very promising, with over 2500 successful submissions as at October 2018. The next challenge for the CIPC and other regulators in South Africa is to expand the taxonomy to include other regulators and government agencies (such as SARS, the South African Reserve Bank, the National Credit Regulator, the Financial Sector Conduct Authority) to truly achieve SBR.
The successful launch of XBRL by CIPC, the proposed SBR launch for use by all South African regulators and the challenge to lead the rollout XBRL into the rest of Africa will affirm South Africa’s role as one of the most influential countries in Africa.
The challenge for South Africa and XBRL SA is to highlight the benefits of a continental improvement in reporting and governance and to develop a plan to assist other willing African countries to implement XBRL. It may not be an easy task, but as Africa’s most diversified, developed and (until recently) largest economy, South Africa has declared its commitment to the continent’s Africa agenda and these could be a step towards achieving the objectives.
South Africa will need to maintain the pace of change to ensure we match the global leaders in reporting and to continue leading the way on Digital Financial Reporting.
In times where corporate scandals and corruption dominate headlines, a move towards the accountability and transparency of business reporting and increased governance is a welcome step.
Author: Sumendra Naidoo: AFA Director on CIPC XBRL Programme Rollout and Hennie Viljoen: AFA XBRL Programme Manager.
The Accounting and Financial Advisory (Pty) Ltd (AFA), was instrumental in the success of the XBRL programme at the CIPC. AFA lead the XBRL Programme Management for the CIPC and have successfully assisted in completing Phase One of the project.
AFA is a national financial management consulting firm headquartered in Johannesburg and with offices in KwaZulu-Natal and Western Cape. The AFA team specialises in providing a diversified range of finance advisory and project solution services to a wide range of blue chip, listed private and public sector clients. AFA has the skills and experience available to assist clients in South Africa to stay abreast of the challenges posed by the fourth Industrial Revolution through technology standards like XBRL. For more information on AFAs’s history follow the link to their website https://afadvisory.co.za/
Source: Accountancy SA