The ABC of XBRL

 Danielle Cyrus, Chief Customer Officer at Arkk Solutions, answers our questions about the new technical requirements and the taxonomy that will become a part of the reporting language.

Q: We hear a lot of complicated-sounding acronyms these days, XBRL and xHTML being two. What are they, in a nutshell?

XBRL stands for eXtensible Business Reporting Language and is a business-ready version of XML – eXtensible Markup Language. Put simply, it’s like barcoding data and ‘tagging’ that number with additional information, such as, ‘This is IFRS profit’, ‘Figures in GBP’, ‘For year ended 31/12/19’ and other terms. The result? XBRL enriches a set of accounts (which tend to be copy heavy) and means they can be machine read.

XHTML – extensible Hypertext Markup Language – is a rendering language and helps web browsers process the content in a web page. 

And let’s not forget iXBRL, the ‘i’ of which stands for inline. This is the type of XBRL that we human beings read in a web browser.

Q: Is this iXBRL the same as we use for HM Revenue & Customs (HMRC)?

Yes. Since 2010, corporate tax returns have been filed through HMRC in iXBRL, with the statutory accounts filed alongside them, also in iXBRL. However, a key difference is that the iXBRL document you send to HMRC may not have all the tags if they don’t appear in the relevant taxonomy, so it’s just left blank. With The European Single Electronic Format (ESEF), though, you have to create your own tags if you can’t find a specific concept in IFRS (e.g. ‘Profit on Apple iPhones’ would require extending as it’s not included in the base taxonomy).

Q: How do you help businesses meet the challenge of all this? 

Arkk Solutions was founded in 2009 and has been involved in the HMRC mandate since 2010. We produce over 6,000 iXBRL documents every year, making us one of the top players outside of the ‘Big 4’. Our core offer is our outsourcing service: 80% of our clients – around 25% of the FTSE 350 – produce accounts in Word or Excel, which our team in Belfast then tag, within 15 working days. With HMRC, the timeframe for producing an iXBRL document is usually 12 months after year end, so there’s plenty of time.

The timeframe for ESEF, however, is going to be much tighter: it is likely that the iXBRL document will have to be ready at the same time as the company announcement. As a result, we’re committing to not exceeding a 24-hour turnaround to meet this requirement.

Another difference between the HMRC and ESEF requirements concerns auditing: the iXBRL will likely be subject to some form of auditing, though this is still TBC. Other countries such as Germany have mandated the audit of the iXBRL, so it will be interesting to see If the UK follows suit.

Under HMRC rules, the documents are not subject to audit, but under ESEF they are likely to be reviewed by several stakeholders including auditors, internal stakeholders and others before the glossy accounts make their way into the public domain. This means that there will be a longer review process, so we recommend a dual approach: before the year end and during the year end. The impact on auditors will certainly be significant – with clients likely being charged more. 

Q: To what extent will ESEF affect the presentation of annual reports? For example, do you foresee a shift from one to two separate documents?

This is a real conversation topic at the minute! Initially, we thought that the market might favour a two-document approach. This is because it appeared that InDesign didn’t really lend Itself to well-designed xHTML documents. We therefore thought that firms would produce two documents: the usual PDF with all design elements, and a more compliance-driven document, with limited design.

Fortunately, the technology in this area has moved on, and we now believe that it is possible to inject iXBRL tags into xHTML documents far more readily. What this means is that while two documents may still be the preference of many, we believe that the ESEF-compliant document will still maintain much of the design that the PDF does. This is a real win for firms affected by ESEF, as well as the consumers of the documents.

Q: What role will third parties play in the implementation of ESEF?

FTSE-listed companies want to make sure that the numbers and messaging are correct. Design agencies have an advisory role of telling their clients’ stories – and making them appealing visually. ESEF will fundamentally change how both corporates and agencies work, as there will be a need for third-party involvement; namely, experts in IFRS tagging and iXBRL taxonomies. Our initial research and conversations indicate that neither corporates nor agencies want to do this in-house, especially as the actual time to convert each set of accounts to iXBRL is only likely to be around two hours. So we foresee a crucial role to be fulfilled by third parties. 

Q: XBRL: transformative or disruptive?

I believe iXBRL has the potential to be transformative. There are lots of good examples of how XBRL has the ability to analyse data to impressive effect. In Japan, it’s used by the local equivalent of Bloomberg. The US has been using XBRL for SEC (Securities and Exchange Commission) filings for around 10 years and there are 7,500–8,000 individual data points tagged on average per entity, providing a wealth of data. By way of comparison, ESEF will only give a little over 200 tags per entity! That means that the data set is not big enough at the moment to be transformative – or, indeed, disruptive. 

So while iXBRL can be transformative, ESEF alone won’t be enough to shift the dial. It’s a useful way of looking at data and a useful addition to the current reporting requirements, but the benchmark had to be set fairly low to be achievable for all European countries, as some have no experience in producing iXBRL documents. We will see the first documents produced in ESEF in early 2021, and we’ll see more tagging (block tagging of notes) two years later, so I do think we’ll end up using it more and more. 

It’s also worth bearing in mind that with Brexit taking effect, ESEF in the UK will be pushed by the UK rather than a European regulator, which may well result in the use of XBRL being pushed further, faster.

The Luminous view

The move towards electronic reporting will allow the comparability and accessibility of issuers’ annual financial statements for internal and external stakeholders alike. However, an annual report is much more than just the financials, and preparers must not lose sight of the human side of the story.

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