Most finance directors have, at some point in their careers, struggled to remain conscious while being served up an acronym-rich alphabet soup by their IT staff. But to nod off as iXBRL joins the menu could be a costly mistake.
The snappily named iXBRL (Online extensible Business Reporting Language) is an extensible markup language-defined financial and business reporting data standard that provides a method for tagging financial and business performance information. Awareness of the language has increased sharply the world over, as private companies and public organisations have embraced it, taking heed of its adoption by financial regulatory agencies and the national governments of the UK, US, Japan, Australia, Belgium and Holland.
The iXBRL format will become mandatory for all UK corporation tax returns from 1 April 2011. After that, all tax returns, computations and accounts must be filed electronically over the Government Gateway web-based service using iXBRL. HM Revenue & Customs has stated unequivocally that those who fail to file both corporation tax returns and company accounts in the new format will have their submissions rejected.
However, while the move to iXBRL will make life easier for HMRC, the cost-benefit analysis looks much less rosy for UK businesses that have to remodel their systems and processes to comply. The Federation of European Accountants and two of its member bodies – the Association of Chartered Certified Accountants and Royal Nivra – recently warned that few finance professionals currently have sufficient knowledge of iXBRL.
According to research from the Institute of Chartered Accountants of Scotland, with less than nine months before implementation of the format becomes mandatory, almost half of companies surveyed are not ready for the technological headaches the move to iXBRL entails. These companies, from a variety of sectors, cite difficulty in identifying suitable software as among the greatest obstac les preventing their readiness to comply with the new reporting regime.
Big Four auditor KPMG warns that most companies in the UK are unaware of the iXBRL ticking timebomb. It predicts that the main issue will not be the filing of corporation tax returns, as tax software vendors have effectively managed to ensure that tax numbers can be filed in an iXBRL format; rather, the main issue will be with the filing of company accounts. This is because most large and medium-sized companies produce their accounts manually and tend to rely on Excel spreadsheets. They need to re-engineer their accounting processes and systems to achieve compliance.
According to KMPG, there are “very few” widely available software packages in the UK that have been designed to produce company accounts in an iXBRL format. Additionally, it warns that there are “almost no solutions” for larger organisations seeking compliance.
In the face of this apparent paucity of technological answers, the choices are clear. FDs from companies currently running software that can output iXBRL should give themselves a pat on the back and tweak their systems to achieve compliance. Those that cannot must achieve compliance by buying in new technology, or will probably have to swallow the cost of additional consultancy support. But what of a DIY option?
Research outfit Quocirca offers a word of advice for those considering bridging the gap between existing systems and iXBRL by creating bespoke software: don’t. It warns that this is a high-risk option. The software will need to be kept updated as the underlying iXBRL standard evolves. Failure to do so means the fidelity of filed data could be compromised, leading to potential fines and serious legal ramifications.
Companies that get their compliance programmes wrong could find themselves deep in the iXBRL soup, with little time to remedy it.
Robert Jaques is a leading commentator on technology issues
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