By Phill Robinson, chief executive of IRIS
Just when the accountancy profession thought it had ticked iXBRL off its collective to-do list, there are changes afoot. With the end of the grace period on iXBRL compliance, a tougher regime is in the offing while in the months ahead we can expect a new taxonomy to be introduced.
As we have previously discussed, a two-year transitional period gave accountants and vendors of accountancy software time to prepare for the introduction of iXBRL. This ‘soft landing’ came to an end in March this year, as planned. HMRC will now put more focus on the quality of tagging and is expected to use a risk and exception-based approach when reviewing accounts and computation. HMRC will use this information along with other sources to focus on companies where there are indicators that the data in the tax return is outside the norm.
There is also likely to be closer scrutiny by HMRC of the general quality of the tagging. And we know that there will be a new requirement to add tags to the detailed profit and loss account.
Another learning curve
The UK HMRC is planning to make a further change to the tagging list later in the year, introducing a mandatory requirement for detailed profit and loss account tags. To date, it has not been mandatory to tag this section of the accounts. Most or all income and expense items in the detailed P&L will have to be tagged to provide HMRC with more granular data.
The new taxonomy will supersede the current detailed P&L sections of the accounts and tax computation taxonomies and, therefore, will result in a single tagging requirement for the detailed P&L, whether included in the UK GAAP final accounts or tax computation.
This will create a new learning curve for accountants who carry out the task of tagging manually. Tagging a detailed P&L accurately and in full – and to a changing taxonomy – will be time-consuming.
Ultimately though, this will lead to greater consistency in reports.
Apart from the introduction of the detailed profit and loss taxonomy and some minor changes to computation tags, there are no short-term plans to change the accounts taxonomies further. However, the taxonomies will need to be updated to cater for current and proposed legislative changes, including the recently published new UK accounting standards FRS101/FRS102. These standards can be adopted early – now, in fact – with the existing IFRS taxonomy being used to meet HMRCs tagging requirements.
Going forward, it is expected that the ownership and maintenance of the accounts taxonomies will fall under the Financial Reporting Council (FRC), rather than being produced and maintained by XBRL UK as they previously were. As the body that sets the standards for corporate reporting and enforces accounting and auditing standards, it seems sensible that the FRC should also be responsible for maintaining taxonomy standards.
It is also expected that the FRC will produce new taxonomies to fully match the new accounting standards (FRS101/102) and that HMRC’s tagging requirement will be amended to reflect the requirement to tag to these new taxonomies. This development is currently planned to go live in the second half of 2014 for FRS101 and the first half of 2015 for FRS102, and would result in users having to adopt the new accounting standards and then tag using a new taxonomy.
All these developments could mean a new learning curve on iXBRL. However, while there will always be exceptions where manual tagging is necessary, if the vast majority of tagging is automated, this takes a huge load off the practitioner. Firms and companies using automated iXBRL-compliant accounting solutions should be able to rely on their software vendor to understand and incorporate these changes.
An international blueprint
iXBRL puts in place another piece of the jigsaw in the drive to consolidate all the financial reporting frameworks that have evolved across the world over the years into a common global standard.
With the global alignment of reporting standards, other tax regimes have taken note of the successful introduction of iXBRL in the UK and have embarked on a similar path. For example, at the end of 2012, the Republic of Ireland announced plans to introduce iXBRL into the Irish tax compliance process.
As I mentioned earlier, the accounting standards FRS 101 and 102 will include anew iXBRL taxonomy for the UK, bringing it more closely into line with regions and territories that are rolling outIFRS and considering their own taxonomies.
Being aware of these changes will allow you to understand sooner rather than later the impact this will have on your business.
Feedback from IRIS customers on the subject of iXBRL indicates that they regard compliance with HMRC’s requirements for formatting information as an additional overhead that adds value neither to their client nor their business. They need their tax and accounting software to handle iXBRL, so that they can concentrate on higher value activities- the work they trained for.
The software industry has played a major role in ensuring that the introduction of iXBRL in 2011 went as smoothly as possible. Leading vendors worked closely with both their customers and HMRC to provide solutions that would minimise the additional administrative workload that iXBRL inevitably imposed on practices and corporate finance departments.
We believe that with the right software partner and the right iXBRL compliant solution in place, iXBRL can simply be part and parcel of the way the practice or firm works, enabling them to take the forthcoming changes in their stride.