iXBRL Reporting Buyer's Guide
This guide provides a high summary overview of Inline XBRL (iXBRL) Reporting including many of the difficulties that we’ve seen users experience combined with practical advice on the process of selecting the best iXBRL Reporting software and the key features that businesses should look for.
Buying iXBRL Reporting software has its challenges
Whatever route you go, SEEING IS BELIEVING. Case studies and customer success stories are valuable and earn their place in the process, but vendors have a tendency to only showcase their most successful projects.
Every credible vendor will be willing to demonstrate their product and be scrutinised by your subject matter experts to evidence that their software can meet your most intricate requirements.
What is iXBRL?
- The Basics
iXBRL, or Inline eXtensible Business Reporting Language, is as the name suggests, a language used for the reporting of business and financial information, in a format that is both human and machine-readable.
iXBRL takes the HTML standard that is used to power the world’s web pages, and embeds extra “tags” into it that give meaning to the figures and statements in a format that can be understood by a computer. The end result is an XHTML document.
- Use Cases
In the UK, HM Revenue and Customs (HMRC) already requires businesses to submit their report and accounts and tax computations in iXBRL format when making their Corporation Tax returns. Beyond the UK, iXBRL is also mandated for corporate filings by government agencies in Japan, Denmark and South Africa.
In the US, the Securities and Exchange Commission (SEC) has announced plans to move to iXBRL, removing the need to report HTML and XBRL documents separately.
In December 2017, the European Securities and Markets Authority (ESMA) published the final draft Regulatory Technical Standards (RTS) setting out the new European Single Electronic Format (ESEF). Under the regulation, starting in 2020, issuers with securities listed on EU regulated markets must file and publish annual financial reports (AFRs) using XHTML format with iXBRL.
The UK has adopted a similar position. Issuers with transferable securities admitted to trading on UK regulated markets are in scope of ESEF requirements (commonly referred to as UKSEF) and will now be required to file and publish human- and machine-readable accounts for financial years beginning on or after 1st January 2021.
In April 2021, the European Commission adopted a comprehensive package of measures to help improve the flow of money towards sustainable activities across the European Union – measures that will be instrumental in making Europe climate neutral by 2050. The package will extend Environmental, Social and Governance (ESG) reporting requirements to all large and listed companies in Europe, while the commission is also developing a separate set of comparable measures for small and medium-size enterprises. And yet again, under this regulation, iXBRL will be the chosen business reporting standard.
As at today iXBRL affects tens of thousands of listed companies. Indeed, iXBRL reporting adoption by supervisory authorities is growing rapidly and this invariably means that it won’t be long before almost all companies, large and small, will be affected.
- How It Works
Although the jargon may be a bit daunting, the how isn’t really that complicated. iXBRL is little more than a dictionary of tags. Preparers need to apply these tags to numeric and textual information in their reports, giving identification to all pertinent facts throughout the document. Because the outputs are HTML, the tags do not actually render in the display and print of the document. They lurk behind the scenes, making up the element that we refer to as machine-readable.
It helps to understand some of the jargon, both in terms of having a broader understanding of the tagging process, but also to understand the iXBRL software available in the market.
You can see a complete glossary of terms here.
How should I go about selecting the
best iXBRL Reporting software?
Identify your principal requirements before you start looking at vendors – refer to the ‘Top Features’ section to discover the typical capabilities that businesses normally look for. Why not consider your disclosure management requirements at the same time? Read our Disclosure Management buyer’s guide.
Most of these solutions are plug-and-play. If implementation is required vendors will typically provide their own consultants or point you in the direction of their implementation partners. Verify that these consultants have proven experience and product knowledge.
We have simplified this process by including the main iXBRL Reporting contenders and their relevant features for free on our site. Book demos here with one or more vendors and we will facilitate the process and insulate you from the initial sales hassle.
Far too often training is dropped as “cost-saving exercise”. Ensure you spend the time training your staff on the software – it will greatly increase the adoption rate across your business and reduce your reliance on expensive variable resource in the future.
Engage with all stakeholders (Procurement, IT & Finance) to determine your final requirements and perform your full software and vendor due diligence. Use our free tailorable Request For Proposal (RFP) pack to get you started.
Purchasing an annual support package from the vendor or an implementation partner can be more cost effective than trying to manage it all yourself. Look for packages that include bug fixes and managed software upgrades.
What are the challenges of
iXBRL Reporting?
- Data Volumes
The task of tagging any single document is typically directly proportionate to the volume of facts reported. Consider this: each value reported in each statement is a fact, as are so many other textual elements and footnotes. It would be quite unreasonable to attempt to manually tag all facts in a large and complex report, such as your annual accounts. It would be both very time consuming and carry a significant risk of human error. As annual reports include multiple reporting periods, a single document is in fact tagged for two or more years’ worth of facts, not just one. It’s also inefficient to tag the prior year each time, given that they were tagged previously.
- Time and Resources
Whilst tagging reports using Inline XRBL certainly improves disclosure and comparability, it also adds yet more activity and processing time to the already busy office of finance. In most cases iXBRL document preparation will occur during busy reporting periods, and documents tend to need to go through many hands, being the initial preparers (often multiple people who collaborate concurrently), reviewers and finally the publishers. Each have timetables to adhere to, and when any individual fails to deliver their tasks on time, a knock-on can be expected across the remainder of the process stream. Inconveniently, annual leave often needs to be scheduled outside of these busy reporting periods and staff illness can have a profound impact on delivery too, owing to key-person dependencies.
It’s no wonder so many companies have opted to outsource document tagging. But with more and more reports needing to be published with Inline XBRL, will it continue to be cost effective to externalise the processing?
- Frequency of Change
Many regulations and taxonomies are subject to frequent change and keeping up with the changes can be tough. Some businesses may fail to consider the delays when newer taxonomies are released and need to rally their teams and put in long hours to meet their deadlines.
Often changes to taxonomies might not appear significantly material from the perspective of the business, but they can have significant impact on document preparation. It’s important that a business can incorporate current taxonomies without delay – yet we need to understand that software vendors do require a window to update their software.
It’s equally important that taxonomies changes are transparent to filers, and not presented purely in a technical language. Business context needs to be included so that the submitters can analyse the changes and prepare upstream data sources to cater for the new taxonomy.
- Taxonomy Extensions
Filers are required to create taxonomy extensions in order to disclose information that is specific to their reporting entity. These are modifications of the base taxonomy. Taxonomy extensions are defined in the same language as the base taxonomies, XBRL. Very few finance and accounting professionals are fluent in XBRL, and even attempting to modify the base taxonomies using raw XBRL would be very time consuming, complex and prone to errors.
Top features to look for when buying
the best iXBRL Reporting software
The world is moving toward iXBRL as the primary standard for public reporting, and more. Taxonomies will underpin all reports and will inevitably change frequently. What with the sheer volume of reports that you will need to prepare with iXBRL, it makes sense to make use of a single product – one that will support any and all iXBRL taxonomies, be it HMRC CT600, ESEF, ESG and so on and so forth.
1. Taxonomy Management
Taxonomies are very large zip folders containing hundreds and even thousands of files. Maintaining the software for new versions of taxonomies will be time consuming and may involve specialist IT skills. Many vendors, on the other hand, will offer a managed solution, i.e. one where taxonomies are automatically available and customers can even report on legacy versions (e.g. for resubmissions). Others will offer software that will consume the taxonomies but this involves an element of administration by customers, who will need to download the taxonomy files from the regulator’s websites and import them into the software.
All viable iXBRL software will include functionality for their customers to build in their own taxonomy extensions, i.e. the elements and relationships between elements that are specific to their financial statements and not included in the base taxonomies. In this regard, differentiation comes down to how easy the software makes taxonomy extensions on the end user.
2. Batch Tagging
With a document often containing thousands of facts, no-one wants to manually tag each data point. Batch-tagging is a feature that should allow a document preparer to select entire sections, such as tables, and have the system intelligently apply the appropriate tags. This tends to be used where the respective text matches the concept names exactly. Sometimes it presents the user with a dialog of all facts in a nice succinct list, offering the user the opportunity to accept or reject one or more of the items.
3. Intelligent Auto-Tagging
Intelligent auto-tagging is similar to batch tagging above, but uses clever machine learning algorithms. With complex taxonomies and businesses having the freedom to use their own text and terminology, auto tagging using exact text string matching might not cut it. That is where machine learning and other intelligent auto tagging features come into play. Many vendors are embracing machine learning and as a result some already cite that their solutions can automatically tag 80% and more of a document immediately and correctly.
4. Roll Forward
A good iXBRL preparation mechanism should incorporate a “roll forward” feature whereby a past financial statement (with its foot notes) could be used to create a template for the new period, preserving as much of the data as is possible and necessary. Nobody wants to do the same task twice after all.
The fundamental benefits of roll-forward are:
- it ensures consistency of tags used period on period;
- provides users with the ability to reuse previous period tags; and
- allows users to apply new tags to facts for a newer taxonomy for the current period.
5. Integrated Disclosure Management
The very purpose of iXBRL is to allow a single document to be both human-readable and machine-readable. The human readable element typically involves disclosure management software. iXBRL point solutions invariably need to consume the very documents that one produces using disclosure management software – so it stands to reason that many disclosure management software vendors have developed iXBRL tagging within their software. This has a range of benefits. Not least, it avoids the need to purchase iXBRL tagging point solutions, and invariably go through the arduous vendor onboarding process.
An integrated solution could offer other benefits too. The task of tagging concepts to derive facts in a document could actually take place at the very stage that the figures and disclosures are embedded in the document; a far more sensible point within the process.
For more information on disclosure management software, see our Disclosure Management buyer’s guide.
6. Certified iXBRL Processor
iXBRL Certified Software is software that has been inspected by XBRL International for conformance with the XBRL specifications. The certification programme exists to ensure interoperability between XBRL software products, ensuring that XBRL reports created in one piece of software can be consumed successfully in another and that those reports will be consumed the same way by other pieces of iXBRL Certified Software.
A published list of certified iXBRL processors is available here.
