Key Points from the ECCT Impact on Financial Reporting Webinar
On Tuesday 27th February 2024, ARKK joined our partner, Law Debenture, for a webinar with Companies House to discuss the impact of the Economic Crime and Corporate Transparency Act.
Transformative Changes at Companies House
As a result of the passing of this Act, Companies House will no longer be a passive recipient of information, but an active gatekeeper and custodian. This will fundamentally change not only how data and information is captured, but also how it is used by Companies House and by other stakeholders. One major change for those submitting annual accounts to Companies House is that they will have to be in iXBRL format. iXBRL is a format that allows for data to be both human and machine readable. Although, for some, this may take some time and initial investment to adjust to this change, it is a positive change and should be viewed as such.
Advantages and Implementation of iXBRL Reporting
Having the reports in iXBRL format will facilitate more real-time communication of financial data between businesses and other users of financial information. Rather than reviewing data by human eye, the machine-readable data can be extracted and analysed at a click of a button. iXBRL will also remove the need for physical and pdf copies of accounts. With ESG targets impacting key strategic decisions for many companies, this should be celebrated. Currently, reams of accounts printed for submission to companies house, therefore a digital report can only be seen as a step in the right direction for a positive environmental change.
As I have already eluded to, the data in the accounts will now be machine readable, allowing for not just Companies House, but as these are in the public domain, for other stakeholders to use the data for comparison and analysis. As we have seen with iXBRL tagged reports for SEC filings in the US and with ESEF filings more recently, stakeholders are highly interested in the digital data. In September 2023, we held a webinar with our partner Corporatings, who have a platform to analyse iXBRL data, and a Financial Analyst who uses iXBRL. This webinar gave an insight into where we are now and how the future will change how we interact with and use the digital data. You can catch up on the recording of that webinar here.
With more stakeholders using the iXBRL, it is more important than ever that the reports are fully tagged using iXBRL and tagged accurately. For the first time, for many issuers, these iXBRL accounts will be available for the public’s consumption, leaving them open to review and criticism. The mandate for iXBRL for HMRC and expected for Companies House, is full tagging. This means that where there is a tag in the relevant taxonomy (iXBRL dictionary for the standard of the accounts) available for a disclosure in your accounts, then this tag should be applied. This can get more complex as not only do you have to apply the relevant tag, but you also must add the required dimensions, such as date, signage, currency, scaling, etc. iXBRL is more than just a matching exercise, which historically it has been viewed as by some. In addition to this, there are 1,000’s of tags in any given taxonomy, so you must have good knowledge of the taxonomy to ensure you are using the tags available to comply with the full tagging requirement. Many are looking to AI and auto-tagging as a functionality to complete their iXBRL reporting and, of course this can have a place, but as no two sets of accounts are identical, this becomes increasingly difficult to ensure all tags have been applied and the relevant dimensions are accurate, such as your signage of your numerical values.
Preparing for the iXBRL Mandate
So, what can you do now? The iXBRL mandate for Companies House is expected to come into play for submissions in 2026. That may seem like a long time away but in reality, it will give issuers one year to do a voluntary run through in 2025. As with all new mandates, this voluntary iXBRL submission would be strongly recommended to ensure that you are comfortable with meeting the mandate in 2026. For many, iXBRL won't be a new requirement, as it has been a mandate for HMRC submissions for nearly 15 years. However, for Companies House, the iXBRL will now have to be completed within nine months of your reporting period end date, unlike the twelve months for HMRC. Also, due to the potential enhance scrutiny, you may also want to factor in time for an enhanced internal review.
ARKK are working closely with Companies House and our partners, such as Law Debenture, to ensure we are ready and prepared to help our clients meet the mandate. As it currently is developing, we will host further webinars and events to help educate our clients on what is required from them and how they can prepare. Please get in touch to ensure you are included in all notifications for these events.
