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Preparing for XBRL and iXBRL

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3rd Mar 2010
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Sage's Simon Taylor explores what practices should be doing to prepare for iXBRL.

For years organisations have been looking to leverage off technology to enable “better, faster, cheaper” decision making. The UK is now trying to implement a solution to this issue.

Following recommendations made in the 2006 Carter Report (a systematic review of HMRC’s online services) a new mandatory filing regime will be introduced from 31 March 2011. It will only accept accounts and tax computations filed electronically with the CT600, using a data standard called XBRL (which stands for extensible business reporting language). The changes to the filing requirements and the processes to generate the XBRL data may seem relatively innocuous, and may still be attracting little attention, but they will present both challenges and opportunities.

Defining the new system
In simple terms, XBRL is a ‘language’, written specifically for business reporting. It contains a taxonomy, a defined set of entries, which includes all the elements of data that users would expect to see in a set of accounts and corporate tax computations. The accounts and tax computations you send electronically to HMRC must be tagged so that the HMRC systems can read this automatically, without the need for staff there to input data manually – a costly and inefficient process.

HMRC is looking to eliminate these costs with XBRL. As well as speeding up the input of data and reducing errors, the idea is that the resulting data can then easily be compared between companies and sectors both in the UK and internationally.

Historically, if HMRC wanted to compare the information for Company A and Company B for example, it would have had to interpret individual entries in the accounts and assess whether the items in each were directly comparable, before it actually started to compare them. The need for human intervention from specialist staff in this process is expensive. Using XBRL means that all accounts will be ‘written’ in the same language so HMRC systems can instantly identify comparable data, with minimal intervention.

The UK are not the first to implement XBRL, however the manner of its approach and the form is unique. In its native form XBRL is not easily interpretable by humans. Therefore, iXBRL has been decided on as the intended technology to render financial statements moving forward. Inline Extensible Business Reporting Language is simply the rendering of XBRL into human readable form, taking a set of financial statements in XBRL and putting them in a form the user would expect to see the accounts in.  The benefits of this are that humans and computers can both read the output.

Preparation for iXBRL
How much preparation you need to do for iXBRL depends both on how you and your clients work together to prepare and file accounts currently, and on how much you both want to leverage XBRL.

One of the possible benefits your clients may want to leverage could be to embed XBRL in all their internal management reporting. This is certainly one of the business benefits envisaged for larger organisations in the creation of the XBRL standard - but there are wider implications. As other institutions such as banks start to embrace XBRL as a data standard, your clients could see requests from banks to provide accounting information in XBRL format in support of loan applications. Accountants well versed in setting up XBRL reporting could be well placed to offer consultancy services for their clients when asked to send information to their respective banks.

Even if you wish simply to help your clients fulfil their filing commitments, preparation has a role to play. For the 75% of accountants who already use software packages to generate their accounts, upgrading to the iXBRL-enabled version, when it arrives should be fairly straightforward. Making sure your staff and clients have a clear understanding of what is required and when it will be required across you client base will go a long way to ensuring you won't get caught with any 11th hour issues that can't be managed.

Although you don't have to act yet, once your software is available and training is undertaken, it would be prudent to file a few accounts during HMRC's 'voluntary' period, which is now open and runs until March 2011. This should enable you to become familiar with any changes to your software and the HMRC filing mechanism and to ensure your processes are reviewed, aligned to your software and understood by all your staff.

Sage's corporation tax software will incorporate iXBRL accounts into the iXBRL file to submit to HMRC and will be available in July 2010, later in 2010 Sage will release compatible companion accounts production packages. Existing users will note that the changes to deliver iXBRL filing will be relatively minor.

Firms that don't already use corporation tax software will need to consider buying now. This is the software which will ultimately be submitting information to HMRC. It would also be prudent to register with HMRC to file electronically on behalf of your clients, although the registration process is relatively quick.

Firms that don't currently use accounts production software should start thinking about buying software that will help your business become XBRL compliant. Whilst tools that will manually 'tag' a set of accounts prepared in Word or Excel will be available, these are likely to be more labour intensive than using software.

Regardless of whether you have accounts production software, it may be a good time to review your software choices now. Firstly you should consider whether the range of account formats currently facilitated meets your needs. Any entity submitting a CT600 will need to submit iXBRL accounts; this includes charities, farms, clubs, LLPs (in some circumstances) and groups. Secondly you might want to look at how easy it is to customise the accounts you produce to your own, or your clients' in-house styles.

There are a number of choices to be made around the implementation of iXBRL and ensuring that you and your clients are both aware of the issues and alternatives  will mean you are well placed to make the choices to best suit your practice.

Further reading
xbrlwithSage.com website
iXBRL coverage and Expert Guides on AccountingWEB.co.uk
HMRC CT Online filing pages, featuring software demonstrator and recognised products.
XBRL International - UK reference site

Replies (2)

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Tim Good profile image
By Tim Good
05th Mar 2010 20:21

iXBRL software now

Our CT package already incorporates iXBRL filing and our accounts preparation package already produces the iXBRL output.  If you want to start preparing for iXBRL now then download from www.absolutetax.co.uk.

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By sandeepjohn
09th Aug 2011 09:33

iXBRL managed tagging services
You could always outsource your iXBRL work to DataTracks www.datatracks.co.uk. We can handle files in multiple formats of word, excel and pdf. DataTracks will help you convert your financial statements and tax computations to the iXBRL format. You can use the pay-as-you-go iXBRL website service if have an limited number of files.

 

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