Filing your annual financial statements the XBRL way

In terms of s33 of the Companies Act, every company is required to file an annual return within 30 days after the anniversary of its date of incorporation and, where a company is required to audit its annual financial statements (AFSs) in terms of the Companies Act, it must file a copy of its latest approved AFSs on the date it files its annual returns.

Regulation 30(5)(a) of the Regulations specifically prescribes for the CIPC to establish a system to review AFSs with the objective of monitoring compliance with the financial record keeping and financial reporting provisions of the Companies Act.

Previously, companies were required to submit AFSs in PDF format, which meant that AFSs were to be analysed, processed and calculated one-by-one; by walking, talking and breathing analysts.

As of 1 July 2018, the submission of AFSs for companies are to be done through XBRL, a form of digital financial reporting which aims to define and exchange financial information in a structured, less administratively burdensome manner. The automated nature of XBRL now allows companies to submit AFSs with the confidence that their AFSs will be analysed thoroughly by a digitally programmed system.

What is XBRL?

For the successful deployment of XBRL, the CIPC created a taxonomy based on the applicable requirements contemplated in the Companies Act and international financial reporting standards (commonly known as a dictionary of “financial facts”) which applies to all companies and which is consistent from one financial statement to another (Taxonomy).

In order to produce AFSs in XBRL format, all companies will require software that will be able to “tag”, validate and/or interpret the required data elements based on the Taxonomy. Accordingly, each individual element of data will be “tagged”. These tags contain information about the element of data as it appears on the AFSs. For example, “accounts receivable”, being an individual element of data, has its own unique tag which is understandable to computers and includes specific information about the element of data such as its value, currency and whether the relevant amount is a debit or credit. Tagging requirements may differ from one company to another depending on whether such company is a Small or Medium Enterprise. However, the minimum tagging requirements apply to all entities and can be accessed on the CIPC website. Pursuant to the new XBRL roll-out, the CIPC created a web portal specifically for the submission of AFSs in XBRL format, which can be accessed via the CIPC website.

The CIPC’s current e-Services functionality (Portal) will allow companies to upload AFSs in XBRL format:

• When users log in, the Portal will authenticate such user who will subsequently be permitted to upload AFSs. The Portal will either validate or reject the upload of the AFSs once automatically compared to the Taxonomy.
• The user will then receive an e-mail notification informing him/her of whether the upload of the AFSs has been validated or rejected. When an upload of AFSs has been rejected, companies will be required to rectify their data, through their own software, before re-submitting the AFSs to the CIPC. For assistance with the rectification of data, users may contact the CIPC by transmitting an e-mail to XBRL@cipc.co.za.
• After the successful upload of AFSs, the CIPC will perform an analysis on a sample of an AFS, including functions which cannot be automated through a digital financial system such as XBRL.

Does our company need to file the XBRL way?

Since the roll-out of the new XBRL format, the big question being asked on repeat is: “does our company need to file the XBRL way?”

In terms of regulation 28 of the Regulations, the following specific categories of companies are required to submit AFSs, on the same day that they file their annual returns, through the new XBRL system:

• all public companies and state-owned companies;
• companies with a public interest score (PIS) of more than 350, or if the PIS of a company is at least 100 and its AFSs for a particular year were internally compiled;
• companies with a memorandum of incorporation which prescribes that the company undergo an audit;
• any non-profit company if such company was incorporated:
  • directly or indirectly by the state, an organ of state, a state-owned company, an international entity, a foreign state entity or a foreign company; or
  • primarily to perform a statutory or regulatory function in terms of any legislation, or to carry out a public function, or for a purpose connected to any such function; and/or
  • any profit or non-profit company, if in the ordinary course of its primary activities, the company holds assets in a fiduciary capacity for unrelated persons and the aggregate value of such assets held at any time during the financial year exceeds R5 million.

How to determine the PIS of a company?

This notion of quantifying the public interest score (PIS) of a company has at the heart of its inception the ideal of social and ethical corporate responsibility. Regulation 26(2) of the Regulations provides that companies are required to calculate their PIS at the end of each financial year. The PIS calculation comprises the sum of the following elements:

• a number of points equal to the average number of employees of the company during the financial year;
• one point for every R1 million (or portion thereof) in third party liability of the company at the financial year end;
• one point for every R1 million (or a portion thereof) in turnover during the financial year; and
• one point for every individual who, at the end of the financial year, is known by the company:
  • in the case of the profit company, to directly or indirectly have a beneficial interest in any of the company’s issued securities; or
  • in the case of a non-profit company, to be a member of the company, or a member of an association that is a member of the company.

Regulation 30(3) of the Regulations provides that if a company is not required, in terms of either the Companies Act, Regulations, and/or its memorandum of incorporation, to have its AFSs audited, such company may file a copy of its audited or reviewed statements together with its annual return. Additionally, if a company is not required to file AFSs or does not elect to file a copy of its AFSs, such company is required to file a financial accountability supplement to its annual return in the required CoR 30.2 form as contemplated in regulation 30(4) of the Regulations, and not in the XBRL format. In the event that the company has a zero turnover or is dormant, a CoR 30.2 form must still be completed and returned to the CIPC.

By mandating the use of XBRL, the CIPC has enabled companies to submit AFSs in accordance with a streamlined approach which is effective, efficient and allows for rapid and focused responses to companies submitting AFSs, all in line with international best practices.