Payments to Governments

Payments to Governments (PtG) XML Filing Requirement For UK Mining Companies

What Is The Payments To Governments XML Conversion Requirement For Mining Companies?

Since January 1, 2015, companies incorporated in the UK, with tradable securities on a regulated market, and part of the extractive or mining industry have been required to make an annual disclosure of the payments they make to various governments.

Under new rules that came into force on August 1, 2016, those companies are required to file their Payments to Governments reports through the Financial Conduct Authority’s (FCA’s) National Storage Mechanism (NSM) in the eXtensible Markup Language (XML) format.

Rules Governing Payments To Governments XML Conversion For Mining Companies

Payments to Governments’ requirements are set out in the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules (DTR) 4.3A. After the Brexit transition period that began on February 1, 2020, and ended on December 31, 2020, UK companies need to comply with the DTR 4.3A if…

  • They are active in the extractive or primary forest logging industries
  • They have transferable securities trading on a UK-regulated market

The FCA says: “Certain listed companies (premium-listed companies other than open-ended investment companies and companies with a standard listing of shares or depositary receipts) which are not already required to comply with the Transparency Rules are also required to comply DTR 4.3A as if they were an issuer for the purposes of the Transparency Rules.”

Companies In The Scope Of Payments To Governments XML Conversion Requirements

Payments To Governments XML Conversion Requirements

What Data Does A Payments To Governments Report Contain?

A Payments to Governments report must have the following information:

  • A breakdown of extraction companies’ payments based on type.

For instance, the category to which those payments belong: Taxes on income or profit; dividends; licenses, rental, and entry fees; production entitlements, among others.

  • A breakdown of extraction companies’ payments on the basis of projects.

The payment made for each project a company is involved with and the type of payment made for each project.

  • A breakdown of extraction companies’ payments on the basis of governments.

Any national, regional, or local authority; department, or agency.

Why Talk About Payments To Governments XML Conversion Requirements Now?

In 2019 and 2020, the FCA conducted a review of extraction companies’ compliance with DTR 4.3A and set forth its concerns through Primary Market Bulletins. Some of the main requirements where the FCA saw companies deviating from the rules are mentioned below.

Payment Threshold:A payment made either as a single payment or as part of a series of payments within a financial year need not be covered in the Payments to Governments report if it is less than £86,000. However, a company is not exempt from preparing a Payments to Governments report in the absence of any qualifying payments in the relevant period.

Report Production, Publication & Filing: Listed companies that fall under the purview of DTR 4.3A must disclose their Payments to Governments in a standalone report made public not later than 6 months after the end of a financial year. The report needs to be filed in XML format.

Equivalence: According to the FCA, “No determinations of equivalence have been made by the FCA in respect of the rules in DTR 4.3A for the purposes of DTR 4.4.8R in relation to any non-EEA State or a third country, either before or following the end of the transition period. Therefore, the exemption in DTR 4.4.8R is not available in relation to the rules on reports on payments to governments set out in DTR 4.3A, and all issuers within the scope of DTR 4.3A are therefore required to comply with those rules.”

The FCA made the following findings based on its review:

  • XML reports were located for only a minority of companies in the scope of DTR 4.3A
  • Breakdown of payments on the basis of projects was missing in a fifth of the reviewed reports
  • Over 10% of the reports were not filed with the national storage mechanism in the review period
  • Several companies disclosed the data in annual reports and did not prepare a standalone report
  • Several companies failed to furnish the report, saying no payments were made or that they were below the threshold. However, this does not exempt them from PtG disclosures
  • Several companies failed to furnish the report, saying they had filed similar prior reports

The Right Way For Companies To Comply With Payments To Governments XML Conversion Requirements For Mining Companies

UK-incorporated companies in extractive industries need to file the report on Payments to Governments with the FCA by uploading it to the national storage mechanism. They need to ensure Payments To Governments XML Conversion compliance using the XML schema provided below:

  1. the Extractive Report Schema Definition;
  2. the ISO Country Code Schema; and
  3. the ISO Currency Codes

The above requirements are in addition to the requirements for the disclosure, dissemination, and filing of regulated information in DTR 6. As reports on payments to governments are regulated information for the purposes of DTR 6, issuers must file the report in XML format and in human-readable format (PDF/HTML).

Introducing A Payments To Governments XML Conversion Solution – IRIS iDEAL®

UK-incorporated companies may comply with the Payments to Governments XML Conversion requirement through a simple four-step process if they use the IRIS iDEAL® solution.

Step 1:Use an MS Excel file with all Payments to Governments data points for 2020/2021

Step 2: The data will be mapped with the XML schema defined by the FCA within IRIS iDEAL®

Step 3: The solution will provide the final validated XML output along with a human-readable file

Step 4:Companies may submit the report to the FCA and confirm a successful submission

IRIS iDEAL® is a digital transformation engine that has been meeting the regulatory compliance needs of over 50 banks, credit institutions, and investment firms worldwide for over a decade now. The solution facilitates high-quality, granular data submissions to regulators.

IRIS iDEAL® is brought to you by Fin-X Solutions®, which is a trusted name in tax filings with the HMRC and annual financial reports prepared in accordance with the FCA’s ESEF/UKSEF requirements. Fin-X Solutions® is a leading regulatory compliance and report authoring solutions provider in the UK since 2010.

Need assistance with high-quality Payments To Governments XML Conversion?

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Structured Reporting For UK-Listed Companies – Key Factors To Consider

Companies in the UK have been using Inline XBRL since 2010-11 when HM Revenue & Customs mandated the format for financial statements submitted as part of Corporation Tax filings. In 2020, the European Single Electronic Format (ESEF) mandate came into force in the European Union. Companies in the EU were required to publish their 2020 annual financial reports in the new ESEF iXBRL format. The UK adopted ESEF requirements before December 31, 2020. However, mandatory compliance with ESEF came into force in the UK only with the 2021 annual reports.

Though the UK can be considered a mature iXBRL market due to the HMRC mandate, the ESEF mandate brings in more comprehensive requirements. Companies need to familiarise themselves with the ESEF and UKSEF taxonomies as well as understand how XBRL tagging and xHTML creation works.

This blog covers a few key factors ESEF/UKSEF filers need to consider.

Key Factors To Consider

The UKSEF/ESEF Taxonomy Version To Be Used

The UKSEF taxonomy is the starting point for structured reporting in the UK using the iXBRL format. The UKSEF taxonomy is an extension of the European Single Electronic Format (ESEF) taxonomy that companies in the European Union use for their structured reporting. In other words, the UKSEF taxonomy adds some UK-specific elements to the ESEF taxonomy. It includes elements that belong to the Streamlined Energy and Carbon Reporting (SECR) taxonomy. As of now, UK-listed companies have the option of using the UKSEF as well as ESEF taxonomies to prepare their structured annual reports.

The Financial Reporting Council (FRC) released its 2022 suite of taxonomies in October 2021. The latest taxonomy version that companies may use is UKSEF 2022, version 2.0.0. Companies may also use the ESEF 2020 and UKSEF 2021 taxonomy versions for their current (2021) iXBRL annual reports.

The UKSEF Tagging Process – What To Bear In Mind

The UKSEF iXBRL report that UK-listed companies submit to the FCA’s National Storage Mechanism (NSM) consists of an instance document and a company taxonomy.

An instance document is a company’s annual financial report in the iXBRL format. An iXBRL document is an xHTML or human-readable document with XBRL or machine-readable tags embedded in it. Therefore, a UKSEF annual report becomes human-readable and machine-readable at the same time. Moreover, the human-readable portion of the document, which is the xHTML, retains all the aesthetic features of a PDF annual report.

The company taxonomy is a collection of the UKSEF taxonomy elements that a company has tagged its annual report disclosures or line items with. It also includes the custom elements or extension (XBRL) tags a company might have created to represent disclosures with no matching element in the UKSEF taxonomy. Moreover, the company taxonomy expresses the relationships between all these elements with the help of four linkbases: Presentation linkbase, Calculation linkbase, Definition linkbase, and Label linkbase.

Tagging, Extensions, and Anchoring

Moving on, what does the creation of an instance document entail? There are three main activities involved in instance document creation. They are tagging – or mapping the disclosures in an annual report to the appropriate UKSE taxonomy concept; creation of extensions or custom tags to represent disclosures for which the right fit element cannot be found in the UKSEF taxonomy; and, anchoring, or the act of ‘connecting’ extensions to ESEF taxonomy concepts with the nearest accounting meaning.

How UKSEF Tagging Works

The XBRL tags embedded in an xHTML annual report lend the document its machine readability. The act of tagging, or mapping the line items in an annual report to the right UKSEF taxonomy concepts requires a good understanding of the UKSEF taxonomy. It would also help to know how an XBRL or machine-readable tag looks. Here’s an example:

ifrs-full_Revenue’ is the machine-readable tag for revenue. The ‘ifrs’ portion indicates that this is an IFRS tag. ‘ifrs-full_CurrentAssets’ is the IFRS tag for current assets. A machine-readable tag has three attributes – data type, balance type, and period type.

Element Name Ifrs-full-Revenue
Data Type monetaryItemtype
Balance Type Credit
Period Type Duration

The Data Type of a tag explains whether a disclosure represents a monetary value, shares, or percentage. For instance, the data type for the tag ‘ifrs-full_Revenue’ is ‘monetaryItemtype’.

The Balance Type explains if a monetary concept is a ‘debit’ or ‘credit’. For revenue, the balance type would be ‘credit’.

The Period Type explains if the value of disclosures is measured as of a particular date or over a period of time. Balance sheet disclosures have an ‘instant’ period type since they are reported on a particular data. Income statement disclosures, since they are measured over a 12-month period, will have the ‘duration’ period type.

Why Extension Elements Are Created And How They Work

While tagging their annual reports, companies will find that there are no appropriate ESEF taxonomy elements for certain disclosures. Companies may create extension elements or customized XBRL tags to represent such disclosures. However, it is good practice to create extension elements sparingly, since inappropriate use of extension elements might affect the quality of information and make the analysis and comparison of iXBRL reports difficult.

Anchoring Of Extension Elements

We have seen that companies preparing ESEF annual reports need to create extension elements to represent disclosures that do not have corresponding ESEF Taxonomy elements to tag with. Per ESEF tagging guidelines, such extension elements also need to be ‘anchored’ to ESEF Taxonomy elements with the closest accounting meaning possible.

The Company Taxonomy

The company taxonomy represents the ESEF Taxonomy elements used in a company’s ESEF annual reports. It includes both the base ESEF Taxonomy elements as well as the extension or custom elements created. All those elements are represented in the form of four linkbases which are listed out below.

Presentation linkbase: The presentation linkbase represents a company’s annual financial report – as it is presented. Elements in the presentation linkbase need to be represented in the same sequence as they follow in an annual report.

Calculation linkbase: The calculation linkbase represents the arithmetic relationships between the disclosures in an annual report. For example, a calculation such as ‘Revenue – Cost of sales = Gross profit’ in an annual report should be mentioned in the company taxonomy.

Definition linkbase: The definition linkbase, in simple terms, is used to represent anchored relationships as well as dimension and member structures in statements (in a shareholders’ equity statement, for instance). Companies must ensure that their extension elements are anchored to the right fit elements in the ESEF Taxonomy.

Label linkbase: The label linkbase lists out the labels a company uses for line items in its annual report. For instance, a company can use the label ‘sales’ for an item that the ESEF Taxonomy called ‘revenue’. This would have to be mentioned in the label linkbase.

Errors And Pitfalls To Avoid – For A High-quality Report

While UKSEF is intended to help companies produce transparent, high-quality structured reports, the format is no guarantee against mistakes or inconsistencies. In XBRL parlance, these inconsistencies are termed errors and warnings.

Errors are a more serious type of inconsistency because they will not let a UKSEF report go past the FCA’s National Storage Mechanism (NSM). Warnings, meanwhile, are less severe because they will not stop a UKSEF report from being submitted. However, both errors and warnings need to be addressed for a UKSEF report to conform to high standards of quality.

Some common inconsistencies in UKSEF filings are listed below.

Incorrect Signs

Calculation errors are the most common form of errors in XBRL reports. They occur when financial reporting teams assign a positive value to a concept whose XBRL definition factors in a negative value, and vice versa. To avoid calculation errors, one must consider the XBRL definition of a concept and not merely go by the calculation relationship it has with the concepts above and below it.

In the example below, the ‘other revenues’ concept has a positive XBRL definition though it is shown with a negative sign in the report. Ideally, other revenues must be reported as positive.

UKSEF1

Inconsistent Duplicates

In an annual report, the same set of disclosures can appear multiple times under different sections of the report. When a specific disclosure is tagged with an XBRL element wherever it appears in the report, one can use an iXBRL viewer to navigate between the various instances. However, such navigation would not be possible if the numbers or values are inconsistent – probably because they were rounded off in a couple of instances. In such a case, it would be difficult for anyone analyzing the report to find the correct value of the disclosure.

In the example below, notice the difference in the values for the concept – ‘Equity’.

UKSEF 2

Calculation Inconsistencies

Calculation inconsistencies in XBRL reports occur due to incorrect signs or rounding-off errors. They also occur when there is no match between the concepts in a calculation tree and the values they represent in the report. Calculation trees, which are a part of an XBRL taxonomy, express simple arithmetic structures in an XBRL report.

In the example below, the value of ‘income tax expenses’ has been added to ‘profit before tax’, resulting in a calculation inconsistency. For the calculation to be correct, ‘Income tax expenses’ need to be deducted from ‘profit before tax’ to result in ‘profit for the year’.

This inconsistency is a result of the negative sign assigned to the value for ‘Income tax expenses’. The XBRL report preparers have not considered the fact that ‘expense’ is a concept with a negative sign factored into its XBRL definition.

UKSEF 3

Report Package Errors

A UKSEF filing is submitted to the FCA National Storage Mechanism in the form of a report package. The report package consists of multiple files placed in a well-formatted ZIP file. There is a prescribed structure for arranging files within the report package so that XBRL software can find them. If the files are not arranged according to the prescribed structure, they will not render correctly.

UKSEF 4Incorrect Dates

Another common error in XBRL reports is tagging disclosures with the wrong dates. This error occurs due to the different ways in which dates and reporting periods are described. For example, the value of a balance sheet item is reported as on the last date of a financial year – in which case the value indicates a closing balance. However, the same value can also be considered an ‘opening balance’, or the value of an item just before the business opens on the first day of the next financial year.

However, XBRL makes no distinction between an opening and closing balance. The XBRL interpretation for balance or ‘instant’ disclosures is consistent. If a balance on a particular date is reported, it is considered as being the balance at the end of that date. For closing balances, this poses no problem. For opening balances, however, report preparers would do well to use the date of the previous day.

Apart from ‘instant’ facts, there are also facts reported over a duration of time. The XBRL tag for duration facts should include the period opening and closing date as ‘Ist January 2021 to 31st December 2021’.

UKSEF 5Redundant Labels

The ESEF Taxonomy is a collection of machine-readable labels assigned to disclosures that match the concept description. ESEF filers need to use labels from the core taxonomy for their disclosures and create new labels for company-specific information for which there is no ready tag in the base taxonomy. However, it has been noticed that ESEF filers redefine tag labels unnecessarily – especially while creating extension elements.

Example –

UKSEF 6Rounding and Inconsistent Calculations

We have mentioned that calculation inconsistencies are caused by certain tagged values not satisfying their expected calculation relationship. Sometimes, such inconsistencies also occur due to the rounding off of values. While the rounding-off might make perfect sense, it does not help satisfy a calculation relationship.

Here’s an example.

UKSEF 7Example: Rounding up differences

UKSEF 8The UKSEF xHTML document – Get The Look Right

Compliance with structured reporting requirements in the UK using the UKSEF taxonomy involves preparing a high-quality xHTML document. An xHTML is a document that has two layers – one displaying a company’s financials for a human reader and the second containing the computer-readable iXBRL tags. Companies need to ensure that not only is their digital annual report free from iXBRL errors but it also appears attractive from a human-readable perspective. This means companies need to take care that both the layers of their report meet the highest quality standards. More so because the xHTML document is one that investors and key stakeholders can access and use for their analysis and decision-making.

Here’s why the quality of an xHTML document needs special mention: When companies in the EU were submitting their early structured reports, some software or service providers were not able to meet quality standards in terms of the xHTML file. The result was as follows.

The image shown below is a PDF document, with a normal display of graphs and charts.

UKSEF 9The next image shows an xHTML document where the graphs and charts look elongated.

UKSEF 10Companies in the UK need to ensure that the software or service provider who is helping them create UKSEF reports has the capability to produce a good-looking xHTML document.

UKSEF Compliance Approach – In-house Or Outsourcing?

The two main compliance options for any company carrying out structured reporting are outsourcing UKSEF report creation to a service provider or creating the reports in-house. A third model exists, which combines the best of the in-house and outsourcing models.

Outsourcing Model

  • The service provider prepares your UKSEF iXBRL report
  • Your internal team reviews the UKSEF iXBRL tagging
  • Suitable for companies without dedicated reporting teams

In-house Model

  • Get an in-house cloud-based software license
  • Get in-house teams trained for iXBRL tagging
  • Your teams have full control of report creation

Blended Model

  • A hybrid model that gives companies the best of outsourcing and in-house models
  • You leverage the software provider’s XBRL experts for the 1st year of UKSEF tagging
  • In subsequent years, you may have your UKSEF iXBRL tagging done by internal teams
  • This approach works best for familiarizing yourself with the process before taking it in-house

Whichever compliance option you choose, make sure you have access to on-tap XBRL expert support.

Looking for an intuitive and comprehensive ESEF/UKSEF compliance experience?

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The UK’s new Sustainability Disclosure Requirements

The UK’s New Sustainability Disclosure Requirements | Fin-X Solutions

In the run-up to the United Nations Climate Change Conference or COP26 in Glasgow, Scotland, UK, in November 2021, the UK government released a document called Greening Finance: Roadmap to Sustainable Investing.

The document details a strategy to implement new sustainability disclosure requirements (SDRs) in the UK that will merge new and existing disclosure mechanisms under one integrated framework.

The new roadmap is meant to build on the success of the UK’s 2019 Green Finance Strategy, in accordance with which the government has made commitments to make TCFD-aligned disclosures mandatory across the economy by 2025 and implement a UK Green Taxonomy that defines the criteria for economic activities to be classified as sustainable or otherwise. TCFD stands for Task Force on Climate-Related Financial Disclosures.

At the heart of the Greening Finance Roadmap and the Green Finance Strategy is a long-term plan to align the UK’s economy with the country’s ambitious net-zero greenhouse gas emissions target by 2050, and a pledge to cut the emissions by 78% by 2035 compared to 1990 levels.

Sustainability disclosure

The new Sustainability Disclosure Requirements (SDRs)

‘Greening finance’ or the process of aligning the UK’s financial system with its emissions targets consists of three phases: 

Informing investors and consumers – The flow of decision-useful sustainability information from corporates to financial market participants.

Acting on the information – Ensuring that the sustainability information is mainstreamed into business and financial decision-making. 

Shifting financial flows – Ensuring that financial flows across the UK economy are aligned with the country’s emissions targets.

The new SDRs essentially fit into the first phase mentioned above — informing investors and consumers. 

The SDRs will employ the global baseline standards that the newly established International Sustainability Standards Board (ISSB) will develop by building on the work of the Task Force on Climate-Related Financial Disclosures (TCFD) and other standard-setting bodies.

While the ISSB standards will facilitate the collection of information that is material to investors, the SDRs will go further to examine the impact of the reporting firms’ activities on the environment — requiring disclosures that employ the UK Green Taxonomy (more on this later).

Three types of disclosure under the SDRs

Corporate disclosure

Companies, including those in the financial services sector, will have to make sustainability disclosures under ‘proposed international standards’ as well as the UK Green Taxonomy. There will be a consultation on this disclosure requirement.

Asset manager and asset owner disclosure

Asset managers and asset owners who manage assets on behalf of clients and consumers (including occupational pension schemes) will have to disclose how they take sustainability into account. These disclosures will help consumers to understand whether their assets are managed according to their sustainability preferences.

Investment product disclosure

Creators of investment products will have to report on the products’ sustainability impact and the financial risks and opportunities they bring. Such information will be the basis of a new sustainable investment labelling regime that will make it easier for investors to choose from a range of investment products available to them.

Compliance timelines for the new SDRs

TCFD reporting for some premium-listed issuers, standard listed issuers as well as some financial companies will begin in 2022.

For the most “economically significant” companies, mandatory disclosures in annual reports using the ISSB standards and the UK Green Taxonomy will begin within the next 1-2 years and for other companies within the next 2-3 years. 

For funds over £5 billion, sustainability reports will be required in 2-3 years, while for those over £1 billion, the reports will be subject to future consultations on the requirements. 

[Source: ESG Today]

What is the UK Green Taxonomy?

Due to the rapid rise in sustainable investing, organizations are increasingly trying to showcase their activities as sustainable or having been carried out in the best interests of the environment. Similarly, a number of financial products are being marketed as being environment-friendly. However, there are no common definitions in place to determine which activities qualify as sustainable and which ones do not.

The UK Green Taxonomy will set out the criteria that any business activity should meet in order to be considered environmentally sustainable.

__________________

Corporate disclosures — whether financial or non-financial — are increasingly being made in the digital (XBRL or Inline XBRL) format and the new SDRs may also have to conform. Most companies in the UK are already filing Inline XBRL or iXBRL reports with the HMRC and the FCA (ESEF or UKSEF filings).

Companies would do well to prepare well in advance for the new reporting requirements that are coming up.

Need assistance complying with the sustainability disclosure requirements that pertain to your firm? Write to us at contact@fin-xsolutions.com

Sustainability Disclosure Sustainability disclosure, Green Taxonomy, Sustainability

Sustainability disclosure, Green Taxonomy, Sustainability


ESEF Mandate Preparation in the UK: Findings of FRC Survey

Where do entities in the UK stand with respect to their compliance with the ESEF mandate? What is their level of preparation?

The UK’s Financial Reporting Council (FRC) sought to find answers to such questions in a recent survey involving 46 companies, more than half of which are listed on the FTSE 100 and FTSE 250. The survey threw up some interesting insights.

Participants in the FRC survey on ESEF mandate compliance preparedness

(Image Source: The FRC survey)

We discuss a few of the findings in the paragraphs below:

Awareness of the mandate and level of preparation

Awareness about the ESEF mandate has grown. Of the 46 respondent companies, over 70% said they were fully aware of the ESEF mandate. Contrast this with 50% of the companies showing limited or no awareness of the mandate in a similar survey in 2020.

However, the numbers showing firms’ preparedness for compliance were a little disappointing. Asked to rate their preparedness on a scale of 1 to 5, about 17% of the companies chose the number 3 and 8% chose 5. However, almost 15% of respondents chose 1, indicating very little preparation for their compliance.

How well prepared are companies to comply with the ESEF mandate?

(Image Source: The FRC survey)

Note: It may be recalled that the Financial Conduct Authority allowed companies in the UK a one-year delay in compliance with the ESEF mandate because of the financial burden brought on by the pandemic.

Actions and activities undertaken

The survey showed that most companies have started taking the right steps towards compliance with the ESEF mandate. About 43% of respondents have started analyzing ESEF mandate requirements, while around 36% have identified ESEF service providers. Almost 15% of respondents said they had already done a test run with a prior-year annual report and an equal number said they have begun training internal resources on compliance tasks. However, only 4% of respondents said they had carried out a voluntary ESEF filing of their 2020 annual reports.

Approach to compliance and willingness to share the file with shareholders

Most of the companies polled are treating the ESEF file as separate from their traditional PDF annual report. They believe that an ESEF xHTML file needs to be created in addition to the PDF. A limited number of companies believe, however, that the xHTML version is meant to replace PDFs.

The FRC said in a note: “…there remains confusion around the appropriate flow and process in relation to obligations under the Companies Act, the FCA rules and the Companies House guidelines. The Lab will cover these in our Early Implementation Review.”

Compliance costs

Almost all companies believe ESEF mandate compliance will add to their costs — but it will be an intermediate cost increase in the interim. The FRC says this is consistent with the findings of an XBRL International survey, which found a significant number of products to facilitate ESEF compliance available at below €25k.

However, the FRC says that while ESEF software and services are key contributors to compliance costs,  “preparers/issuers will need to dedicate significant internal and governance resources to ensure that the ESEF process results in high-quality reporting”.

Taxonomy preferred

Over 30% of the companies polled are awaiting guidance about the taxonomy to be used for ESEF mandate compliance. About 15% said they would use the UK Single Electronic Format (UKSEF) taxonomy. Around 13% said they would use the ESEF taxonomy.

The ESEF taxonomy, which is based on the IFRS taxonomy, is an exhaustive list of over 5,000 accounting concepts. The UKSEF taxonomy adds UK-specific concepts or tags to the ESEF taxonomy.

The UK’s Financial Reporting Council recently released an updated version of the UKSEF taxonomy as part of its 2022 taxonomies suite.

Other tagging areas

Companies participating in the FRC survey were also asked about other areas of digital corporate disclosure that they would comply with if a taxonomy was available.

Most companies chose Taskforce on Climate-related Financial Disclosure (TCFD) reporting and other

Environmental, Social, and Governance or ESG-related reporting as priority areas for digital disclosure.

The FRC said the latest UKSEF taxonomy can be used along with other taxonomies in the FRC suite such as the Streamlined Energy & Carbon Reporting (SECR) Taxonomy and TCFD.

__________

Based on the findings of the survey, the FRC is making the following resources available to ESEF filers:

  • A list of resources to help companies understand and implement the requirements 
  • An Early Implementation Review of ESEF across the UK and EU
  • An event to get people prepared for year-end

Companies looking for ESEF mandate compliance software and support can get in touch with us.

ESEF Mandate Preparation in the UK: Findings of FRC Survey

ESEF Mandate Preparation in the UK: Findings of FRC Survey

UKSEF, ESEF, UKSEF taxonomy, ESEF taxonomy

UKSEF, ESEF, UKSEF taxonomy, ESEF taxonomy


What exactly is UKSEF

What Exactly is UK SEF? | Fin-X Solutions

What Exactly is UK SEF? | Fin-X Solutions

The Financial Reporting Council (FRC) released the UK Single Electronic Format (UK SEF) taxonomy in September 2020 as part of its 2021 suite of taxonomies. In its communication back then, the FRC said companies could use the UK SEF taxonomy for their filings with the Companies House and the HMRC.

In this short write-up, we discuss the similarities between the UK SEF taxonomy and the European Single Electronic Format (ESEF) taxonomy. We will also answer the question if UK companies can use the UK SEF taxonomy instead of the ESEF taxonomy for their reporting with the Financial Conduct Authority (FCA).

We’d further like to remind our readers that the UK opted for a revised timeline for implementing the ESEF mandate, to lessen the financial burden on companies due to the coronavirus pandemic.

UK SEF: A brief intro

In a PwC blog, iXBRL expert Jon Rowden writes that UK SEF is a taxonomy that builds upon or extends to the ESEF taxonomy. UK SEF adds the component of carbon emissions disclosures to the ESEF taxonomy through the Streamlined Energy and Carbon Reporting (SECR) requirement. It also makes room for a mention of the company’s registered number and period end date — a requirement for filing with the Companies House.

Simply put, UK SEF = ESEF + SECR + Company’s registered number and period end date.

It may also help to recall that the SECR taxonomy was released in early 2020, having been developed jointly by the Financial Reporting Council (FRC), Companies House, and the Department of Business, Energy, and Industrial Strategy (BEIS).

Can companies use UK SEF instead of ESEF?

The UK’s Department for Business, Energy, and Industrial Strategy (BEIS) has said that companies could use UK SEF to file their annual reports with the FCA.

However, companies might be hesitant take on the additional burden of Streamlined Energy and Carbon Reporting (SECR) that comes with UK SEF. They may prefer using the ESEF taxonomy for their FCA reporting.

Expert view on the SECR requirement

Jon Rowden, who we’ve mentioned above, writes that since stakeholders will have access to information in a digital format under ESEF, it seems reasonable for companies to extend that information to cover SECR disclosures. That would also allow them to file the fullest version of their annual report with the Companies House.

However, since ESEF is an annual commitment and filing for the first time in that format may be a challenge, “the UK SEF step-up could be rolled into the additional tagging necessary for second year compliance with ESEF”.

As another option, UK SEF can be deferred to until it becomes mandatory, says Jon. He adds, however, that there is no certainty that UK SEF will be made mandatory.

Jon says he hopes that some companies decide that compliance with the additional SECR requirement is a step worth taking. “…the SECR data is of considerable interest and the more data that can be filed at Companies House, the better.”

Fin-X Solutions® is your one-stop solution for all iXBRL requirements in the UK and Ireland. We let you choose your compliance model. Prepare your ESEF (or UK SEF) documents in-house, outsource the report creation to us, or opt for a blend of the two options.

ESEF Taxonomy, UKSEF Taxonomy, UKSEF, ESEF

ESEF Taxonomy, UKSEF Taxonomy, UKSEF, ESEF

 

 


ESEF Reporting - Lessons From Early Filing Experiences

ESEF Reporting - Lessons From Early Filing Experiences

“Where do we start?”

You may be a lighthouse customer who has already filed their first ESEF report, or a non-participant who has decided to wait and watch; there’s a good chance you’ve already posed this question to your finance team at some point. Deciding how to proceed FCA-ESEF compliance finally comes down to a choice between two alternatives – an inhouse or outsourced solution.

Choosing an inhouse solution requires personnel who are equipped with substantial accounting knowhow as well as proficiency in XBRL. You would also need a product or service for the subsequent xHTML conversion of your annual report.

The effort to bring this process inhouse is usually only observed in organisations looking to develop long-term inhouse XBRL competency. It entails detailed planning — in terms of the time and money that the organization needs to devote to training its resources.

As XBRL evangelists who have worked with the standard for more than 15 years and in over 40 countries, we have seen that while companies initially prefer to outsource their XBRL/iXBRL creation to a XBRL software/service provider, they only begin to move these processes in-house when they start gaining familiarity with them.

Picking the right FCA-ESEF reporting solution

There is a surplus of tools that aid with all the parts of ESEF reporting. What then, should you consider, when choosing the best tool for your ESEF reporting needs?

A product that can precisely tag numbers in your financial statements, as well as transform your stylized annual report into xHTML effortlessly and without loss in detail, is necessary.

If your chosen product can also align with narrative reporting, i.e. tagging notes, then that’s just the cherry on the cake. For you are then prepared for future revisions to the ESEF mandate and those related to broader phase 2 ESEF reporting.

Other elements that may affect your final decision with respect to the choice of product or service might include budgeting, report complexity, corporate governance, and testimonies of reference customers.

Knowing the taxonomy and tagging requirements

 ESEF filings

Taxonomies can be quite complicated and perplexing for first-time filers. If a concept doesn’t exist for a data item in your report, a custom tag or extension needs to be generated. These extensions should be used sparingly as they influence ESEF reporting by decreasing the comparability of your report against others.

In addition to choosing the right tools, it’s imperative to have the right experts by your side to assist you with regards to tagging, extensions and anchoring. Since these tools are not a 100% automated, they require human intervention every now and then.

 XBRL tagging is not as big a deal as xHTML conversion

There has been an extraordinary emphasis on getting XBRL tagging right. However, the time and effort involved in creating an xHTML file that is identical to a company’s stylized PDF annual report, is underrepresented.

After examining some of the early ESEF filings, we found that the biggest challenge issuers are facing is to have an xHTML file that is indistinguishable from its PDF counterpart. It is therefore important to pick a service provider and software that can accomplish this adequately. Carrying out a test run with an ESEF vendor can help you assess the results for yourself. As a good starting point, ask the vendor you are evaluating to convert a short section of your stylized report into xHTML.

Passing three levels of validations

There are three levels of validations that need passing to complete a successful ESEF filing. These are tool validations at the level of the ESEF service provider, the auditor and finally the local regulator (FCA in this instance).

Issuers may pass one level but fail another. Therefore, it is wise to do a dry run with an older annual report, (perhaps from the year prior) ahead of the live ESEF filing. It is imperative to make sure your ESEF iXBRL package passes all 3 levels of validations. The FCA will accept structured and tagged AFRs using non-reference taxonomies during the voluntary filing period.

 ESEF filings

The audit process and tackling last minute changes

In some countries, there are official recommendations for the audit of annual reports published in the ESEF iXBRL format. This means that every version of the annual report that is sent to an auditor needs to be audited for ESEF as well. Therefore, it is essential to make sure your annual report publication schedule is allied with that of your auditor’s, leaving some buffer for contingencies.

Last second alterations brought about by the auditors and the Board can result in an increased to and fro, and more pressure to file on time. The design agency needs to track and incorporate these last-minute changes. The ESEF vendor also needs to deliver an updated ESEF reporting package on time, which will then be signed off by the auditor.

Crafting a calendar where all participants, both in the organization and outside of it (design agency, ESEF vendor, auditor) are in sync, is fundamental to the success of your ESEF filing. Dry runs and testimonies from your vendor’s reference customers are indispensable in tackling the issues.

The key to successful ESEF reporting lies as much in attentiveness as it does in time management. Though submissions may seem convoluted at first, with the right set of utilities and personal guidance, your ESEF filing can be completed with minimal effort.

ESEF Reporting, ESEF Filing, ESEF, XBRL, iXBRL, xHTML

ESEF Reporting, ESEF Filing, ESEF, XBRL, iXBRL, xHTML

ESEF Reporting, ESEF Filing, ESEF, XBRL, iXBRL, xHTML


A 5-Point Checklist for Choosing The Right ESEF Software | Fin-X Solutions

In the UK, mandatory compliance with ESEF requirements will begin with LSE-listed companies submitting their Annual Financial Reports for the financial year from January 1, 2021 to the FCA in the xHTML format.

The companies will have to place XBRL tags only against the basic financial information in their AFRs for the financial year just mentioned. From the financial year that follows (beginning January 1, 2022), the companies will also have to tag the notes to the financial statements.

ESEF software

XBRL tags can be applied using software that is ESEF-ready — having passed the European market regulator’s field tests and being certified by XBRL International.

While there are multiple ESEF software solutions in the market to choose from, it would help to consider a few points before narrowing down upon the one solution that would best serve your company’s purpose.

Here’s a five-point checklist to help you:

ESEF software

The right credentials and certification

Make sure you research the background and credentials of the ESEF software or service provider. Check the years of experience the XBRL professionals on their team have, the countries they have worked in, and the number of iXBRL filings they have handled in the past. A software with the right credentials would help you fit the bill perfectly in terms of ESEF requirements.

ESEF software

Customer references

Ask for references from current customers of the ESEF software. Look for references from other countries where issuers are required to comply with ESEF requirements as well — requiring familiarity with the IFRS taxonomy, needing to submit documents in the iXBRL format, dealing with aspects such as extensions and anchoring, and handling stylized documents, among others.

ESEF software

Ability to handle stylized documents

Ensure that the ESEF software vendor handles tagging on the face of a human-readable financial statement and not on an MS Excel template. If you are presented with an Excel template, beware. It isn’t the iXBRL format. An Excel document cannot accommodate the customized styling and design of the AFR. Ensure that you do not fall short of the ESEF requirements when it comes to the appearance of your ESEF documents.

ESEF software

Flexible working models

Does the ESEF software under consideration offer you the flexibility to choose between in-house and outsourcing conversion options or a blend of both approaches?  Also, does the iXBRL solution have any additional disclosure management modules to help streamline your overall annual report preparation process? Take care to choose just the right mix to help you perfectly comply with ESEF requirements.

ESEF software

Support anytime you need it

A new regulation often needs careful attention and implementation in line with the ESEF requirements. The ESEF software provider under your consideration should offer adequate support and expert assistance whenever you need it. Check if the provider works in your time zone and make sure that you are adequately covered for whenever you need help. Find out what is the best way to access support — email, phone, or online chat. Also check if you are going to be charged extra for any additional support hours.

We hope our 5-point checklist would be of help to you in picking the ESEF software that serves you best. If you need help or consultation on complying with ESEF requirements, or if you would like to see a demo of an ESEF solution tried and tested in mainland EU, get in touch.

Contact Our Experts

ESEF software

ESEF software

ESEF software


iXBRL format

The iXBRL Format HMRC Wants Company Accounts Submitted

Her Majesty’s Revenue & Customs (HMRC) mandates companies in the UK to file their tax returns with it by creating a legal obligation for each company in the form of a ‘Notice to deliver a Company Tax Return’ or CT603. ixbrl format

In 2011, the HMRC Commissioners’ Directions under the Income and Corporation Taxes (Electronic Communications) Regulations 2003 mandated that companies in the UK submit their accounts in iXBRL format if they have been prepared under the purview of:

A. Companies Act 2006
B. Building Societies Act 1986
C. Friendly and Industrial Provident Societies Act 1968
D. Friendly Societies Act 1992
E. Insurance Accounts Directive (Miscellaneous Insurance Undertakings) Regulations 2008

As part of the Corporation Tax return, the HMRC also requires companies to submit their financial statements in the Inline XBRL or iXBRL format.

iXBRL format

What is XBRL?

XBRL or eXtensible Business Reporting Language, is a business reporting standard that facilitates the exchange of business information through the placement of machine-readable tags against the disclosures in a financial document from the backend. The standard helps increase the transparency and accessibility of business information. The XBRL Specification is developed and published by XBRL International, Inc. (XII) and many financial and regulatory reporting regimes have mandated its use globally.

Inline XBRL or iXBRL format

Inline XBRL or iXBRL is a more advanced reporting format wherein a single document becomes human-readable as well as machine-readable. A document in the iXBRL format is an xHTML file with XBRL tags embedded. The basic idea of developing iXBRL is to allow preparers to retain the original view or formatting of the source document, while creating an XBRL document. The xHTML representation of the information helps the document to be human-readable.

XBRL and iXBRL — the difference

XBRL iXBRL
  • Only machine readable
  • Machine and human readable
  • XBRL output appears in tables
  • iXBRL output appears as what-you-see-is-what-you-get
  • You would need a special application called XBRL viewer to view or render the data
  • iXBRL output can be rendered on any standard browser
  • Offers limited flexibility for formatting
  • iXBRL offers several options to format data and helps retain a report’s formatting
  • An XBRL instance (machine readable instance) must be filed separately along with a human-readable HTML instance
  • iXBRL allows for the filing of human readable as well as machine readable formats via a single instance document

Yet to see how an iXBRL document looks like? We have an example for you below.

The annual report in the iXBRL viewer link above is only for illustrative purposes and has not been fully tagged. Please open the link on Google Chrome, Chromium, or Microsoft Edge. The link may take up to a minute to load, depending on your internet speed.

The financial statement you see is in the xHTML format with XBRL tags embedded. The content with highlights indicates that XBRL tags are embedded behind such content.
__________

Fin-X Solutions offers IRIS CARBON®*, a disclosure management cum XBRL | iXBRL report creation software called. We have flexible offerings for HMRC, FCA(ESEF), and Revenue iXBRL filings.

*IRIS CARBON® is owned by IRIS Business Services, India, which is doing business in the UK under the trade name Fin-X Solutions. The firm and the product have no affiliation with UK’s IRIS Software Group.

iXBRL format

iXBRL format

iXBRL format

HMRC Mandate