Revenue, Ireland’s tax, and customs authority require companies to submit their financial statements in the Inline XBRL format as part of their corporate tax returns. Inline XBRL (iXBRL) is a format which helps a human reader as well as a computer to decipher the information contained in a financial document.
An iXBRL document has two layers – a human-readable layer and a machine-readable layer. The machine-readable layer is created using XBRL tags to mark up the relevant financial information.
Revenue publishes a Tax and Duty Manual to assist corporations with their iXBRL tagging. Recently, Revenue updated its Manual with a new section on Tagging Errors in iXBRL Submissions.
Tagging errors in iXBRL affect the quality of digital financial statements and impede their analysis. This can defeat the purpose of creating digital financial reports – which is to make the analysis and comparison of those reports more efficient. Hence, companies must exercise great care to ensure that the reports they create are of high quality and serve their intended purpose well.
In this article, we list out the iXBRL tagging errors mentioned in the Tax and Duty Manual and offer our observations. The errors are as follows:
- Currency Errors
- Sign Errors
- Scale Errors
Revenue usually converts values in foreign currencies to Euros in the iXBRL reports. This helps uniformity and makes all iXBRL reports submitted to Revenue comparable. However, problems arise when a human-readable document shows amounts in a currency different from that of the XBRL tags applied to those amounts. In such a case, the distortion caused by the exchange rate difference could be enormous. Therefore, filers must ensure that their human-readable financial statements and their corresponding XBRL tags are in the same currency. If not, the resulting distortion could result in iXBRL filers potentially being identified as a tax risk.
Currency errors can take place in the following situations:
- When facts in the human-readable layer of a report are in one currency but the XBRL tags represent a different currency
- When the same value is reported in more than one currency within the financial statements
- The ‘PrincipalCurrencyUsedInBusinessReport’ tag is present in the file but has a currency different to that of the human-readable financial statements
- When company branches present their accounts in both Euros and their ‘home’ currency
There are definite rules for users of XBRL in terms of the positive and negative values in their disclosures. The Tax and Duty Manual says that all data must be entered into a report as a positive value. But here is the catch. The manual also says, “Where data may be positive or negative, the label will indicate the correct sign of the item. Labels will use brackets around terms to show what data should be entered as negative. If no brackets are present, data MUST be entered as positive UNLESS the value is the OPPOSITE of that indicated in a tag label.”
The Manual goes on to say that the sign reversals indicated above must only take place when concepts genuinely represent positive or negative values. Sign reversals must not be used to transform the meanings of concepts.
Examples of sign indicators in labels include:
- Operating Profit (Loss)
- Net Current Assets (Liabilities)
- Net Cash Inflow (Outflow) from Disposal
A scale error occurs, for instance, when a human-readable report presents data in thousands but none of the XBRL tags used is assigned the scale value of ‘3’ to tell the iXBRL processor that the values are in thousands.
Here is another example of how a scale error can occur: For instance, an audited Profit or Loss account presents a value in millions – such as a turnover of €73m for the year – and assigns it a scale value of 6. However, the ‘Detailed Profit or Loss’ account gives the whole unrounded value – €73,123,456 – and a scale value of 6. This results in a final value of €73,123,456,000,000.
A General Reminder
The Tax and Duty Manual also reminded users of the need to fully tag their financial statements, using every appropriate tag from the provided XBRL taxonomy. This includes all notes and disclosures. For instance, where two out of three values are aggregated to get a total value, none of the three component values must be left untagged. Simply put, wherever an accounting calculation such as ‘a + b = c’ appears, every value in the equation must be tagged unless no tag exists in the taxonomy to tag it.
Revenue has issued general reminders on other aspects of iXBRL financial statements such as Detailed Profit or Loss Account, hidden tags, tag dates, and inappropriate use of tags. The full report can be accessed in the link shared above.
Companies must ensure that the iXBRL financial statements they file with Revenue are of high quality. While the iXBRL format is designed to improve the transparency, accessibility, and comparability of financial disclosures, there is scope for errors to creep in and disturb the quality of those disclosures. Some of the steps companies can take to ensure high-quality iXBRL reports is choose the right sort of tagging software or service, pick the most appropriate tags from the taxonomy, and fix all validation errors that the software would flag.