The iXBRL Channel is Now Open

If you have recently filed a CT1 online via ROS (Revenue On-line Service) you may have noticed something different. In the course of the CT1 Online submission process, filers are now alerted that they have the option to electronically file their financial statements online in iXBRL format.

Although many of you will already be familiar with iXBRL, for the uninitiated, iXBRL (in-line eXtensible Business Reporting Language) is a language which allows financial information to be communicated and presented in a format that may be recognised and read by both people and computers. This is achieved by ‘tagging’ each piece of financial information with a label that identifies it in terms of standard accounting concepts as defined by GAAP or IFRS standards. These “tags” (comparable to ‘bar-codes’) are embedded within the electronic copy of an iXBRL document which accordingly may be accessed and interrogated by computer systems. The same iXBRL document will present data in a recognisable document format legible to the human user.

When Revenue originally released ROS, the adoption of a business reporting language such as XBRL (which pre-dated iXBRL) was not considered feasible because the technology had not sufficiently matured. Instead ROS Accounts Extracts Menus were employed to communicate customer financial statement information, supplementing CT1 returns. Since then however business reporting language technologies, tools and taxonomies (dictionaries of ‘tags’) have evolved. This evolution was accelerated significantly when, in 2011, HMRC obliged all UK Corporation Tax payers, to submit their financial statements and tax computations in iXBRL format as part of their annual return.

Against this backdrop, in December 2011 Revenue published a Consultation Document regarding the proposed implementation of electronic filing of financial statements and tax computations using iXBRL. iXBRL filing offers Revenue the opportunity to deliver on its strategic objective of leveraging technology to enhance efficiencies and reduce compliance costs in a number of ways. Aside from eliminating paper filing, iXBRL filing of financial statements facilitates the analysis of such information electronically when verifying tax liabilities and assessing risk. Additionally this approach is consistent with the broader movement internationally of establishing electronic standards for the exchange, analysis, reporting and production of financial information.

Thereafter, a consultation process with a range of stakeholders including a sub-committee of Taxes Administration Liaison Committee (TALC), software vendors and practitioner representative bodies was undertaken and in July 2012 Revenue, in Tax Brief 04/2012, confirmed iXBRL filing obligations. Following the release of enhancements into ROS, the first iXBRL financial statements were uploaded by customers on 26 November 2012.

Prepare!

Currently the filing of financial statements in iXBRL format is optional. However, it will become mandatory for all Corporation Tax Payers. The first mandation deadline is 1 October 2013. From that date customers of Revenue's Large Cases Division (LCD) must file iXBRL financial statements when making their tax returns, with respect to accounting periods ending on or after 31^st December 2012. The timing for mandatory iXBRL filing for all other Corporation Tax payers will be determined and announced in the next few months.

So, the iXBRL countdown has begun. While the process of migration will, in many cases, be very straightforward, we in Revenue recognise that for some this will be a big change. We recognise that the change process will bring challenges and through the transition we will provide help and support where it is needed. In particular, Revenue is committed to a tolerant and supportive response where practitioners or taxpayers have genuine difficulties in meeting their iXBRL obligations in the early stages of the new approach. In advance of mandation Revenue encourages Corporation Tax Payers to avail of the opportunity the optional phase presents. It is a chance to prepare, a chance to test systems and processes to ensure that they are iXBRL ready.

How Does One Become ‘iXBRL Ready’?

The practical challenge presented is to implement a means or mechanism of accurately matching financial statement data to ‘tags’ and to capture these relationships electronically. Thus, it is a match-making process performed by people using software and a measure of skill and judgement. Unsurprisingly, there is no single acknowledged optimum iXBRL solution and each entity will need to find a solution which suits their particular circumstances. However, practitioner experience in the UK (as reported in the iXBRL 2012 Roadshow¹) suggests that in planning an approach, iXBRL filers need to consider a number of questions.

One of the first and more important questions to be considered by companies planning to be iXBRL ready is choice of tagging solution. In the UK, filers have tended to either outsource iXBRL tagging or use tagging software in-house. In the case of the former, the financial statements are prepared, finalised and signed-off as normal and then sent for tagging to the outsourced service provider. These tagging services have been accessed and available from a range of sources such as web-based service providers and professional services firms. Alternatively, UK iXBRL filers have also used software to tag the requisite part of their tax return in-house. Such tagging software may be a stand alone product or may be an upgrade, add-on or integrated within an existing accounts production package. In terms of function, some software solutions tag the data by ‘translating’ finalised financial statements, others embed the tagging process within and throughout the accounts production process.

Revenue does not prescribe or recommend a specific tagging approach; you should choose a solution that suits your company. However, where tax or accounts production software is already in use, it may be prudent to talk to your software provider about their iXBRL plans. In this regard, Revenue has been in continual contact with the vendors and developers of accounts production software packages. Through our Software Vendors Forum we have conveyed our iXBRL filing requirements. Additionally, Revenue has also put in place a number of supports and information resources to facilitate the iXBRL readiness of financial software products available to Irish taxpayers.

The question of who will be involved in the tagging process both in terms of the mapping and review should also be considered. Should it be the Financial Accounting person/department or the Tax person/department or both? The best practice advice from the iXBRL 2012 Roadshow is that as iXBRL tagging of financial statements is essentially an accounting disclosure ‘matching’ process, ownership or strong involvement of the financial accounts team makes sense. In determining who should be involved in this process, it should be borne in mind that, following mandation, iXBRL financial statements will be a requisite component of a companies Corporation Tax return. Accordingly, notwithstanding the fact that Revenue will take cognisance of difficulties encountered with initial filings, iXBRL financial statements should be afforded an importance comparable to a CT1.

The Next Steps

Next for the Revenue iXBRL project will be the announcement of the mandation date for Corporation Tax payers who are not LCD customers. We will also be looking at iXBRL tax computation filing. While the Revenue iXBRL Consultation Document, published in 2011, envisaged the filing of both financial statements and tax computations, the current mandation schedule is limited to financial statements. In recognition of the very big change challenge moving on both tax computations and financial statements at the same time would present, Revenue decided to defer tax computations filing obligation from the initial project phase. It also seemed prudent to postpone decisions on the make-up and form of a tax computation return until Revenue had an opportunity to assess the implications of new self-assessment provision under section 959R amendment of the Taxes Consolidation Act introduced by the Finance Act, 2012. Now we are in a better position to define our tax computation requirement and to schedule its roll-out in further project phases to iXBRL savvy customers and practitioners.

In Conclusion

From an iXBRL perspective, Revenue's key message to practitioners and customers ?can be summarised in a single word.-PREPARE. Over the next few years, it will become mandatory for Corporation Tax payers to file iXBRL financial statements and now is the time to prepare to meet this obligation. To date the move to iXBRL has been hallmarked by excellent co-operation between practitioner bodies and Revenue. If we continue to work together we can make the transition as smooth as possible for all of us.

Finally, if you would like further information in relation to Revenue's iXBRL project or requirements, please visit the Revenue iXBRL Webpage. Aside from publishing regular updates on iXBRL developments, this webpage is intended to be a one-stop iXBRL resource for customers, practioners and software vendors. Or, alternatively, if you wish to contact Revenue's iXBRL Business Team, e-mail us at ixbrl@revenue.ie.

In the meantime..Happy Tagging!!

Pat Mulhall Revenue iXBRL

Business Team

E-mail: iXBRL@Revenue.ie

1.Business Reporting Ireland Ltd/Revenue XBRL Roadshow - a nationwide awareness and education campaign in September 2012 undertaken to advise tax filers of what is involved in filing in XBRL with Revenue