What needs to be done on data quality? FRC reviews first mandatory ESEF year
The FRC Lab, part of the UK’s Financial Reporting Council (FRC), has released a valuable analysis drawing out lessons learnt from the first year of mandatory digital reporting using the Inline XBRL-based European Single Electronic Format (ESEF). It finds that many companies are rising to the challenge of this new format, and points the way forward on more that needs to be done to unlock the full benefits of structured digital reporting.
“It’s really encouraging that so many seem to have taken on board the tips from last year’s early implementation review,” says Mark Babington, the FRC’s Executive Director of Regulatory Standards. There is of course room for improvement and the actions in this report will help companies to make their reporting fit for increasing digital consumption. A focus on data quality and usability will be key to achieve this.”
The report offers recommended actions and better practices to enable companies to meet the needs of investors and other users of company disclosures, in the areas of reporting processes, usability and design, and XBRL tagging in particular. It advises companies to think about structured digital disclosures as an integral part of the annual reporting process, and to adopt a continuous improvement mindset.
In terms of tagging, the FRC recommends that companies implement comparative peer review, an approach that we suspect could help to significantly improve consistency. It provides guidance on selecting the right tag and creating extensions, and notes that many of the specific tagging issues it highlighted in last year’s review of early, voluntary ESEF reports remain important to consider. The report also suggests that companies start testing text block tagging now in readiness for this additional requirement, and consider voluntarily tagging notes in detail where this may be of interest to users. Readers wishing to learn more should look out for a webinar on the report’s findings and suggestions, planned for the coming weeks.
Here at XBRL International we welcome the FRC’s ongoing review process – an exercise that is well worth considering by other national bodies. While the adoption of a new format and a new approach to reporting inevitably brings a learning curve, this process can be simplified through the identification of best practices, current sticking points and key areas for focus and improvement.