UK delays Audit of iXBRL Tagging
The EU’s ESEF mandate includes a requirement for the assurance of ESEF-compliant disclosures – but how that will work in practice is dependent on the interpretation of local jurisdictions. In the UK, the situation is further complicated by Brexit and by the previous decision of the securities regulator in that country to delay the implementation of ESEF by one year.
This week, the UK Government announced that it has decided that it will exempt UK companies from obtaining independent assurance in this field – at least for the moment.
The UK government’s position states that they will not implement a mandatory auditor reporting requirement on electronically formatted accounts, and that the electronic formatting requirements required by ESEF can be applied after the accounts are approved by directors. In their words:
“The electronic formatting requirements in the ESEF Regulation can be applied after sign off of the annual accounts by the directors. In practical terms this means that the directors’ confirmation that the accounts meet the requirements of the Companies Act 2006, and give a true and fair view of the company’s financial position, does not extend to consideration of the iXBRL tagging. This is the case even if the company chooses to tag the accounts before submitting them to be signed off by the directors.”
This decision effectively creates a two-tier system where the digital disclosures used by investors are subject to a lesser degree of assurance than the human-readable ones. Comforting then that the UK position appears to be a holding one – a delay perhaps, rather than a final policy decision.
Our view? The shift from a paper paradigm to a digital paradigm is often complicated, more so in any regulated field. Some long held assumptions, as well as complex and sometimes contradictory legislation will need to be looked at afresh before there can be consistent and widely understood rules in this area. Conceptually, this is not difficult – an independent review of management’s tagging decisions needs to be undertaken in order to be sure that a company’s digital message is complete, accurate and comparable.
Read more here.
