Article written by Hennie Viljoen (XBRL Specialist: CIPC)
The Fourth Industrial Revolution in South Africa
The definition of the fourth industrial revolution is not quite set in stone and the technologies associated with it are moving targets whose true value will only be revealed over time. According to the website of the South African Presidential Commission on the Fourth Industrial Revolution (4IR – (www.4ir.gov.za) the current definition reads:
“… the 4IR can be broadly defined as an integration of faster, efficient and intelligent technologies.”
CIPC strategy on digitisation
The above definition of 4IR aligns well with the stated strategy of the Companies and Intellectual Property Commission (CIPC). Par 8.2.6 of the CIPCs strategy is quoted:
“Digitisation remains key for CIPC in preparation for the Fourth (4th) Industrial Revolution”.
Also, this expressed statement of the CIPC to digitise, aligns with Regulation 30 (5)(a) of the Companies Act as updated in 2011 with regards to financial reporting to the CIPC:
“The Commission must establish a system to select and review a sample of financial accountability supplements, audited annual financial statements or independently reviewed annual financial statements that have been filed …”
Annual Financial Statements in digital format
The Companies Act prescribes that audited or independently reviewed Annual Financial Statements (AFSs) should be submitted to and reviewed by the CIPC. Since the CIPC is the registrar of companies in South Africa, and therefore the central regulator of all businesses of all types, there were important challenges the CIPC had to overcome to adhere to its legislative mandate:
- Volumes were overwhelming. Tens of thousands of AFSs had to be processed annually by a small team of investigators;
- Data was not structured in any back-end system;
- No standard labelling of data elements aligned to the IFRS accounting standard as prescribed by the Companies Act;
- There was no automated analysis or reporting, meaning efficiency was low and analysis was very laborious and prone to errors;
- The CIPC had little regulatory oversight, was only reactive instead of proactive, and therefor had low regulatory effectiveness.
XBRL as enabler of digitisation
The above-mentioned challenges let the CIPC to embark on a journey to develop a mechanism for receiving of, analysis and reporting on AFSs, via XBRL (eXtensible Business Reporting Language), which is fast becoming the world-wide technology standard for digitisation of business and financial reporting. XBRL was implemented on 1 July 2018 as sponsored by the then Minister of Trade and Industry (Dr. Rob Davies). XBRL is an open international technology standard for digital business and financial reporting, managed by an international not-for-profit consortium – XBRL International (www.xbrl.org).
In line with the definition of the 4IR, XBRL provides intelligent context to data via taxonomies (data dictionaries), like “barcoding” of data. Through the use of taxonomies aligned with accounting standards (e.g. IFRS – International Financial Reporting Standard as annually updated by the IASB – International Accounting Standards Board), ambiguity is removed from financial concepts (e.g. ensuring all reporting entities understand exactly what is meant by “revenue” and how it is made up).
Because data exchange via XBRL filing is electronic and structured; automated validation has been incorporated into the process to ensure accuracy and completeness; and back-end analysis and reporting via Business Intelligence (BI) technology is now part and parcel of processing AFSs, the implementation of XBRL also addressed the “faster” and “efficient” aspects of the definition of 4IR.
The results of implementing XBRL
Since the implementation of XBRL on 1 July 2018, the CIPC received more than 43 000 successful XBRL filings. Regulatory effectiveness improved in the following ways:
- Better control over execution of policy;
- Compliance significantly improved;
- Identification of early signals of sector distress became possible;
- Better proactive enforcement is now a reality.
The CIPCs XBRL Programme is still ongoing with the emphasis now on:
- Data sharing with other regulators and government agencies towards the goal of Standard Business Reporting (SBR) – the principle of report-once-share-many;
Future digital assurance of electronic files in XBRL format. This is possible through 3rd party digital certification or block chain technology, and has to be implemented in conjunction with other regulators and professional bodies (e.g. IRBA, SAICA, etc.).
Digitisation through XBRL is a worldwide trend and a major driver of the 4IR. In South Africa, XBRL is a mechanism to enable collaboration between different regulators and government agencies. The potential of XBRL for assisting the economy is significant, and this fact has been emphasised by the international innovation award the CIPC recently won from the Corporate Registers Forum (www.corporateregistersforum.org).
Information about the CIPCs XBRL Programme is available on the iXBRL Page of the CIPCs website (www.cipc.co.za).