KPMG XBRL
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KPMG XBRL Presentation Transcript

  • 1. iXBRL Accountsfor UK Tax FilingJon D’Arcy30 November 2011
  • 2. Contents• Who, What, Why, When • Tagging and taxonomies• From XML to XBRL to iXBRL • Accounts conversion• Adoption of XBRL • Auditor considerations• Filing with Companies House • Non-audit services• XBRL implementation in the UK • What should companies do now• Filing formats • HMRC Soft Landing• Group accounts© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 1
  • 3. Lord Carter’s 29 key recommendations The universal electronic delivery of business tax returns by 2012.  SA – April 2008  PAYE – April 2009  VAT – April 2010  CT – April 2011© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 2
  • 4. iXBRL – Who, What, Why, When WHO? • All companies which are required to submit a tax return must comply© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 3
  • 5. iXBRL – Who, What, Why, When WHAT? • In-line XBRL (iXBRL) is a web based computer language which is designed to be readable by users (via a web browser) and computers • HMRC have announced that submission of tax returns and financial statements in iXBRL format will become mandatory© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 4
  • 6. iXBRL – Who, What, Why, When WHY? • HMRC will be able to electronically review accounts and automatically identify inconsistencies and inaccuracies through ratio analysis and electronic profiling. It will also facilitate the identification and closure of tax loopholes • The process will give HMRC paperless storage providing quick and easy access to significant volumes of information.© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 5
  • 7. iXBRL – Who, What, Why, When WHEN? • All corporate tax returns filed after 31 March 2011 must be in iXBRL format along with supporting computations and accounts© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 6
  • 8. From XML to XBRL to iXBRL • The extensible Markup Language XML was created so that richly structured documents could be used over the web • XBRL was designed to make it easier for computer software to automatically communicate, exchange, read, process and analyse financial information (as data). It cannot easily be „read‟ by people and XBRL tagged files cannot easily be used to reproduce a financial source document in its original format • In-line XBRL (iXBRL) combines HTML (a text based language designed to display data) and XBRL tags, people can open iXBRL files (using a web browser) and see the original content and format of a document, while the tagged XBRL data can be stripped out and automatically processed by software© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 7
  • 9. XBRL v iXBRL© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 8
  • 10. Adoption of XBRL• XBRL is being adopted by numerous governments, regulators, companies and organisations across the world• Several European regulators and other information gatherers have already made XBRL their preferred or mandatory format for receiving data• In 2009 the Securities and Exchange Commission (SEC) in the United States committed to the phased, but ultimately mandatory, transition to XBRL for filing quarterly and annual financial results• Revenue in ROI have outlined that they intend to accept voluntary filing of iXBRL accounts in 2012 and mandatory for some classes of corporates in 2013© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 9
  • 11. Filing with Companies House • As it currently stands, most companies will need to file company accounts separately with HMRC and Companies House • The two are working together to align their services and create a joint filing facility which may reduce the administrative burden for some businesses • Companies House launched its iXBRL filing service for unaudited accounts of small companies in August 2010 (full set was to be by Summer 2011, but not met) • HMRC and Companies House do offer a template-based „Joint Filing‟ software tool, suitable for smaller companies© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 10
  • 12. XBRL implementation in the UK • All UK Company Tax Returns (CT600s) for accounting periods ending after 31 March 2010 and submitted after 31 March 2011, must be filed online with accompanying accounts and computations in iXBRL format • The exact filing date and accounting period end dates were very important on first implementation − The requirements mostly applied first to companies with a 30 Sept 2010 year end − However, some companies were able to avoid the requirements for one year if they were able to finalise their accounts and file their tax return quickly afterwards ie 30 April, 30 June, 30 Sept and even some 31 Dec 10 year ends (normally you have 12 months to file your tax return in the UK) − Hence for some companies with a 31 Dec 11 year end, this is their first year of adoption© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 11
  • 13. Filing formats CT600 Form• Filing requirements Statutory Accounts Computation − XML Corporate Tax Returns − iXBRL Corporate Tax computations − iXBRL Legal entity accounts (UK GAAP or IFRS) − iXBRL Group Accounts (UK GAAP or IFRS) − The whole of a company‟s annual report, including the directors‟ report, etc. will need to be submitted in iXBRL format. Any supplementary reports and schedules that do not form part of the accounts or financial statements per se may be submitted in PDF format• If accounts are not filed in iXBRL along with Tax Return, the entire submission will be rejected© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 12
  • 14. Group accounts• For UK registered companies, Part 15 of Companies Act 2006 requires every company, including group holding companies, to prepare individual accounts (S.394)• Companies required to prepare group accounts must deliver both those and their own individual accounts as part of the company tax return.• Parent companies must send individual accounts using iXBRL but may choose to send their Group accounts as a PDF. A single consolidated account can be submitted, if it contains the iXBRL information about the parent company that would have been provided by iXBRL tagged individual company accounts© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 13
  • 15. Tagging and taxonomies • HMRC has published lists of items in the accounts and corporation tax computations that it wants to be tagged. These lists are like dictionaries and are called taxonomies. Not every number or disclosure needs to be tagged, only those on these lists should they be present in your accounts • HMRC has published a minimum tagging list for UK GAAP accounts and UK IFRS accounts (valid until 2013) • The minimum tagging requirement means that for each line in the accounts, a tag must be attached if the item or financial reporting concept in question appears in the minimum tagging list of the appropriate taxonomy • Tagging exercise to be repeated on conversion from UK GAAP to IFRS/FRSME© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 14
  • 16. Tagging and taxonomies - in more detail UK Regulated Chart of Accounts XBRL tags required for XBRL tags required for UK XBRL tags required for tax returns/comps GAAP accounts – legal IFRS accounts – legal entity entity HMRC Tax UK GAAP IFRS Taxonomy Taxonomy Taxonomy Approx 5,000 tags covering tax Approx 7,000 tags covering UK Approx 8,300 tags return and computation GAAP accounts Banking and insurance (minimum tagging list 1,253 tags) extensions available© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 15
  • 17. HMRC’s CT Filing Product• Available since 23 November 2009• Extended in October 2010 to incorporate fields that Companies House need and will be the basis for „Joint Filing‟• Based on CT600(Short) + Supp Pages A, E and J• Intended for smaller companies with less complex affairs − Has to be downloaded for each company for each AP − Previous year‟s figures do not carry forward − Templates for Accounts and CT comps „impose‟ a format• Feedback from agents and their rep bodies suggests it‟s unlikely to be used by them except for, e.g., pro bono work for clubs, small charities, etc.© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 16
  • 18. Accounts conversion • Fully automated approach - Specialist developers of accounts production and taxation software (such as, Sage, IRIS and Digita) have made their products XBRL and iXBRL compliant • Conversion approach - Word or excel accounts will need to be converted into iXBRL using a bolt-on software tool (KPMG‟s tool is called XME) − Items in the accounts will need to be manually tagged to the relevant UK GAAP or UK IFRS taxonomy elements. A conversion tool is not able to automatically embed the XBRL tags in the iXBRL file − Tags are retained for future iterations of the same document template, thus the majority of the work will be required in year one with only maintenance and updating of the tags in subsequent years© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 17
  • 19. Fully automated approach© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 18
  • 20. Conversion approach Year 1 KPMG XME Tag statutory accounts to relevantCurrent process for taxonomy creating statutory Produce Develop statutory Test statutory accounts accounts format in MS outputs accounts in Review changes to Word iXBRL format taxonomy or or MS Excel accounts disclosures. Update tags as appropriate Review iXBRL documents Year 2+ Attach approved iXBRL document to tax return using tax compliance software (Alphatax) © 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 19
  • 21. Conversion approach - Option 1:Fully outsource conversion of accountsProcess Same process for MS Word or Excel Outsource Party sends creating statutory accounts tagged client the iXBRL file for accounts in MS & converted by review Word or Excel Outsource Party & submissionApproach• Generally suited to companies with limited no of entities (15/20) and/or limited finance resource© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 20
  • 22. Conversion approach - Option 2:Partially outsource conversion of accountsProcess MS Word or Excel Same process for accounts template(s) Outsource Party sends Client uses templates to creating statutory tagged client iXBRL accounts type accounts and accounts in MS & converted by template file(s) submit to HMRC Word or Excel Outsource PartyApproach• Generally suited to companies with large number of entities and reasonable finance resource• Templates (Complex trading, simple trading, holding, dormant)© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 21
  • 23. Conversion approach - Option 3:Use conversion software to manage process in-houseProcess Same process for MS Word or Excel Client converts creating statutory accounts tagged accounts to accounts in MS using software tool by iXBRL and submits Word or Excel(a) client in-houseNotes: (a) Some modifications to templates will be made to enable or make more efficient Finance processes will need to be revised accordinglyCost License fee based on size of company, number of entities and users (nominal cost)Implementation support dependent on level of handholding required Training Help with template production Help with process design Help with tagging of templates Testing, dry runs, submission© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 22
  • 24. Template pre-forma approach© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 23
  • 25. “Form filler” approach© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 24
  • 26. Conversion - What do you need to do? 4. Ensure the correct 3. Click the tag period (context) has icon been selected 2. Highlight the 1. Find the correct number or text to be disclosure from the tagged listing© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 25
  • 27. Conversion - What do you need to do?Your accounts department: Government HMRC Gateway Per Tag: Tag Description HMRC Database Balance Type: Debit/Credit Data Type: Monetary/Text/Statistical Period Type: CY/PY/Value at Given Moment Value XBRL Type of Asset Class Tags Owned/Leased Assets Type of Equity Class Continued/Discontinued Operations Legal entity Segmental/Divisional Analysis iXBRL file Geographic Analysis (accounts + tax returns/ comps) Taxonomy MS Word/Excel Accounts© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 26
  • 28. Fully automated approach v conversion approach• Fully automated accounts production − More work upfront: need to revise entire legal entity/group accounts process − Significant finance resources required (availability/other priorities?) − More expensive − Automated end to end accounts production (Group and Stats) and iXBRL filing − Can be used for Foreign GAAP accounts production and/or within SSCs − Fully automated workflow and audit trail functionality − Ongoing maintenance relatively straightforward• XBRL Mapping tool (KPMG‟s XBRL Mapping Engine [XME]) − Quick implementation: bolts onto existing Word/excel accounts − Low cost − Only deals with iXBRL filing and TB mapping − Ongoing maintenance can be time consuming© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 27
  • 29. Auditor considerations • The Auditing Practices Board Bulletin 2010/1 “XBRL tagging of information in audited financial statements – guidance for auditors” discusses the impact of the use of XBRL on financial statement audits and outlines factors to be taken into account in providing non-audit services relating to XBRL to audit clients − ISAs (UK and Ireland) do not impose a general requirement on the auditor to check XBRL tagging of the financial statements as part of the audit − Because the XBRL tagging is simply a machine-readable rendering of the data within the financial statements, rather than a discrete document, it does not constitute „other information‟ as defined in ISA (UK and Ireland) 720 Section A. Accordingly the requirement of ISA (UK and Ireland) 720 Section A for the auditor to „„read‟‟ the other information for the purpose of identifying material inconsistencies or material misstatements of fact is not applicable to XBRL tags − APB will consider the needs of users and the extent to which an audit of financial statements should be expected to provide assurance on the accuracy of the tagging process. It is also possible that regulators may require auditors to provide assurance on XBRL-tagged data at some stage in the future© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 28
  • 30. Non-audit services • Audit clients may request various non-audit XBRL related services to be performed by its auditors. These may include: − Performing the tagging exercise; − Providing a service to the directors of the company as to accuracy of the tagging performed by management (e.g. by undertaking an agreed upon procedures engagement); − Providing advice on the selection of individual tags; − Supplying accounts preparation software that automates the tagging; − Training management in XBRL tagging • Subject to compliance with the ASBs Ethical Standard (ES) 5 (and specifically the management and self-review threats) auditors can provide XBRL services to audit clients (also subject to any SEC restrictions)© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 29
  • 31. What should companies do?• Start planning immediately• Establish the extent to which the business is affected• Identify any necessary changes and the preferred approach• If necessary, decide who will be responsible for addressing and managing the impact• Eliminate unnecessary companies/agree pro forma accounts template/agree proforma template for similar companies)• Pilot test submissions• The main impact of the new requirement is unlikely to be filing the corporation tax return and computations, but rather on converting or preparing company accounts in iXBRL, and assigning the relevant tags from the appropriate taxonomies© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 30
  • 32. HMRC Message – “Soft Landing” The key is working together: • Help and support in the implementation phase • Appreciate not everyone will get it exactly right first time • Particularly sympathetic approach to penalties in first two years but flexibility beyond that − Reasonable Excuse − Reasonable Care • Working with you to get it right© 2010 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliatedwith KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland. 31
  • 33. Thank YouPresentation by Jon D‟ArcyOur contact details:Jon.darcy@kpmg.ie or +44 (0) 289 089 3863
  • 34. © 2010 KPMG, a partnership and a member firm of the KPMG network of independent member firms affiliated withKPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.The KPMG name, logo and "cutting through complexity" are registeredtrademarks or trademarks of KPMG International Cooperative ("KPMGInternational"). 33