Standard business reporting is coming to Australia. Supported by XBRL, it is set to reduce the reporting burden across the business financial reporting chain, writes Trevor Pyman.
Standardisation, which includes the development of an XBRL reporting taxonomy, is coming and there's not much we can do about it.
You can try to push against it or you can swim with it and see where it takes you. One thing is for sure; we will all end up in a different place to where we are now. Some will see it as a glorious new land of opportunity, others will long for the good old days when they had a comfy little niche carved out for themselves.
Regardless of which camp you are in, knowing what is coming will help you prepare.
Most industries and occupations have been hit by standardisation, and it's generally regarded as a good thing by the consuming public. Using an ATM card that will work in any machine in any country has made it so much easier to spend money overseas.
Today it's difficult to comprehend the notion that a train could not travel from one city to another due to changes in the width of the tracks between jurisdictions, which used to be a common occurrence. The ubiquitous barcode has made the checkout process a breeze when we are buying goods that we could not afford before containerisation revolutionised global trade (and made thousands of wharfies redundant).
Standardisation is now about to have a crack at business reporting. What we report has been standardised, through IFRS and other standards, but how we report has not.
That's about to change. Japan and the Netherlands have already embraced this change, and the UK, EU and US are well down the path. Australia is no longer able to resist, but why would it?
The Australian government announced in late August the approval of a long-term program to reduce the reporting burden for Australian businesses. Standard business reporting (SBR) will use a standards-based approach, including the development of an XBRL reporting taxonomy to bring about a sustainable reduction in effort across the business financial reporting chain.
SBR will make reporting easier for business by removing unnecessary or duplicated reporting. It will standardise terminology used in reporting. Technology will allow businesses and their advisers to send their financial reports to SBR agencies via a single security sign-on. It's hoped that eventually improved technology will also allow government forms to be prefilled directly from business accounting/record-keeping software and sent electronically to the agencies.
This approach to reductions in reporting burdens allows regulators to fulfil their roles, but also allows businesses and their advisers to spend less time in the reporting process.
It also minimises unintentional errors that cause embarrassment and reverse workflows. Having government forms prefilled from accounting software, and sending them electronically to the government will also save time in reprocessing and keying information that already exists in a system.
The Treasury will coordinate the program, which will harmonise reporting for agencies such as the Australian Bureau of Statistics (ABS), the Australian Prudential Regulation Authority (APRA), the Australian Securities and Investments Commission (ASIC), the Australian Taxation Office (ATO) and, potentially, state revenue offices. Once harmonised, XBRL will be used to create a reporting taxonomy, which will allow as much information as possible to be prefilled from a business's accounting software package.
The SBR initiative is expected to save businesses and their advisers $795 million per annum within four years of its implementation in 2010.
The mapping of the reporting taxonomy to the accounts within the software will also allow for the production of a range of business-to-business purposes, such as financial or investment advice. Reports such as daily profit and loss statements will also be possible, which will allow businesses to understand their financial viability in near real time.
The full implementation of SBR for financial reporting is scheduled for mid-2010. There will be earlier implementations in 2008/2009 of tax file number declaration forms as well as other pilots and tests to gain confidence and support for the new processes and systems. Members of the accounting profession and software industries will be invited to work with the SBR agencies and to get ready early.
All software developers are being involved in the consultation and design of the processes and systems to support SBR. To ensure you are supported, you should let your software developer know that you expect them to provide SBR-capable systems.
On the private-sector side, the accounting profession has long been an advocate of the technology that drives this. CPA Australia established and maintained the Australian jurisdiction of the XBRL International Consortium with the Institute of Chartered Accountants from 2002, only recently passing control over to the Australian federal government and the ASX to continue the work.
XBRL stands for eXtensible Business Reporting Language. It has been developed over the past eight years by a global consortium of the world's largest companies, stock exchanges, regulators, software developers, accounting firms and accountancy professional associations.
How XBRL works is for the propeller heads. All you need to know is how it will affect you, and how you and your practice will get information on how to make the best advantage of it.
Client data and external data (industry trends, stock prices, competitor performance indicators and the like) can, via this technology, flow freely from one system to another without the need for interfaces to be built, just as you can view a website on the internet without building an interface to it.
You can view the hours lost gathering and collating this data as missed revenue, or the opportunity to spend that time on activity the client values far more highly: the application of your knowledge and expertise to that data. The charges for this value-added time are much more recoverable at accountants' rates than data entry and correction. You just need to make sure your practice is geared up for the shift in focus to do that work.
As well as providing the XBRL reporting taxonomy, the SBR program is also developing web services that will allow forms to be lodged electronically directly with the government using a single sign-on (across the agencies involved).
This means that potentially, businesses and accountants will be able to manage their accounts, create government reports that have been largely prefilled, have them validated, and lodge them online without leaving your accounting software.
There should be no need to close the accounting software and log into another system (maybe a portal) and then re-key or transfer the reporting information for lodgement.
Returns and forms lodged online in this manner will also have receipted confirmation (online) and in some cases, errors will also be notified online. All this will potentially be possible from your accounting software.
The extent to which this functionality is provided by the software you use will be driven by the demands and expectations that you provide to the developer that supports your software.
Change on this scale is always kind of scary, and it's hard to know what to do. As the scouts say: be prepared. Talk to your software provider about what they are doing in this space.
Keep an eye out for CPA Australia events that have sessions on standard business reporting or similar topics and go along to hear what the experts have to say so you can assess what it means for you. Watch the press for announcements and articles that will give you pointers on the progress of this change so you can assess the right time to make changes to your practice to accommodate it.
CPA Australia represents you at consultative forums with the Tax Office, and through these, further information about SBR will be provided.
Whether you view this as a friend or an enemy, the strategy is the same: learn all you can about it so you know how to respond when it washes over you.
Trevor Pyman is a director of XBRL Australia Limited, the Australian jurisdiction of XBRL International.
