The Companies and Intellectual Property Commission (CIPC) was the pioneer in South Africa to carry out a full-scale implementation of iXBRL, which provides major benefits for the preparation, analysis and communication of annual financial statements. The CIPC made it mandatory to implement the digital reporting system for all qualifying entities effective, 1 July 2018. This is due to the fact that the Companies Act requires organizations to file their annual financial statements as supporting material to their annual renewal submissions with the CIPC.
Regulatory authorities need structured data to perform their monitoring and oversight functions. This digital reporting feature saves time from having to manually enter any information into the system.
Phase 1 of the implementation was successfully carried out, and now, Phase 2 is underway, with key activities having been implemented by 1st October 2019.
One of the main insight into the CIPC’s taxonomy is that every company is required to calculate a Public Interest Score (PIS), which will determine whether the entity must file with the CIPC or not.
- Firstly, the number of points directly represent the average number of employees during the financial year.
- One point is allotted for every R1 million (or portion thereof) with reference to the third-party liability of the company, at the end of the financial year.
- One point is given for every R1 million (or portion thereof) with reference to the turnover at the end of the financial year and,
- Finally, one point is given for every individual who, at the end of the financial year, is known by the company to directly or indirectly having a beneficial interest in any of the company’s securities issued. If it is a non-profit company, every individual needs to be a member of the company or a member of an association which is a member of the company.
The resulting scores will determine the type of financial reporting required. While there has been significant uptake of the digital reporting tool, there are still companies that remain non-compliant. There will be a converging focus on the enforcement of the Companies Act, and the companies who do not comply with the requirement to submit their annual financial statements will be sanctioned appropriately.
Phase 2 Update:
The second stage of the project will involve updating the CIPC taxonomy. Information that was part of the 2017, 2018 and 2019 is to be included while following 2016 IFRS taxonomy. This round of update will focus on enhancing certain facets of the taxonomy such as data quality, quantity, availability and standardisation.
So far implementation has been a success, with significant gains, including faster turnaround in the investigation of cases, and the ability to immediately detect non-compliance upon filing. This has freed up staff time to focus on the substantive analysis of financial information.
Going forward, the CIPC has also noted that the filing community can expect a vigilant focus on enforcement, and appropriate sanctions for those entities found not to have complied with the requirement to submit annual financial statements in iXBRL.