Assurance

XBRL mandate: mandatory assurance on the XBRL report

In January the Netherlands started preparing for an additional eXtensible Business Reporting Language (XBRL) mandate under the banner of Standard Business Reporting (SBR). The new mandate requires medium-sized enterprises to file their annual reports in the XBRL format, and accountants to provide an electronically signed auditor’s opinion. This standard, SBR Assurance, ensures that the information in the XBRL report cannot be falsified. The XBRL report will be the only version of the annual report; no paper or pdf version can be filed with the business register (Kamer van Koophandel).

Consistent presentation

The biggest challenge to providing assurance on a structured-data document is the decades/century-old regulation which states that a statutory report must provide a “true and fair view” of the viability of the organization. The key question is: ‘How do we make sure that the auditor, business owner, creditor and investor are all looking at the same ‘rendering’ of the structured-data document?’

SBR is a Dutch Government initiative (including Logius, the Ministry of the Interior and Kingdom Relations, Ministry of Economic Affairs, Ministry of Justice, the Institute of Chartered Accountants and other SBR partners) that have created and published an open specification which determines how plain XBRL should be rendered; the Consistent Presentation (CP). This standard is implemented by accounting and reporting software vendors (which are all SBR/XBRL-enabled). The CP refers to XBRL rendering specifications such as the presentation and table linkbases and sets additional rules when needed.

Auditing XBRL

Auditors are using a mix of traditional tools (examination of human-readable view, rendered according to Consistent Presentation) and new technologies (XBRL-enabled data validation with XBRL formulas (public and private), detection of trends, irregularities, etc.) to audit XBRL documents.  The SBR initiative expects many innovations by the private sector in this area, just like we have seen with workflow innovations based on the SBR process and machine-to-machine specifications.

The auditor’s opinion

An electronic report requires an electronic auditor’s opinion. The Institute of Chartered Accountants (NBA) published an XBRL taxonomy which defines the content of the auditor’s opinion in XBRL format. An auditor’s opinion XBRL instance document can easily be generated by accountants, and can be visualized.

Signing off

For further automation, an electronic signature is necessary when signing off on XBRL documents. The SBR initiative created the SBR Assurance specification, which uses open standards (e.g. X.509, XML Detached Signature with XAdES) for linking and signing of the XBRL statutory report and the XBRL auditor’s opinion. The auditor signs off with the electronic certificate (provided by the Institute of Chartered Accountants and approved by the Netherlands’ trusted root certificate). The resulting three files (XBRL report, XBRL auditor’s opinion and XML detached signature) are then filed with the business register (the detached signature is not limited to two XBRL documents; extensions and attachments can be linked as well). With the same standard, the authenticity of the documents and identity of the signing accountant can be verified by anyone. An open source tool is available. An interesting feature of the specification is that it allows for filtering of the data which must remain unchanged for the hash verification to match the original one. E.g. e-mail addresses are removed from the filing before publication in the business register, but the documents can still be verified.

Consistent Presentation instead of Inline XBRL

Another solution would be to require the use of Inline XBRL (human-readable HTML with embedded XBRL): the preparer of the filing determines the visualization of the document. The SBR initiative prefers Consistent Presentation over Inline XBRL since the advantages of Inline XBRL are not required in the filing process of many smaller businesses and bring an additional burden:

  • Inline XBRL requires additional validations by the auditor: whether the human-readable HTML is sufficiently close to the underlying XBRL (what is displayed/what not, do labels match semantics, etc.).
  • To reduce the burden for their clients, software vendors would probably build in default renderings, even with Inline XBRL, defying the initial purpose of Inline XBRL.
  • Within the Consistent Presentation, there is still a level of autonomy to determine the rendering of documents, which will be offered by software vendors and accountants.
  • Most smaller businesses do not desire a custom visualization of their filing; they are used to the output of their accounting software.
  • Rendering by software tools and online portals can still use Inline XBRL and the Consistent Presentation (based on generic or specific templates) for better human understanding of the reported information.
  • Company-specific information can be included in the filing by using XBRL extensions, permitted within the boundaries of the Dutch Preparer’s Extensions (PE) specification.
  • All relevant accounting and reporting software is SBR-enabled: generating and submitting SBR/XBRL reports with the push of a button. Manual tagging software is available, but hardly used.

Having said that, the SBR initiative in the Netherlands will comply with the upcoming (2021) European Single Electronic Format (ESEF) mandate by the European Securities and Markets Authority (ESMA), which requires Inline XBRL for listed companies (issuers). Large non-listed companies will be allowed to choose between ESEF and SBR format.

Summary

The SBR initiative in the Netherlands created three specifications which are relevant for filing by medium-sized and large companies, and which are crucial for the implementation of a digital auditing process:

  • Consistent Presentation: specification to ensure that anyone can reliably render and read XBRL.
  • SBR Assurance: specification for linking and signing of (XBRL) documents.
  • Preparer’s Extension: specification for company-specific disclosure.

Sources

https://www.nba.nl/themas/ict/sbr-assurance-oplossing/ (Dutch; SBR Assurance)

https://aansluiten.procesinfrastructuur.nl/site/en/ (SBR gateway Digipoort)

https://www.sbr-nl.nl/english/knowledge-development-sbr

http://www.challengingthechain.com/ (book; downloadable pdf covering the foundations of SBR)

http://opensbr.org/index_en.html (open source implementation of SBR Assurance)

https://sbrbanken.nl/sbr-banks/ (SBR Nexus initiative)

https://www.kvk.nl/inschrijven-en-wijzigen/deponeren/jaarrekening-deponeren/deponeren-met-sbr/ (Dutch; business register)

https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/intermediairs/aangifte_doen/standard_business_reporting/ (Dutch; Tax office)

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