Out-Law News | 08 Jun 2020 | 5:22 pm | 1 min. read
The UK government has confirmed that directors do not need to consider the electronic formatting of company accounts they are signing off in order to meet their duties under the Companies Act.
Under the European Single Electronic Format (ESEF) Regulation published in May 2019, accounts for companies with publicly traded shares will need to be prepared in electronic format with Inline eXtensible Business Reporting Language (iXBRL) tagging for financial years beginning on or after 1 January 2020.
The requirement will make certain sections of company accounts machine readable, and will apply in the UK to all issuers that are subject to the FCA’s Disclosure Guidance and Transparency Rules Sourcebook and that prepare their consolidated accounts in accordance with International Financial Reporting Standards.
In new guidance (7 page / 246KB PDF), the UK government said the electronic formatting requirements in the ESEF regulation can be applied after directors have signed off the accounts.
“In practical terms this means the directors’ confirmation that the accounts meet the requirements of the Companies Act, and give a true and fair view of the company’s financial position, does not extend to consideration of the iXBRL tagging. This is the case even if the company chooses to tag the accounts before submitting them to be signed off by the directors,” the Department for Business, Energy & Industrial Strategy (BEIS) said.
Corporate governance expert Tom Proverbs-Garbett of Pinsent Masons, the law firm behind Out-Law, said the guidance would be welcomed.
“Directors will no doubt be relieved to learn that the electronic formatting of accounts is quite separate, in BEIS’ view, from the true and fair requirement under section 393 of the Companies Act. Directors can concentrate on making sure that the substantive elements are in line with legislative requirements, leaving the technical specifications to those best qualified to put them into practice,” Proverbs-Garbett said.
“This seems logical: a machine-readable element will be helpful for computer-driven cross-jurisdictional comparisons, but will be a background issue for most people including all but the most interested directors,” Proverbs-Garbett said.
In the guidance BEIS said firms could choose to create a single filing, a parallel tagged document, or the creation of a tagged document once the annual report has been completed in paper format, but the directors’ confirmation of the company’s financial position related to the human-readable version of the report.
Following the publication of the guidance, the Financial Reporting Council has launched a survey aimed at those involved in preparing company accounts – including XBRL service providers, auditors, data providers and companies themselves – in order to better understand companies’ preparedness for applying the ESEF regulation.