Digitisation is Best Practice: The Case for Digital Reporting
Published - 20 April, 2020
Former Bank of Finland Governor and chair of the Trustees of the IFRS Foundation, Erkki Liikanen, has spoken on how digitisation and standardisation of business reports should offer productivity benefits – helping investors diversify and invest, and encouraging transparent, accountable, efficient markets around the world.
When it comes to investor relations, a website is one of the most crucial platforms a company should use to educate and engage clients about its offerings and in differentiating itself from its peers. Investors need to quickly identify and easily digest the company’s value proposition and performance metrics.
Research has shown a general tendency towards digital reporting formats, of which PDF, the reporting standard XBRL (and iXBRL) and digital annual reports (HTML) are said to have the greatest potential and importance. In fact, investor relations experts believe that in the future, reports will only be provided in a digital format.
In addition to this, in the digital era, user experience is of key importance – and research shows that a full HTML report with smart navigation and search functionalities is essential.
Only a full HTML report can meet the expectations of today’s digital audience: with interactive and multimedia content, easy navigation and mobile-friendly design, good searchability and options for social media sharing. It is for this reason that full HTML reports, not PDFs or summary pages, are the future of digital reporting.
The Right Thing
Although mainly a statutory information document, the integrated report should also serve as a communication and information vehicle. The report contains a lot of highly relevant facts, figures and background information on multiple topics. Reaching audiences with this content should be part of any company’s corporate reporting strategy.
Web accessibility is currently receiving a lot of attention. Accessibility is becoming a key compliance area, with the rise of legislation in recent years and the release of the international Web Content Accessibility Guidelines. Additionally, accessible websites have been found to reach a larger audience. They have greater visibility, because being web accessible also improves a website’s Search Engine Optimisation (SEO). Researchers and investor relations professionals suggest that demonstrating accessibility is “the right thing to do” as increasingly more institutions and fund managers are looking favourably on Socially Responsible Investing (SRI).
The aim of company websites as far as investor relations is concerned, is to provide quick and easy access to the key information and tools that investors and analysts most want.
By enabling iXBRL to electronically process, store, and transmit financial data within digital reports, the technology offers many beneficial uses, which are welcomed in this digital age. Predictably, the way forward will continue in the direction of digital and standardised reporting.
If a digital report is created in HTML format, it is possible to make use of this report with iXBRL technology. Financial data within the digital report is provided with clearly identifiable labels. This process is referred to as “tagging” the data. The tagging of financial information within digital reports is mainly computer-based.
The use of iXBRL in digital reports has the advantage, among other things, of a very high degree of standardisation of data. This increases the comparability of information, and inter-operability and degree of automation. In addition, the use of iXBRL can dramatically improve the data quality of the reports, since media leaks can be largely avoided by using iXBRL. Another possibility created by using XBRL is Real-Time Reporting.
Other benefits for the reporting company of using XBRL in digital reporting include the high level of flexibility provided by the individual extensibility of iXBRL taxonomies, the international recognition of the standard and the fact that the use of iXBRL is in no way limited to business reports. In addition, report readers enjoy a clear understanding of standardised data, greater data transparency, and an easier way to detect irregularities.
Technology is a significant enabler, Liikanen has said, stating however that the real benefits will only come once long held efficiency habits are replaced. In addition, the right tools must be made available, and laws should be updated to allow digitisation to be fully embraced by regulators.
Digital reports can make them interactive for the user. Moreover, the ability to find digital reports over the Internet gives the reporting company access to a wide range of people. By using interactive digital reports, the company can retrieve, evaluate, and exploit extensive user data by retrieving, clicking, and scrolling.
It is widely known that investors seek diversification in risk and investment opportunities. Consequently, the digitisation of financial information can help them to achieve these goals. It is important that work is continuously carried out to facilitate and support transparent, accountable and efficient financial markets in a digital world.
Regulators globally are already fully embracing electronic filing with iXBRL, the IFRS taxonomy being used in Chile, Peru, Mexico, South Korea, South Africa, Australia and the US. The European Commission has finalised its proposals to require listed companies that prepare consolidated financial statements using IFRS standards to tag their primary financial statements using the IFRS taxonomy for financial years starting on or after 1 January 2020.