5 Significant updates in the IFRS 2021 Taxonomy
Accounting standards have been put in place to facilitate the easy readability and comparability of company statements across geographies. These standards usually specify how a transaction should be disclosed, measured, and identified.
One such accounting standard is The International Financial Reporting Standards (IFRS) that describes firms’ financial performance from over 140 jurisdictions across the globe.
The language that is used to standardize the reporting addresses the need for a machine-readable set of terms for faster processing – eXtensible Business Reporting Language (XBRL)
This language or ‘Taxonomy’ goes through a review annually to keep up with the IFRS and ensure transparency and compliance with global accounting best practices.
In line with this, IFRS has recently published its taxonomy for 2021. On analysis of 400 electronic filings, over 100 tags have been added to the taxonomy, correlating to 5 significant updates from the 2020 taxonomy.
- Covid-19-Related Rent Concessions
Changes in rent for bearers of a property lease affected due to the pandemic.
- Amendments to IFRS 17 Insurance Contracts and Extension of the Temporary Exemption from Applying IFRS 9
This update aims at guiding companies with the implementation of IFRS 17 Insurance Contracts. They will need to describe their financial performance and decrease diversity while accounting for earnings from selling items produced while preparing an asset for its proposed use.
- Interest Rate Benchmark Reform
This modification aims to help companies offer valuable information to investors about the consequences of interest rate benchmark reform on their financial statements.
- Primary Financial Statements
The New mandate requires certain additional information to be submitted on the financial position, financial performance, cash flows, and changes in equity and Earnings Per Share (EPS).
- Employee Benefits
Amendments in presentation and disclosures related to defined employee benefit plans.
These revisions have been mandated with an enhanced XBRL reporting experience in mind. In turn, this makes it imperative for filers to keep an eye out for specific changes they will need to make to comply with this mandate.
- Which entity-specific elements will need to incorporate the new 2021 taxonomy tags?
- Will this revision warrant a new tagging process as the taxonomy is modeled a little differently?
- What tagging errors are likely to surface due to the taxonomy revisions, and how can they be addressed?
While early adoption is encouraged, all amendments apply to annual reporting periods beginning on or after 1 January 2023.
XBRL wins hands down as an efficient means to ensure seamless digitization of the IFRS standard, thanks to the flexibility it offers. It is also increasingly being adopted by other major regulators (SEC and FERC) as the language of choice for regulatory reporting. With the IFRS looking to establish their sustainability standards board and multiple frameworks coming together to create a more global standard for reporting, you need to ensure that your company is ready to adapt and scale.