engleski

TOWARDS FULL DIGITIZATION OF THE FINANCIAL REPORTING – OVERVIEW OF THE FINANCIAL REPORTING LANGUAGES

Financial reports are a communication tool used to present a company’s financial position and business performance among other mandatory and voluntary disclosures. In the era of digitalization financial reports have also been faced the transformation from only human-readable to both human and machine-readable documents. The XBRL standard plays a crucial role in that convergence. The IASB and IFRS Foundation have developed a structured classification system of IFRS disclosures in digital reporting – IFRS Taxonomy. The IFRS Taxonomy is based on the XBRL standard. When it comes to the listed companies on the EU regulated market, according to the Transparency Directive they are obliged to prepare their annual financial reports applying the European Single Electronic Format (ESEF), which was developed by the European Security and Market Authority, as of the financial year 2020 (postponed by one year due to the COVID-19 pandemic). One of the reasons for the conversion to digital reporting was an intention to improve the communication between preparers and users of financial reports. With the same aim, the IASB launched an initiative Better Communication in Financial Reporting a decade ago. The initiative still connects several ongoing projects meaning that the financial reports improvement is not easy to achieve, but it is rather a long-term process. To bring the benefits of reporting digitalization closer to the interested public, but also national standard-setters and preparers, this paper summarizes all the above taxonomies. Using the deductive method of description, the IASB’s initiative Better Communication in Financial Reporting is briefly described. As to one of the initiative’s ongoing project, emphasis has been given to the IFRS Taxonomy. Since the IFRS Taxonomy is based on the XBRL standard, the XBRL is also described. Finally, the ESEF is presented due to the fact that all listed companies on the EU regulated market will have to report based on that technical standard. This paper is intended primarily to preparers to facilitate the understanding of the electronic formats which are possibly the future of reporting not only for listed companies but also for the SMEs. Accounting profession challenges continuous changes coming either from accounting standards amendments or legislative, which includes technical changes such as overall digitalization. Accordingly, all stakeholders of the accounting profession have to continuously follow the legislation and digitalization changes.

better communication in financial reporting ; digital reporting ; XBRL ; IFRS Taxonomy ; ESEF

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