The National Bank of Ukraine (NBU) has published the rules for financial reporting based on the IFRS taxonomy as part of implementation of the single Financial Reporting System (the System).
The System will be introduced at enterprises that are of public interest in line with the Law of Ukraine On Accounting and Financial Reporting in Ukraine. Such enterprises include banks.
The System will allow for acceptance, processing, verification, and disclosure of financial statements of enterprises in a single electronic format. It is free of fees and established on the basis of the National Securities and Stock Market Commission (the NSSMC). Starting 2019, the enterprises, including banks, will prepare financial statements under international standards in a single electronic format XBRL (the UA XBRL IFRS reporting taxonomy) and submit them to the NSSMC.
According to the Memorandum of Understanding on Development and Implementation of Financial Reporting System (the Memorandum) signed in 2017, the NBU will be the System’s user. Other regulators also will be able to use the System’s data.
“In addition to total improvement of the quality and availability of corporate financial statements, the single Financial Reporting System greatly improves the exchange of business information. In particular, it promotes the transparency of banks’ customer relationships, as banks will not be the only institutions reporting through the System. Their customers – business entities – will also submit electronic statements under international standards,” emphasized Bohdan Lukasevych, Director of the Accounting Department of the NBU.
In Q1 2019, a new special website of the single Financial Reporting System will be established on the basis of the NSSMC. This will launch the test stage for all reporting banks, which (before switching to the operational version of the Financial Reposting System) will be able to check the following items:
- compliance with the logical rules when submitting the financial information
- capability of their own technical platforms to create and send XBRL reports and effectiveness of the exchange with the System.
“Banks will submit financial statements in electronic format to the NSSMC through the website. At the website, one can also find the explanatory material on implementation of the System, in particular the platform for remote training and technical and testing tools of the Financial Reporting System,” emphasized Bohdan Lukasevych.
Before the final transition to electronic reporting under the XBRL standard, the NBU will test the use of its operational version by Ukrainian banks. For this purpose, it will create a separate bank testing schedule. The NBU plans to finalize the schedule no later than in February 2019.
“We understand that the annual financial reporting and its audit by independent auditors will not allow for banks to switch to the reporting under the new format before mid-Q2 2019. That is why the central bank will insist on feasible timeframes for the transition to the Financial Reporting System under the schedule of its implementation by all enterprises that are of public interest,” said the Director of the Accounting Department.
Moreover, according to Bohdan Lukasevych, the NBU plans to hold meetings with banks to clarify all possible details on preparing and submitting the financial statements on the basis of the UA XBRL IFRS reporting taxonomy.
New rules for financial reporting by banks are set in NBU Board Resolution No. 163 On Amendments to Certain Regulatory Documents of the National Bank of Ukraine dated 28 December 2018.
Important links:
- The UA XBRL IFRS reporting taxonomy (the financial reporting system under the XBRL standard) with the indicators for banks and the Guide on opening an XBRL file can be found at the NBU website in the section “Information materials”, available here.
- The illustrated guidelines on the IFRS Taxonomy (the XBRL financial reporting system) and the relevant Order by the Ministry of Finance No. 983 On Approval of Translation of Taxonomy for Financial Reporting under International Financial Reporting Standards dated 7 December 2018 can be found here.
For reference
The financial reporting taxonomy is a collection of items and indicators of financial reporting and its elements that are to be disclosed, as well as the links between them and other elements of the taxonomy.
XBRL (eXtensible Business Reporting Language) is an open standard for the business information exchange. It is a common standard for financial reporting under IFRS and US GAAP in electronic form. The fact that the standard is open means that the companies using XBRL do not have to purchase licenses and pay fees for the use.
XBRL was developed by the international organization XBRL International Inc. for the purpose of business information exchange between business systems. It is widely used in numerous countries by regulators of securities markets, banking regulators, registrars, tax authorities, and national statistical agencies. Currently, XBRL is officially recommended for electronic reporting under IFRS and supported by the IFRS Board.
Main advantages of XBRL include:
- automatic data input/output without the re-transformation
- fast and automatic reporting, including consolidated financial statements
- fast, efficient, and reliable data analysis and matching
- data monitoring, reduced time of the decision-making
- promotion of effectiveness and cost-efficiency of the regulatory (supervisory) process.
One of the most common ways to use XBRL is the regulation of preparation, submission, and analysis of financial information, such as financial statements. XBRL is based on taxonomy indicators and rules.
Please be reminded that the financial reporting under XBRL is being implemented with the participation of international donors, such as the EU-FINSTAR project (Technical Assistance in Financial Sector's Priority Areas) and the USAID’s Financial Sector Transformation project.