European Regulatory Roll-out Package guide
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CEN Workshop Agreement
Status: Approval Final Draft - Formal Vote
CEN WS CWA3 Convenor: Aitor Azcoaga (EIOPA)
CEN WS XBRL Experts: Pieter Maillard (Aguilonius), Pablo Navarro (Atos)
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Foreword
This document has been prepared by CEN/WS XBRL, the secretariat of which is held by NEN.
CWA XBRL 003 consists of the following parts, under the general title Improving transparency in financial and
business reporting — Standard regulatory roll-out package for better adoption
— Part 1: XBRL Supervisory Roll-out Guide
— Part 2: XBRL Handbook for Declarers
This CWA is one of a series of related deliverables. The other deliverables are:
CWA XBRL 001 which consists of the following parts, under the general title Improving transparency in
financial and business reporting — Harmonisation topics:
— Part 1: European data point methodology for supervisory reporting.
— Part 2: Guidelines for data point modelling
— Part 3: European XBRL Taxonomy Architecture
— Part 4: European Filing Rules
— Part 5: Mapping between DPM and MDM
CWA XBRL 002 Improving transparency in financial and business reporting — Metadata container
Introduction
This document is intended to provide guidelines to European regulators in the implementation and roll out of
the reporting standard using XBRL across Europe.
The set of recommendations included in this document aim to facilitate the implementation of European
National Supervisors to adopt XBRL in any of the reporting frameworks. The following sections will provide
guidance on the use, understanding, preparation, and extension of their filings in eXtensible Business
Reporting Language (XBRL).
This guidance is in the form of notes in association with the pertaining requirements clause and uses the
terms “should” (recommendation), “may” (allowance) and “can” (possibility). Organizations wishing to
implement this CWA would be expected to consider all recommendations where the term "should" is used.
COREP, FINREP (and Solvency II or other future) XBRL taxonomies are offered to European regulators for
national implementation. The first releases (2006) of the COREP and FINREP XBRL frameworks have proven
that a standardized technical roll-out package is needed to increase the adoption rate and avoid
implementation variances, which have a detrimental effect on the overall cross-border effectiveness of using
one reporting standard. As well this roll-out guide tries to promote the economies of scale for a better
adoption.
Contents |
Scope
This CWA is a general guide to XBRL oriented towards national regulators on how to implement, extend and
manage XBRL taxonomies. The guidance and recommendations included in this CWA have been created for
regulatory filings in the context of European supervisory reporting.
In this document, “regulatory filings” encompasses authoritative financial reporting standards and generally accepted accounting principles/practices (or GAAP), regulatory reports whose subject matter is primarily financial position and performance and related explanatory disclosures, and data sets used in the collection of financial statistics; it excludes transaction- or journal-level reporting, primarily narrative reports (for example, internal controls assessments) and non-financial quantitative reports (for example, air pollution measurements).
How to start with XBRL. Supervisory Perspective
This section describes how the XBRL standard can be implemented from the regulator's perspective.
First, we present different levels of XBRL adoption, to help define the supervisor's strategy.
This is followed by a description of the minimum steps required to facilitate initial understanding of the XBRL standard, and guidelines describing the review and the likely impact on existing infrastructure and internal information systems.
Finally, we suggest additional considerations which should be taken into consideration during preparation and planning, to help regulators establish which services they need to implement to enable reporting entities to adhere to the XBRL standard. Figure 1 presents an overview of the activities described in the section.
Figure 1 —The Business Overview to Rollout XBRL reporting
Determine the level of XBRL adoption
Widespread adoption of XBRL as a business information exchange format has revealed a number of implementation alternatives.
Selection of a specific adoption strategy by the regulator establishes the roadmap for implementation from the regulator's current reporting framework to a framework which supports the new legislation. This step is probably the most important step in XBRL adoption.
Attending to the level of penetration (or permeability) of XBRL between the Regulator and the Filing entities the adoption can be classified in the following:
- Use of XBRL solely for the electronic exchange of data between the national regulator and European Authority to comply with legislation.
- Adaptation of existing reporting channels to receive XBRL reports from reporting entities as well as using XBRL for the electronic exchange of data between the national regulator and the European Authority. In this scenario, regulators could make use of automated business rules to validate data received from reporting entities.
- Full exploitation of XBRL for internal reporting models (multidimensional data analysis) in addition to the use of XBRL for receiving data from reporting entities and electronic exchange between the national regulator and the European Authority as described above.
Depending on the strategy selected, the regulator must also determine which XBRL enabled software applications should be made available to their internal departments and also to reporting entities under their jurisdiction.
To name a few examples for consideration: XBRL validation, report visualization, conversion from existing data formats, filing forms, monitoring, security enforcement and versioning that will facilitate the analysis and supervision of reported information.
Plan and prepare the new reporting models
From the regulator's perspective there are two main key drivers in favour of XBRL adoption: compliance with new regulation directives and ensuring the accuracy of data reported by reporting entities.
Compliance with new regulation directives implies the adequacy of the reporting business models and rules to the XBRL language and semantics to be implemented.
The most important requirement for financial supervision reporting is data accuracy. Reported data, for legal reasons, is expected to be:
- accurate for arithmetic purposes;
- calculated accurately based on the required definition;
- preserved during the data transfer process.
It is also a good idea to plan and prepare the adaptation of all data requirements. For this, the regulator needs to learn and understand the following topics:
- XBRL basics – terminology, syntax and structure;
- how the data models correspond to the business model and semantic rules into XBRL syntactic schemas and filers forms that define reporting data. Consider information requirements which could have causes additional issues to be solved in the modelling architecture.
Many are approaching as compliance requirements driven by a new reporting directive. An alternative approach is considering XBRL adoption as a technology evolution of current reporting systems to take advantage of this standard and reap the benefits of a standardised electronic exchange format.
In general, successful XBRL implementations usually do not change the business models, just the report format resulting in a transparent use of XBRL to the end users.
It is specially recommended to apply a structured methodology for data modelling. On this topic the Eurofiling architecture approach is proposing a methodology on normalization called Data Point Modelling. This will be introduced later in Section 5, but mainly consists of defining a method to model dictionary data, their aspects and relationships in terms of domains and hierarchies, business validation rules and the corresponding classifications of the data in different tables and forms for filing and visualization (figure 2).
Figure 2: DPM process and XBRL relationship
[SOURCE: Abstract description of the model represented in taxonomies following the DPM approach]
How this data inherited from the European frameworks fits into the national reporting model. Study if the current information models for reporting entities have more disclosures or information. In case more detailed information is required, knowledge on the extension of European taxonomies is needed. This will be detailed in Section 4.
In order to select the most appropriate XBRL strategy, the regulator should consider the relevant answers to the questions below that will help to address reporting decisions:
- How many different reporting templates do we need to receive from reporting entities?
- What is the frequency of this reporting information? Quarterly, semi-annually, annually?
- What is the minimum reporting unit of information expected to receive (one template, one module, one table, one fact, other)?
- What is the profile of reports (minimum and maximum size expected) to be received keeping a margin of security for processing?
- What response time is needed to process received reporting information?
- Will it be allowed partial submissions? Or will all data need to be reported in full?
- What is the minimum precision accepted for data?
- Will it be allowed for reports to be re-submitted if the reporting entity wishes to submit an amendment? Will It be placed any deadlines for receipt of any amendments?
Review existing reception infrastructure
From an IT perspective, regulators will have the opportunity to review their current receipt and transmission infrastructure with their reporting entities to incorporate the new reporting standard to their channels:
If regulator has well established data collection mechanisms in place, it will be necessary to adapt these mechanisms to accept XBRL instance documents, including additional workflows (submit and feedback loops) for the validation of header information and XBRL validation (following recommendations documented in “CEN WS XBRL CWA2 as valuable initiatives to take into consideration).
Specific items likely to require IT review:
- Select a new system or adapt if necessary an existing system for receiving reports from reporting entities and sending acknowledge messages and validation report results from regulator (transmission channel): web secure portal upload, email secure SMTP, web service secure integration submission, cloud portal, etc.,
- Select, reuse or adapt the security methods to maintain confidentiality, integrity, authenticity, non-repudiation (following recommendations documented in CEN WS CWA2 related to digital signature and use of certificates)
- Select which additional services could be provided as part of the submission protocol from reporting entities to national regulator, for example tracking or monitoring submitted reports, visualization of XBRL instances, pre-validation including formulae[4] which defining regulatory requirements, display the specific data set (templates) that each reporting entity is expected to fulfil, etc.
Review internal information systems
Regulators who elect to adopt XBRL for internal information systems will need to consider how to adapt existing systems for XBRL integration and data analysis.
All national regulators across Europe are responsible for defining their local regulation and communicating with their reporting entities. Existing, internal systems vary significantly between national regulators and some will need to adapt more than others to meet the new European directives. The purpose of this section is to establish a common set of high level guidelines based on current best practices that could apply for the internal use of XBRL in regulatory reporting to help realise the benefits of using a standard method of data exchange across Europe.
The European framework and the XBRL International abstract model version 2.0 provide a clear method to enable consistent definition of business information. Aligning the adaptation of internal systems with align those methodologies is foreseen as the key to driving better regulatory practice across Europe.
Making use of automated business-rule validation on reported data will help to assure high quality data and reduces the processing time associated with manual checks allowing more time to analyse and dedicate to analysis real supervisory activity. The creation of data-warehouses based on XBRL taxonomy frameworks and models will facilitate access to reporting information through the different perspectives of regulatory reporting (compliance, risk, prudency, transparency).
In conclusion, adapting internal systems to work with XBRL reporting carries several advantages:
- full utilisation of the multi-dimensional data models and XBRL frameworks provided by European authorities, allowing use of OLAP-enabled databases and exploit this information for integration and analysis and regulatory activity using business intelligence tools;
- reuse and take advantage of native XBRL formula validation across multiple reporting documents to ensure the quality and consistency of the data submitted by the reporting entities saving time and effort in the process using multi-instance sub-module of the specification.
Prepare the communication plan for Reporting Entities
Once the regulator has defined all reporting requirements and project plan to adapt information systems to support the exchange of reporting information using XBRL, it will be required to establish a clear plan for communicating the new regulatory process to reporting Entities.
This communication need to cover several steps to be actions taken by the national regulator to involve their main reporting entities as early as possible to ensure a smooth transition to new processes and new technology in the process normative.
We recommend that national regulators hold periodic plenary sessions with the reporting entities under their jurisdiction to facilitate successful communication about XBRL adoption and implementation roadmap. Example content could include:
- communicating the perimeter of the new recommendations;
- presenting a technical overview of XBRL taxonomy frameworks and the DPM methodology used;
- presenting how to reduce the impact on current data exchange processes with reporting entities;
- communication of expected timelines for compliance.
Other successful XBRL programs around the globe have found it beneficial to create an "Early Adopters" program between the national regulatory Authority and a reduced number of major reporting entities. The “Early Adopters” program can be used to set up an initial proof of concept for XBRL reporting exchange and facilitate the success of a full rollout.
The main benefits of an “Early Adopters” program are:
- to refine the process in the receipt and acknowledgement of XBRL reports;
- to enable the reporting entities to study the new requirements, to analyse any potential impact in their business models, to realise the estimation effort required and develop or adapt their IT systems to support XBRL;
- to test the performance of services deployed by the national regulator in terms of processing, security enforcement, integrating, analysing and validating XBRL reports.
Summary
During this section the regulatory supervisor has been able to introduce all the topics required to establish a roadmap to adapt their systems and plan the new reporting information system to rollout.
How to implement and extend XBRL taxonomies
One of the key challenges faced by regulators when adopting the XBRL standard is to fit the reporting requirements set by European frameworks and directives into existing national supervisory and compliance processes.
In most of the cases, the flexibility of the XBRL standard will allow the national supervisor to fulfil both requirements. Mechanisms to implement and extend taxonomies are likely to vary from one to another.
The objective of this section is to provide a set of guidelines to facilitate a harmonized approach to XBRL implementation collected from previous national XBRL adoptions across Europe.
The main objectives in regulatory reporting are: maintain data accuracy, data transparency, regulatory compliance and process interoperability.
European Framework background information
The scope of this section focuses on the European framework for regulatory reporting. Under this context, there are currently two major European Authorities that will drive the application of a harmonized reporting using XBRL. And therefore will address the corresponding recommendations in terms of implementation and extension of taxonomies for regulatory supervisors:
- Taxonomy frameworks of the European Banking Authority (EBA): COREP and FINREP;
- Taxonomy framework of the European Insurance and Occupational Pensions Authority (EIOPA) for
Solvency II.
Figure 3 — European Taxonomy Frameworks Diagram
These two authorities have been developing XBRL implementations which form the basis of the European frameworks pillars for supervisory reporting (Basel II, Solvency II and Financial Statements). Eurofiling initiative is an open collaboration between groups of experts, including regulatory reporting experts from EBA, EIOPA, XBRL Europe and other volunteers working on a common project to collect the regulatory reporting practice across Europe. The cross-sector definitions common to Solvency II, COREP and FINREP is most likely to be defined in the http://www.eurofiling.info namespace and location. National regulators will use the taxonomies defined by these authorities to implement their regulatory reporting process in accordance with national law and EU directives. In terms of XBRL implementation those National adoption will represent the third namespace owner for 1 reporting (covering the national GAAP) as shown in figure 4 below.
