Case Study. Emirates Securities & Commodities Authority

Transcription

1 Emirates Securities & Commodities Authority

2 About ESCA 1 The Emirates Securities and Commodities Authority (SCA) was established in 2000 by the UAE government to legislate, regulate and enable the efficient functioning of UAE financial markets. SCA is also responsible for ensuring transparency in reporting the financial status of companies to help investors make an informed decision. The mission of SCA is to protect investors and enhance the principles of sound and fair business practices, and to improve the efficiency of UAE capital markets through the development of necessary legislations, enhancement of supervisory 2 regulations and the development of investment and legal awareness. SCA has always been a frontrunner in the adoption and implementation of new standards in financial reporting, regulation 3 and compliance. SCA was granted a provisional XBRL jurisdiction status in the first in Middle East to be granted this status - and became a permanent XBRL jurisdiction in With globalization and accelerated economic growth, it has become an extremely complex task for regulators to manage and monitor fiscal compliance. Another pertinent issue for regulators is to balance the ever growing demands and complexity of business reporting while ensuring that companies are not burdened with tedious and time consuming filing requirements. In order to achieve this, the regulators need a highly effective and efficient financial reporting system and a globally acceptable accounting standard. This was the objective of Emirates Securities and Commodities Authority (SCA) when they embarked on an ambitious firstof-its-kind project in the Middle East, to implement a reporting platform using IFRS 2011 taxonomy as the base taxonomy and XBRL as the enabling reporting standard, for companies listed in the Dubai Financial Market (DFM) and Abu Dhabi Securities Exchange (ADX). An agreement to this effect was signed by H.E. Mr. Abdullah Al-Turifi, Chief Executive, SCA, Mr. Rashid Al-Baloushi, Deputy CEO and Director of Operations of Abu Dhabi Securities Exchange and Mr. Essa Kazim, Executive Chairman of Dubai Financial Market. This initiative by SCA and its partners is intended to help UAE achieve its vision of becoming the financial hub of the world. This project - to build the first end-to-end XBRL based electronic filing platform (FIX) for the UAE market - was awarded to Fin-X Solutions (A wholly owned subsidiary of IRIS Business Services Ltd., India.) The FIX platform has been built using the IRIS ifile desktop tool which has been adopted successfully by various jurisdictions around the world. In order to provide a successful implementation, Fin-X Solutions studied the reports filed by companies (quarterly and annual) to both exchanges. Studies were conducted to understand the local reporting requirements and how they differed from IFRS reporting standards. The current reporting platform of both the exchanges was analysed and Fin-X Solutions came up with the proposed platform. Business rules were customised for SCA, DFM and ADX specifications. Fin-X Solutions utilised the expertise of Mr. Gavin Marais of Deloitte & Touche (South Africa) in an advisory role during the design phase of the new UAE taxonomy. The new UAE taxonomy catering to 10 different industries have been developed using IFRS 2011 taxonomy as the base and adding elements as per regulatory and industry specific requirements. The UAE taxonomy has been reviewed by International Accounting Standards Board (IASB). UAE Taxonomy is probably the first Taxonomy to be published based on IFRS 2011 Taxonomy (by the time it is released for public review) Auditors: Auditors play a key role in certifying the compliance of the submitted data. The workflow for an audited filing consists of verification and certification by the auditing entity (individual or firm) regarding the accuracy of the filed data. The platform will enable auditors to download and verify the data. This is pprobably the only XBRL based filing platform in the world which has Auditor interface in it. Auditor interface ensures consistency of XBRL filings with audited statements. Investment Community: This initiative by SCA provides the investment community (like financial institutions and investors-at-large) with the opportunity to easily search and download information about the companies, that has been verified by the regulator, for further analysis. Since the data is in XBRL format, it can be consumed easily by their internal systems. The resulting transparency and accuracy in reporting the financial information of companies helps to get the attention and trust of the investment community. The major objective of this project is to make financial data available to investor community, which is clean, transparent and comparable with data of other company due to single standard i.e. XBRL. Fin X Solutions made its Analytical tool iwiz available which consumes XBRL and non XBRL data to generate various ratios & charts for SCA. 1 Source: Securities and Commodities website ( 2 Source: Securities and Commodities website ( 3 Source: XBRL website (

3 Stock Exchanges Both DFM and ADX stand to benefit by having the data collection mechanism handled by the regulatory authority (SCA) as it guarantees the reliability and comprehensiveness of the filed data. The exchanges will also have the ability to customize the validation rules applied on the financial information submitted by the companies listed on the respective exchanges. The aim of this is to reduce the burden of collection and verification of data by the exchanges and allow them to reallocate resources to other activities like data modelling, analysis, reports, product design etc. In this filing platform SCA, ADX & DFM are able to generate various reports like list of companies which have submitted filing, list of companies which have submitted filing on time etc. Regulator This solution will help SCA collect the financial information from companies, analyse the data, make regulatory recommendations and enforce financial integrity in the UAE markets. Probably for the first time Corporate Actions and Governance are brought in by regulator as part of the filing requirements in XBRL based filing platform. Probably for the first time Capital Markets Regulator has made active use of Arabic labels in Taxonomy as well as XBRL filing platform. Brokers: SCA is collecting data related to Broker operation for UAE. The following are the key component of the solution Capital Adequacy Report Segregation Report Aging Report Broker Financial Report Broker companies and individual brokers can generate the XBRL instance document for the above reports using ifile Desktop Tool provided by SCA. The generated instance documents will then be uploaded to the FIX portal. The entire system has been designed taking into consideration the unique requirements of the stakeholders. This is probably the first Taxonomy and filing platform for regulating Brokerage Operations of country by Regulator using XBRL. The UAE Financial Reporting Taxonomy: Taxonomy is the core of any XBRL based project. UAE Financial report taxonomy architecture is based on the IFRS 2011 Taxonomy Architecture, which was released on 25th March A Clean Approach has been followed for extending the IFRS 2011 taxonomy, meaning, only the concepts, their labels and references are imported into UAE Financial report taxonomy while the relationships are entirely defined as per the practices approved by SCA and followed by listed companies in DFM and ADX. The extended links are similar to the IFRS 2011 taxonomy and new industry/sector specific elements have been added wherever required. Each sector has a separate entry-point, although users can access the entire set of elements from the schema. There are close to four thousand elements in the taxonomy. The following chart depicts the hierarchy in the taxonomy structure.

4 Desktop Preparation Tool (ifile): ifile is an Excel add-on tool. Once installed, data entry templates will be generated based on the selected entry point. It has been designed keeping in perspective the familiarity of the Excel interface among the majority of filers, thereby enabling a smooth transition and greater acceptance rate. The ifile tool is further divided into two components Client component Admin component Client Component: The client component of ifile allows the users to prepare and generate an XBRL instance document that can then be uploaded to the ifile Portal An overview of the filing process using the ifile tool is presented in the figure below. Registered users can download the ifile installer from the FIX portal. Based on the sector selected during installation the corresponding taxonomy will be loaded when ifile is opened. The following sectors are available for the user to choose: Banking Islamic Banking Non-Islamic Consumer Staples Energy Financial Services Industrial Insurance Islamic Insurance Non-Islamic Real Estate Services Telecom Transportation The user will have the option to select a language (English / Arabic) based on which the element labels and orientation will be updated in the tool. The reporting templates will be generated in real-time based on the answers provided by the user for the scoping

5 questions. The user will have the ability to select the sections to enter optional financial information in addition to the sections mandated by SCA. Based on the scoping questions, the tool will present the user a set of templates as independent worksheet. Once all required information has been entered and the data has passed all the mandatory validation rules, the filers will be able to generate the XBRL instance document. This instance document will be uploaded to the FIX portal for validation, acceptance and further analysis by SCA. Key features of the desktop tool includes Multi language display (Arabic/English) Text orientation based on selected language Industry specific templates Integration with Excel. ifile tool menu will be installed within the Excel toolbar Navigation page listing all the sheets selected by the user Built-in taxonomy viewer: A taxonomy Viewer is integrated into the tool to view the various taxonomy components like presentation view, calculation view, definition view, label view and schema view with element information. Rich text editor for Notes and Footnotes: A rich text editor is provided to allow the filer to insert images and formatted text into the Notes as well as Footnotes sections. FIX Portal: FIX Portal is the online component of the FIX platform. The web portal will allow companies to upload their XBRL instance document in English or Arabic created by the ifile desktop preparation tool or any other software applications. The portal will run validations to ensure that the filing is XBRL compliant. The portal will also make sure the data is confined with the business rules defined by SCA. Description of key features of FIX Portal: Maker Checker Workflow: This feature helps in enforcing the integrity of the document by having the uploaded file checked by the auditor who audited the company financial information. The system requires the company checker to review and accept the filing before it can be accepted for further processing.

6 Auditor verification: This is a new feature that has been implemented probably for the first time in any jurisdiction. This feature allows the filing (for audited records) to be verified by the auditor (or any other user from auditing firm) of the company after the filing has been accepted by the "Company Checker". After which the file will be sent to the "Company Checker" again for final verification and submission to Exchange. The verification by the auditor proves the authenticity of the document and helps analysts and decision makers to trust the submitted information Figure 4 FIX Portal - Auditor check workflow Web rendering and data export: This feature helps produce an human readable output from the XBRL instance document. The generated output can also be exported into Word, Excel and PDF formats. Project milestones and achievements: Arabic language support provided in the preparation tool The first active use of Arabic labels by a Capital Markets Regulator Multiple exchanges (DFM & ADX) collaborating with regulator (SCA) to promote this common platform to ensure compliance as well as efficient data collection and reporting Feature requiring the auditors to certify that the filings are the same as the audited copy

7 For any questions, please contact: Deepta Rangarajan Shreeja Nambiar IRIS Business Services Limited Tower 2, 3 rd Floor, International Infotech Park, Vashi, Navi Mumbai, India Phone: