In April 2016, the Capital Market Authority, Kuwait introduced XBRL for voluntary electronic submission (e-filing) of financial statements of the licensed and unlicensed companies (includes listed and unlisted companies), investment funds, auditors registered in CMA’s register, in addition to investors and persons concerned with securities activities. This was done to facilitate rapid and accurate disclosures, vital for transparency, efficiency and accountability for all financial and non-financial disclosures of companies listed and most importantly protects the rights of investors in Kuwait through providing a supervisory system.
Background
The Capital Market Authority (CMA), Kuwait is the Stock exchange regulator responsible for setting supervisory and controlling regulations which support an attractive and competitive investment environment in the State of Kuwait; based on the principles of fairness, transparency, and integrity according to the best international practice. Kuwait has approximately 156 licensed entities which are required to submit financial and non-financial reports to CMA in either Arabic or English, as part of legal compliance.
Challenges
Before XBRL was implemented in CMA, entities used to file their data manually and in paper form. These documents were then stored as images in CMA’s system. The process posed some challenges:
- Monotonous Task: The manual process of submission and storage of paper documents was very tedious. Also the processing time taken for consumption of submitted documents was more than pre-defined month.
- Non-compliance check: As the filing was in paper format, tracking of documents submitted, ensuring authenticity and communicating non-compliance in time were big concerns resulting in risk of non-filing/ filing after due date.
- Lack of validated data: With scrutiny of documents being completely dependent on manual effort, validation of submitted data was a serious concern leading to risk of non-adherence to business rules.
CMA wanted an efficient and cost-effective driven system to address the challenges in preparing, analysing and publishing the financial statements. The regulator wanted to move away from paper-filing to a more technology driven e-filing system which would:
- Establish the concept of transparency and declaration in the Kuwait financial markets,
- Standardize financial reporting for participating organizations,
- Increase the accuracy of submitted financial statements,
- Automate the receipt of financial and non-financial information,
- Increase the reliability and availability of financial reporting information to all interested parties.
- Easy to use for filers in terms of time and expenses and on-time filing.
- Being compliant will increase the worthiness of the entity.
The Solution
The IRIS divided the project into two parts:
- Pilot phase – It covered Balance Sheet, Income Statement, Fair Value through Profit and Loss, Available for Sale, and a few of the Notes
- Full scope phase – It covers the all the Financial statements as mandated by standards and the related notes to it. The Taxonomy is developed and is in UAT process.
The Purpose of the Pilot was –
- To give the market an idea of what is coming and capture any feedback
- To deliver some early taxonomy development focusing on the most standardized reports
- To test and appreciate the various methods of XBRL tool work
- To ensure that the tool can be customized for different categories of companies
- To give CMA and EY a practical understanding of how process will work to assist in the full development.
CMA Taxonomy:
IRIS conducted a study of the reporting and compliance requirement of all legal and business entities in Kuwait. Here, entities are divided into Licensed and Unlicensed status, which can again be bifurcated into Listed and unlisted companies. Based on the guidelines, these entities are required to prepare their financial statements as per “International Financial Reporting standards”.
The CMA Taxonomy is developed on the basis of the above standard. The taxonomy is the XBRL representation of the underlying standards, to allow business entities to prepare financial statements in accordance with the XBRL filing requirements.
It has 7 entry points covering fifteen business sectors. Entry points are for Securities activities including and excluding brokerages, Mutual funds, Brokerages, Banks, Real Estate and Others. The taxonomy enables filers to capture the filing information which identifies the filing entity and other relevant details pertinent to XBRL filing for financial. It has defined business validation rules to ensure quality data capture. And references of “Executive Bylaw” have also been incorporated.
Filing Platform:
The transition from paper to electronic format was a difficult task. CMA has decided to provide filers with filing tools to help them transit from paper to e-filing in this digital era. IRIS has developed an e-filing XBRL application, for the pilot project which is live now and for full scope (to go live in couple of months) based on the filing requirements and business rules used for validation.
Main components of the filing platform are:
- Filing Tools:
- iFILE e-form: A web-based filing tool for filers to prepare, validate and submit XBRL documents to CMA. This is applicable for Disclosures (not forming part of Financial Reporting).
- iFILE client tool: A desktop and MS Excel based filing tool to prepare validated XBRL documents offline and submit to CMA as and when required.
- iFILE e-Filing portal: A website for uploading XBRL filings for approval and rejection from CMA. The website also includes a validation tool to validate XBRL filings received and a reporting tool to produce regulator specific analytical and review reports in addition to MIS reports.
Key features of the filing platform are:
- A complete end to end XBRL compliant electronic filing solution
- Modular implementation
- E-mail confirmation and alerts at every step of the filing process
- Administration modules and dashboards for compliance
- Login based workflow
- Multi-language support – Arabic and English
- Dashboard for filing history and filing calendar
- Auditor approval process
- Auto-validation based on standard taxonomy and business rules
- Data available for download in multiple formats
Results
CMA started experiencing the benefits of using XBRL reporting soon after implementation of Pilot Project. These benefits included:
- Standardization and Better decision making: Standardization of the concepts helps in better analysis and comparison of the data industry wise, which results in better decision making and enhances transparency in the market.
- Automation combined with validation check: It contributes in ensuring the accuracy, efficient inputting and timely preparation of the validated Output.
- Work-flow management: Improve the reporting process by introducing an electronic platform.
- Efficient and less compliance burden: Promptly deliver accurate and reliable business and financial information to all stakeholders and reduces the reporting and compliance burden on filers (both in terms of cost and effort).
About CMA
The CMA is committed to setting supervisory and controlling regulations which support an attractive and competitive investment environment in the State of Kuwait; based on the principles of fairness, transparency, and integrity according to the best international practice.
About IRIS
IRIS Business Services Limited is a leading structured data solutions company with global presence in regulatory and compliance reporting software. The firm is uniquely positioned with offerings across the spectrum of creation, management and use of structured data in the realm of business and financial reporting. IRIS serves a client base that includes regulators in over a dozen countries around the world, leading banks, financial market intermediaries, consulting firms, financial printers as well as large and small enterprises. Our partner network includes the Big 4 accounting firms, system integrators and specialized software and consulting firms that use IRIS’ products and expertise to enhance their offerings to end clients.
Learn more about us at: www.irisbusiness.com
