Process annual accounts from preparation to submission without any disruption

Digital solutions have become indispensable in day-to-day processes: for several years now, the tax authorities have also required companies to submit their annual accounts digitally as e-balance sheets – the XBRL format is mandatory. If the underlying taxonomies – which ensure a standardised organisational structure – are not consistently used during processing, and the financial statements are prepared in a format other than that required by the tax authorities, this results in unnecessary effort and wasted time. A suitable software solution therefore makes it possible to prepare the financial statements directly on the basis of the taxonomy, without the need for conversion to XBRL.

Modern processing without analogue intermediate steps: Since 2013, the tax office has required all companies that draw up a balance sheet and are obliged to submit double-entry accounts to submit their balance sheets electronically. Accounting systems must also be adapted accordingly. The requirements for the so-called e-balance sheet are set out in Section 5b of the Income Tax Act (EstG).

Taxonomies are the mandatory format for data storage and presentation

The e-balance sheet is based on so-called taxonomies, a standardised data structure system that classifies data and organises it into categories and groups. This enables correlations to be identified more quickly and provides an overview based on a standardised system. Companies must submit their annual accounts using taxonomies. There is a core taxonomy and, depending on the industry, adapted taxonomies. The Income Tax Act specifies the relevant tax-related data schema. The e-balance sheet must be prepared in the eXtensible Business Reporting Language (XBRL) format, an XML-based language for the automation of business and financial information. This is intended to standardise the data sets.

What is XBRL?

XBRL stands for „eXtensible Business Reporting Language“ and is an international standard for the digital reporting of business information. It is an XML-based language that was developed specifically for the transmission of financial and business data. XBRL enables companies to create, store, transmit and analyse financial information in a standardised format.

The use of XBRL has several advantages. Firstly, financial data can be transmitted and analysed more quickly, efficiently and accurately. Secondly, XBRL makes it easier to compare financial data across different companies, sectors and countries, as the data is provided in a standardised format.

XBRL is used by regulatory authorities, financial institutions, companies and accounting organisations around the world. It is a key component of financial reporting and is also used to comply with regulations, such as the submission of annual accounts to the authorities.

For the past 30 years, annual accounts have been prepared in accordance with the structure and standards set out in the German Commercial Code (HGB) – previously on paper, and now using industry-specific software tools or standard programmes such as Word and Excel. However, this means the accounts are in the wrong format. Particularly during the transition to e-financial statements, numerous companies faced the challenge that their systems were unable to output the data in XBRL format. Annual accounts based on general ledger accounts must be converted using taxonomy software based on XBRL. Whilst good software can certainly handle this, the problem is obvious: this approach involves a change of medium. This is not only time-consuming and costly, but also outdated. Furthermore, it effectively doubles the workload for companies: if an employee might need an hour for the conversion, a practice with 400 clients would have to spend half a month on it. Furthermore, the conversions must be carried out anew every year, and new general ledger accounts must be incorporated into the structure in the event of changes – not to mention the additional analysis and checks required.

Prepare the annual accounts without conversion

It is time to take the next step and finally do away with these outdated practices. The solution is to prepare the annual accounts directly on the basis of taxonomies. Companies save time, effort and paper in equal measure. The data is available directly in digital form in XBRL format. This technical standard for data transmission applies across all areas of the financial sector: all financial reporting worldwide is based on these taxonomies.

All that is required is a fully developed software solution that enables the preparation of annual accounts and balance sheets on a taxonomy-based basis, thereby making it easy to tick off all legally defined electronic obligations. The Publication of the annual accounts in the Federal Gazette and the e-balance sheet can therefore be submitted to the tax authorities at the touch of a button. Also the digital financial report Submission to banks and the annual accounts to Creditreform can be carried out without any problems, as they are already in the correct format. Digital banks require annual reports in XBRL format, and information is returned to companies in the same standard. In this way, various key business figures can be transmitted. If companies prepare their reports directly on the basis of taxonomy, all data recipients can be easily accommodated.

The right tool guides the user through the programme and builds up the annual accounts step by step. It is largely intuitive to use. The included templates make it easier to organise data. Documents no longer need to be created individually, and data no longer needs to be re-entered constantly – making the entire financial reporting process more efficient. Thanks to the high level of detail, there are fewer enquiries from the authorities and tax auditors, whilst a high density of information is available.

Conclusion

Many companies use software to convert their annual accounts into the XBRL format required by the tax authorities so that they can submit them as e-financial statements. It is time to take the direct route and avoid the need for data conversion: by preparing the annual accounts using XBRL taxonomies from the outset.