What is the International Financial Reporting Standards (IFRS) taxonomy and how is it relevant? A webcast published by the International Accounting Standards Board (IASB) provides some detail on the subject. Board member Stephen Cooper explains that, to keep in step with the increasing digitisation of data, the IASB is focusing on the theme of 'better communication', with a view to enhancing the communication in primary financial statements, through the disclosure initiative and also through the IFRS taxonomy.

Making financial data more accessible

A taxonomy is a system of classification and a way of structuring information. This principle of classifying data with a number of categories or digital tags is also applied to IFRS reporting. This means that when the financial report is filed electronically, a computer can read the tagged data and extract information. This enables investors and other parties to get timely, cost-effective data about the financial report.

The webcast is quite useful in that it describes exactly what taxonomy in the financial statement looks like (figures, dates and classifications are translated into XBRL). This is a much more efficient way of delivering content in an electronic format, says Cooper.

Advantages of using digital tags in financial reports

The benefits of using taxonomy in financial reporting are:

• it gives improved access to electronic IFRS information;
• it provides more direct and objective information (companies themselves tag the information);
• it reduces cost, enabling investors and regulators to process and analyse data faster; and
• the data can be customised to produce tailored reports.

 

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CTMfile take: This webcast usefully explains some detail about how financial statements could use the principle of taxonomy to provide faster, cheaper access to data.