Go-ahead for Digital Financial Reporting
In Berlin, the Bundesbank and representatives of the German financial sector have given the green light to "Digital Financial Reporting". From April 2018, companies will be able to send their annual accounts and other financial reports electronically to their banks and savings banks in a standardised format for the whole of Germany.
"Digital Financial Reporting is a prime example of putting into practice a digital agenda that everyone is talking about," said Bundesbank Executive Board member Joachim Wuermeling at the launch event held in the Bundesbank’s Regional Office in Berlin. He believes Digital Financial Reporting will noticeably lighten the administrative load of preparing and distributing annual accounts, giving banks and savings banks a faster and more reliable means of assessing creditworthiness, thereby improving access to credit for small and medium-sized firms.
Digital Reporting avoids media breaks
Digital Financial Reporting involves the digitalisation of what is known as the disclosure process: when a bank or a savings bank grants a loan to a firm, statutory provisions stipulate that the bank must stay up-to-date on the borrower’s economic situation. The bank therefore requires the firm’s annual accounts, which it has so far only received in printed format. For the credit institution to be able to process the financial data, they first have to be entered into the bank’s own IT systems, resulting in error-prone and cost-intensive media breaks when these reports are distributed and evaluated.
With Digital Financial Reporting, annual accounts and other financial reports can now be sent directly to the recipient’s IT analysis systems and processed immediately, thereby avoiding media breaks, lowering cost and time outlays and improving data quality. The data are transferred using the machine-readable language "Extensible Business Reporting Language" (XBRL), which is already being used for similar applications, such as the statutory electronic transmission of balance sheets to tax offices (eBilanz).
Substantially greater comparability
Bundesbank Executive Board member Wuermeling stated that the content of 7,000 possible balance sheet data fields have been standardised for Digital Financial Reporting, and that banks and savings banks can now use, process and interpret these balance sheet data points uniformly.
"This will ultimately result in a substantially greater level of comparability and improved data quality when processing balance sheet data," said Wuermeling, concluding that this will make for a more stable and up-to-date database on lending to the real economy.
He emphasised that the transmission language XBRL has not prompted the creation of any new accounting rules; in Germany the language follows the current German Commercial Code rules and makes processing easier by structuring balance sheet data and ensuring standardisation at a technical level.
"Information has to be entered and received in a standardised way, similar to how containers are handled in the logistics sector," Wuermeling explained.
Spahn: automatic analysis
In addition to the smooth transfer of financial data that Digital Financial Reporting will make possible, Jens Spahn, the parliamentary State Secretary for Finance, then also highlighted in his introductory remarks how the collected data will be analysed automatically by artificial intelligence systems, for example.
Bundesbank experts involved in the project consider the feedback channel from credit institutions to tax advisers and auditors tasked by firms to prepare annual accounts to be a particularly helpful development feature of Digital Financial Reporting, pointing to the provision of principal and interest cash flow schedules to law firms as an example.