Forming the Financial Reporting System of Issuers on the Basis of Taxonomy: Current Problems and Ways to Solve Them

Abstract

The use of standardized financial reporting formats in a form convenient for international investors, in particular on the basis of taxonomy, is becoming increasingly common in the world, given the significant role of transparency for public investment and automated processing of branched statistical information on financial instruments. Implementation at the state level of significant changes in procedures, deadlines, formats for reporting information should take into account both the proper legal regulation of such changes and the availability of working infrastructure for the formation and submission of reports, sufficient time to adapt to changes in reporting entities, auditors, IT companies. Despite repeated postponements of the transition of Ukrainian companies to taxonomy-based reporting, there are numerous difficulties in implementing this project. Thus, the article’s objective is due to legal, financial and technological risks for many taxonomy-based reporting entities and the uncertainty of current and future procedures for adapting international reporting requirements in XBRL format for their application in Ukraine. The international experience of introduction of financial reporting on the basis of taxonomy is considered and the advantages of such format for all participants of information interaction (reporting subjects, state regulators, investors, financial intermediaries and users of financial services, subjects of information-analytical infrastructure) are determined. The current lack of expected benefits for Ukrainian issuers and investors is justified due to the preservation of duplication of reporting information in various formats, disorder of deadlines and reporting procedures, delay and omission of difficulties in implementing the Financial Reporting System. Measures are proposed to accelerate the efficiency of the Financial Reporting System, reduce legal and regulatory risks, avoid duplication of different forms and deadlines for reporting, expand the participants in the information interaction on the pilot launch of the project and prepare for regular taxonomy changes. It is planned to analyze the actual impact of increasing financial disclosure requirements by issuers on the investment attractiveness of the Ukrainian stock market (primarily the equity segment) and the quality of its information infrastructure in the absence of noticeable interest of issuers in public raising capital and circulation of their securities in the regulated market.

Keywords

• stock market, securities, issuer, financial statements, international financial reporting standards (ifrs), taxonomy, xbrl format.