Additional electronic tagging requirements for many UK listed companies

For many years, financial statements have been prepared in a paper format and approved in person by those charged with governance. Copies of these documents are sent to shareholders and to other relevant regulators. For most companies listed on the London Stock Exchange, amendments to the disclosure and transparency rules will require the primary statements to be prepared electronically using the single electronic format. The changes apply to accounting periods commencing on or after 1 January 2021. Notes to the financial statements, for accounting periods commencing on or after 1 January 2022 will have to be prepared using the electronic format. The tagged electronic accounts have to be filed with the London Stock Exchange. The changes in the rules do not apply to companies listed on the Alternative Investment Market.

What should Directors consider?

The UK government’s position is that the requirement to prepare true and fair accounts arises prior to the electronic tagging requirements required by the single electronic format. As the electronic data will be automatically used by analysts, credit rating agencies and potential finance providers, an error in tagging could have significant implications for the business. Directors should consider how the tags will be applied, either in-house or by an external provider.

Auditing of single electronic format financial statements

The UK government has not mandated auditor reporting on the electronic formatting of accounts. For directors of businesses required to adopt electronic tagging, they should consider if their auditor or another audit firm, should be engaged to provide assurance over the tags added to the financial statements. Your auditor will not be able to tag the accounts for you as this is a prohibited non-audit service.

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