Australia is moving towards a transformative shift in financial reporting, with growing momentum behind proposals to mandate digital financial reporting.
Financial reports in Australia are still shared as hard copies or PDFs. ASX-listed companies often have over 150 pages of detailed statements and disclosures which are manually prepared, hard to search through and time consuming to analyse. Australia is currently an outlier with major jurisdictions including the European Union, United Kingdom and United States having already mandated digital financial reporting.
At the request of the Australian government, the Productivity Commission (“PC”) is looking at ways Australia can make better use of data and digital technology. In its interim report[1] the PC recommends the introduction of mandatory digital financial reporting to initially cover disclosing entities[2] such as public companies and listed registered schemes.
Global trends show that digital financial reporting only gains widespread traction when its use is mandated. This is clearly reflected in the Australian context, where companies have had the opportunity to voluntarily submit digital financial reports to ASIC since 2010, however none have taken up this option to date.
We welcome the leap forward in transparent, accurate and more accessible financial reporting information. Australia began applying International Financial Reporting Standards (IFRS Accounting Standards) from 1 January 2005 with the main purpose of enabling cross-border comparisons of financial information and to facilitate access to international capital markets for Australian companies. These benefits of applying IFRS Accounting Standards will be amplified by mandatory digital financial reporting.
- https://www.pc.gov.au/inquiries/current/data-digital/interim
- As defined by the Corporations Act 2001
Why digital financial reporting is a game changer
Digital financial reporting transforms the way in which financial information is prepared, shared, and analysed by using tags to give meaning to data. Each tag is part of a larger system called a ‘taxonomy’ which is based on accounting standards. The IFRS Accounting Taxonomy is already available and can be used to implement digital financial reporting in Australia.
Digital financial reports are presented in a computer-readable format, either in XBRL (eXtensible Business Reporting Language) or iXBRL (Inline eXtensible Business Reporting Language). XBRL is presented in a machine-readable format which requires specialised software. XBRL is license free and actively used across 65 countries[3]. Financial reports in iXBRL provide tagged data for analysis and can also be viewed in a human-readable form, allowing companies to maintain the glossy annual report format while embedding fully tagged digital data.
Digital reporting offers tangible value, consistently supported by research and global practice as a proven means to enhance transparency, efficiency, and accessibility in financial reporting.
Digital financial reports are structured to enable more efficient and accurate data extraction and analysis. It preserves the readability and accessibility of traditional formats but substantially reduces manual data entry and errors. This is beneficial for various stakeholders such as investors, regulators, auditors and others who want transparent and easy access to financial information for data analysis.
Investor groups, standard setters, and regulators in Australia support the move to digital financial reporting.
Investors are increasingly using AI and other smart technologies to analyse financial reporting information to help guide their investment decisions. KPMG Australia’s latest report highlights how AI is transforming financial reporting, delivering benefits in insight generation, anomaly and trend detection, risk management, and data-driven decision-making[4].
If financial data is prepared in static PDF formats or contains errors which are more likely in manual financial report preparation, algorithms cannot process the data properly. In a recent report, CA ANZ highlighted the significance of digital reporting for Australian listed companies noting that Australia’s ongoing use of paper and PDF financial reports makes its capital market largely invisible or inaccurately portrayed[5].
To fully unlock the potential of AI in this regard, organisations must shift to digital financial reporting to provide the data accessibility and integration AI needs to deliver meaningful insights and efficiencies.
International and local standard setters are continuing to develop new accounting and sustainability reporting standards and amendments to address stakeholder needs for better information about financial performance, climate and broader sustainability risks and opportunities.
AASB 18 Presentation and Disclosure in Financial Statements takes effect from 1 January 2027 and aims to make financial reporting more consistent, comparable, and transparent. It brings major changes to how financial statements are presented, affecting all companies and their reporting systems, processes, and controls. Depending on timing of any mandate, digital financial reporting can help ease the transition to this new accounting standard.
Starting 1 January 2025, in addition to providing financial reporting information, large businesses and financial institutions must include climate disclosures in their sustainability reports marking a major step toward greater transparency around climate risks and opportunities. These climate disclosures will form part of a company’s annual report and therefore will likely be submitted in static PDF form. It is our expectation that climate disclosures will be less structured and lack the consistency of financial reports, making climate information even harder to analyse and compare than is the case with financial reporting information. As noted in the CA ANZ report digitising financial reporting is essential to build the infrastructure, standards, and practices needed to manage growing content[4]. Without a strong digital framework, Australia risks fragmented and inconsistent sustainability data, making meaningful analysis and comparison difficult[5].
Short-term challenges
System upgrades and process updates may pose financial and operational challenges for preparers. In a period where additional effort will be needed to implement new accounting and sustainability standards, mandatory digital financial reporting may initially add pressure on IT and finance teams. However, research suggests that its implementation can result in substantial long-term cost efficiencies far exceeding the upfront costs of implementing digital financial reporting.
Key considerations for policy makers
KPMG fully supports the move toward mandatory digital financial reporting, positioning Australia in line with leading global standards while delivering on the Australian government’s commitment to making productivity-enhancing reforms.
Our key recommendations that we provided to the Productivity Commission include:
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