ESEF | Everything you need to know about ESEF (Blog 1)
From now on, all companies with securities in the European Union and the UK will have to publish their annual financial report in digital form in accordance with the new guidelines of the European Securities and Markets Authority (ESMA). ESMA has developed a ‘European Single Electronic Format’ (ESEF) for this purpose. What does this mean for your organization?
In this first blog of our blog series about the impact of ESEF we address the question: What is ESEF and how does it affect organizations in Europe?
What is ESEF?
ESEF stands for ‘European Single Electronic Format’. It is an electronic reporting standard developed by ESMA. All companies with securities within the European Union and UK are obliged to prepare their annual report in accordance with this standard. This obligation applies to the reports for fiscal years commencing on or after 1 January 2020.
By means of ESEF, the information value of the annual reports becomes higher, more accessible, and easier to process by software programs. The comparability of annual reports between different companies and countries becomes thus much higher!
Which companies are subject to this obligation?
When your company issues securities within the EU or UK, you must report in accordance with this new ESEF standard. The obligation does not apply to large companies that do not issue securities: they will probably not be covered by this mandate until 2022.
In what format should companies report?
Companies will have to report their annual report to the regulatory authority(ies) in a different format. This new format is called Extensible HyperMarkup Language (XHTML). XHTML is the standard format for web browsers, such as Chrome and Microsoft Edge. Companies are now used to file their annual report with the Dutch Authority for the Financial Markets (AFM) in PDF format, but this is no longer sufficient.
Additionally, if you report on consolidated IFRS financial statements in your financial reporting, you must include inline XBRL (iXBRL) tags in the XHTML to ‘tag’ these figures.
What is inline XBRL?
iXBRL gives meaning to the figures in your annual report, by tagging these figures to a taxonomy (a kind of dictionary). This gives the data a clear structure and allows software programs to easily process the information.
ESMA has defined a taxonomy for ESEF. The taxonomy is based on the ESMA IFRS taxonomy.
Which part of the financial annual report is subject to the obligation to ‘tag’?
The ESEF mandate has been rolled out in several phases. The obligation for the reporting years 2020 and 2021 is limited to the consolidated primary statements – only these need to be tagged. From the 2022 reporting year onwards, the principles and notes are also covered by this mandate.
In summary: what does ESEF mean for your organization?
If your organization falls under the obligation of the ESEF mandate, then your organization must comply with the following key-requirements:
The annual financial report must be drawn up in XHTML;
All consolidated IFRS Financial Statements must be enriched with XBRL ‘tags’ according to the ESEF Taxonomy, which are included in the XHTML document.
It is important that your organization prepares for the implementation well in advance: this prevents additional stress during the regular annual reporting process. Which is often a busy period anyway.
How CPMview helps organizations?
CPMview helps organizations to meet the ESEF mandate. In the second blog of this blog series you can read more about the process to achieve a timely and reliable ESEF compliant report. Furthermore, we will focus on the solutions and services that CPMview offers in this space.