EUROPEAN SINGLE ELECTRONIC FORMAT
The European Single Electronic Format is the electronic reporting format in which issuers on EU regulated markets shall prepare their annual financial reports from 1 January 2020.
In 2013 the Transparency Directive, which sets rules on harmonisation of transparency requirements of issuers, was amended to include amongst others a requirement for issuers to prepare their annual financial reports in a single electronic reporting format. ESMA was assigned the responsibility to develop regulatory technical standards (RTS) to specify this electronic reporting format.
The objectives of the provision are to make reporting easier for issuers and to facilitate accessibility, analysis and comparability of annual financial reports.
RTS ON ESEF
The cornerstones of the RTS on ESEF that is included in the Final Report on the RTS on ESEF as Annex II are as follows:
- All annual financial reports shall be prepared in XHMTL which can be opened with standard web browsers and can be prepared and displayed as intended by the issuer;
- Where the annual financial report contains IFRS consolidated financial statements, these shall be labelled with XBRL ‘tags’ which make the labelled disclosures structured and machine-readable. This allows for instance the analysis of large amounts of financial information without extensive and burdensome manual processing. Furthermore, as XBRL taxonomies can contain labels in several languages, users can compare numeric information in the financial statements across issuers even though the issuers prepare their financial statements in different languages. In addition to that, the machine-readable XBRL information can be easily transformed to other formats such as SQL or Excel thus avoiding onerous manual rekeying;
- The XBRL ‘tags’ shall be embedded in the XHTML document using the Inline XBRL technology which allows to encapsulate the XBRL tags in the XHTML document within a single document set;
- Structured electronic reporting using XBRL requires the existence of a taxonomy, which is a given hierarchical structure used to classify financial information. The IFRS Taxonomy, issued by the IFRS Foundation has been specifically developed to mark-up IFRS financial statements with XBRL tags. Therefore, the core taxonomy to be used is an extension of the IFRS Taxonomy.
- The IFRS consolidated primary financial statements (income statement, balance sheet, etc.) shall be marked up in detail, whereas the notes to these financial statements need to be marked up by applying mark-ups for whole sections of the notes (block tagging).
ESEF REPORTING MANUAL
ESMA prepared an ESEF reporting manual to provide guidance on common issues encountered when generating Inline XBRL instance documents. The purpose of this document is to promote a harmonised and consistent approach for the preparation of annual financial reports in the format specified in the RTS on ESEF.
The content of this document is addressed to issuers required to prepare annual financial reports in Inline XBRL and to software firms developing software used for the preparation of annual financial reports in Inline XBRL. The guidance directed at issuers relates to questions that were frequently asked by stakeholders in the course of ESMA’s outreach activities or to issues identified in the course of the field tests of ESEF. The guidance to software firms consists of recommendations on technical aspects, and rules that should be supported by their tools to facilitate harmonised reporting by issuers.
To assess whether the proposed specifications for ESEF are practicable and to determine if and to what extent they have to be improved in order to increase comparability of annual financial reports and to reduce the burden on preparers, ESMA carried out field tests.
In these field tests, ESMA supported 25 volunteer issuers to transform their IFRS consolidated financial statements to Inline XBRL. ESMA published a number of the reports created in the course of the field tests to allow market participants to familiarise themselves with the Inline XBRL technology. These reports and more information on the field tests can be found on the field tests webpage. A report on the field tests is included in the Final Report on the RTS on ESEF.
In the course of the development of the RTS, ESMA carried out a public consultation. The Consultation Paper was published in September 2015. The Feedback Statement on the consultation published in December 2016 summarises the feedback received and ESMA’s response to it. Furthermore, it contains a cost-benefit analysis for ESEF.