Implementation of the Uniform Reporting Format
The “European Single Electronic Format” (ESEF) is a new EU requirement for all companies that have issued securities within the EU.
As a result, the companies in question will be required to prepare their annual financial reports in XHTML format starting on 1 January 2020. In addition, the consolidated IFRS financial report must contain certain “inline eXtensible Business Reporting Language”, or iXBRL elements. Put simply, the introduction of the ESEF means that all figures and information from the previous financial statements will be provided with a standardized label, or tag. These tags then follow a clearly defined IFRS taxonomy that enables IT systems to automatically read out annual financial statements and consolidated financial statements.
The aim of the ESEF is to ensure that IFRS consolidated financial statements can be better compared with each other in the future, irrespective of structure, language and format, while providing a faster exchange of information and avoiding manual tasks and system discontinuities.
In order to keep company effort at a reasonable level for the first step, the ESMA decided that only the “primary financial statements”, i.e. the balance sheet, the profit and loss statement, the statement of comprehensive income, the cash flow statement and the statement of changes in equity, need to be prepared in a structured way.
IFRS taxonomy extensions are planned for entity-specific disclosures.
Mandatory, identifiable labeling (“tagging”) is not stipulated for the IFRS notes to the consolidated financial statements until 2022. In addition, the chapters in the notes to the financial statements may initially be given a collective iXBRL tag.
No direct transmission of financial statements to the ESMA is planned. The national business registers will continue to exist. However, there will be a central European register with reference to the national registers (European Electronic Access Point).
Success Factors for the ESEF Implementation
The requirements of an ESEF-compliant financial report should not be underestimated:
- Determination of the requirements and careful and needs-based selection of the IT software for iXBRL tagging
- Compliance with legal requirements and applicable IFRS standards
- Availability of detailed IFRS knowledge and extensive reporting skills
- Comprehensive knowledge of IFRS taxonomy and ESMA tagging rules
- Software expertise for the technical implementation of tagging
- Close cooperation between the involved corporate departments such as accounting, IT, legal and investor relations
- Allocation of limited resources and consideration of other regulatory projects (new IFRS standards, CSR Directive, etc.)
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