3 Myths about ESEF Tagging
So, you’re trying to figure out how you should handle your ESEF compliance, but the question of tagging keeps popping up. Is it a task that should be handled in-house or is it something you should look into outsourcing? In this article we’ll go over three misconceptions related to ESEF tagging and provide you with an idea of how to best handle the process.
Leading up to the ESEF mandate, one area that seems to confuse many companies is the tagging process. Some believe that it is best to handle the process in-house while others plan to outsource the task, but what is the right way to go about it?
In the end, it is of course a question you need to answer for yourself, but in an effort to try and help you, we’ll go over 3 of the most hard-lived myths about ESEF tagging. That way we hope you can get a little closer to making the best decision for your company.
Myth #1: Outsourcing Tagging Takes the Responsibility Off of Your Team
Many companies and teams are looking for solutions which will let them share some of the responsibility with an external partner, and because of this, they are looking towards outsourcing the tagging process. There is of course a spec of truth to this idea, as an external partner will help guarantee the quality of your tagging, but it is not possible to outsource the legal liability for your filing.
At the end of the day, it is your company and your team who are accountable for the accuracy of your filing, not the ESEF vendor. So, while you can rely on your vendor to provide you with the technical know-how, your team will still need to understand and review the files and be confident in the quality of the tagging performed by the vendor.
Myth #2: You Need to Take Control of the ESEF Tagging Yourself
Many ESEF providers will tell you how technological advances has made the tagging process much easier, and that they will provide you with the tools to take control of the tagging process, so you can handle that task in-house.
This has led to the belief, that there is in fact a need to take control of the tagging process. The reason some vendors tell you this, is likely because they want you to handle an otherwise time-consuming, manual task, instead of doing it themselves.
Manually tagging an annual report takes a lot of time, which is why you should probably look towards solutions that will assist you in tagging your financial statement instead of ones that requires you to tag the posts yourself. This is not only because it is time-consuming, but also because the margin for error is quite large, when the task is handled solely by humans.
When your ESEF vendor asks you to take control of the tagging process, it is much like if the pilot of a commercial jet asked you to take control of the plane.
If for some reason you need to take control of the tagging process you should of course be able to, which is why we provide solutions that will allow you to do so, either by yourself or assisted by our experts and our system of simplified tagging which you can read more about here.
Myth #3: Outsourcing Your ESEF Tagging Removes the Need for Learning about ESEF
While outsourcing your tagging process certainly removes the need for in-depth technical knowledge about how your chosen software works, it doesn’t really remove the need to develop in-house knowledge about ESEF in general.
You will always need to be able to thoroughly review your filings, as your team and your company still possess the legal liability of the filings. Because of this you need to develop a sound review process, so you can ensure that the work of your ESEF provider is satisfactory.
To do this, you (or at least your auditor) will have to develop knowledge of what is available within the taxonomy, when extensions should be created and how the iXBRL format transforms values.
At the end of the day, these three myths are exactly that – myths. Your company is going to be legally liable for your filings, which means you need to have at least a little in-house knowledge about ESEF and iXBRL but there is a silver lining – and it’s a big one.
You do not need to take control of the tagging process yourself. If you feel a need to do so, you should of course look into picking a solution which will let you, but it is by no means a necessity.
Converting annual financial reports to ESEF was never going to be one size fits all, which is why we offer a range of different solutions tailored to fit any company. We can take care of the entire process for you, we can give you the tools to handle everything yourself, or we can provide you with a healthy mix between the two.
If you want to know how simple it can be to become ESEF compliant, or if you want to see how an ESEF report looks, then you can try our free iXBRL test conversion.