The True Benefits of ESEF Reporting
An easier way to encourage investors to spend their money, an easier way to compare your reports against the market, a heightened quality of data. If you ever wondered what your company will gain from the new ESEF format, you’ll find the answer here. In this article we’ll go over the benefits of ESEF reporting.
If you’ve been in the market for an ESEF solution provider, you’ve probably heard it all. “ESEF is going to be mandatory” or, “You have to do be compliant, it’s the law.” But have you ever been told what’s in it for you?
There are a lot of articles which cover the broader societal benefits of ESEF reporting. It is true, after all, that greater financial transparency will reduce the risk of new financial crises – and we will all benefit from that.
Recently we’ve been asking our customers and followers on LinkedIn what they think are the biggest benefits of ESEF reporting , and in this article we will cover the top 3 benefits that YOU as a company or an investor will gain from the new European Single Electronic Format.
Structured Information Makes Consumption Easier
One of the goals of the ESEF initiative is to make XBRL data more widely available to regulators and investors. If you aren’t sure what the difference between XBRL and ESEF is, you can find out in this article about the impact of the letter “i”.
The idea is that more structured information will encourage investors to make investments. In short ESEF will provide them with the ability to process the data of financial reports quickly and comprehensively, which means they can devote more of their time to analysis instead of data collection.
Even if you were the only company to provide your annual financial report in the ESEF format, you would be able to benefit from this, simply because you would also be the only company to present your annual financial report to potential investors in an easily consumable way.
Increased Comparability of Data Makes Consumption Faster
Today everything is data driven, but when the data isn’t structured in similar ways, comparing that data can quickly become a complicated matter.
Imagine that one company reports “sales” while another reports “turnover” and a third reports “revenue.” The solution in this example might be obvious to most readers but imagine the same disparity throughout just half the posts in the three financial reports. The task of comparing the three reports suddenly becomes a lot larger and a lot more tedious.
If the filers had structured the reports within the ESEF taxonomy, however, the words used in the example above, would all be mapped to the same taxonomy element, which then makes comparing the three reports a lot easier.
This is the benefit of ESEF on a large scale, but even if you where the only company to report in the ESEF format, anyone with access to the ESEF taxonomy would still be able to easily and correctly consume your report.
Higher Data Quality Makes Consumption Better
One of the biggest reasons that data quality is considered low, is because the data set contains flaws. It might just be a misspelled word or a number which is incorrect.
No matter how thorough you are in creating your reports, there is still a chance for error, which is often related to the human component of your creation process. Luckily, this is one of the things that ESEF can help alleviate.
One of the reasons ESEF will help heighten data quality is due to the validation rules that are built into the taxonomy. The validation rules can run several checks such as calculation, consistency, and assertion to weed out errors in the report during the creation process rather than after it is handed over to a regulator.
The Benefits of ESEF Reporting Aren't Just Related to Compliance
As you may have already noticed, there are benefits related to ESEF, which has nothing to do with compliance. We believe this is also one of the reasons why our product is gathering interest from Swizz and Russian companies, who aren’t faced with the same compliance requirements as companies within the EU. And we also believe this is why Norwegian and Icelandic companies are already showing interest, even though they aren’t facing similar requirements until they start reporting the financial year of 2021.
While compliance is of course very important when it comes to choosing your ESEF solution provider, it is a missed opportunity to only focus on becoming compliant. The benefits to not just become compliant but excellent are so obvious.
In short, the European Single Electronic Format is a way to bring financial reporting into the digital age, and this is your chance to be at the forefront of that development.