The ESEF Requirements

Beginning with the financial year of 2020, all companies listed on EU regulated markets are required to prepare their annual financial reports in ESEF. The European Securities and Markets Authority commonly referred to as ESMA, has put forth a list of ESEF reporting requirements which each report must live up to in order to be compliant.

The Story Behind the ESEF Requirements

In 2013 the Transparency Directive was amended to include the requirement that issuers prepare their annual financial reports in one electronic reporting format. ESMA was tasked with developing the regulatory technical standards (RTS) specifying the format. What they came up with was ESEF, or the European Single Electronic Format, which is an iXBRL format. You can learn more about ESEF reporting here.

What Are the ESEF Requirements?

The detailed provisions of the European Single Electronic Format (ESEF) are contained within the Reporting Technical Standards (RTS) on ESEF which are included in the Final Report on the RTS on ESEF.

All annual financial reports (AFRs) must be prepared in XHTML, be human readable and capable of being opened with any standard web browser.

AFRs containing consolidated statements in accordance with International Financial Reporting Standards (IFRS) must be labelled with XBRL tags, which make the disclosures in question machine-readable.

The consolidated financial statements need to contain XBRL tags embedded within the XHTML file in the iXBRL format in order to combine the benefits of XBRL tagged data with the visual presentation of AFRs.

Financial information must be structured by following a set of rules and orders specified in the ESEF taxonomy. The taxonomy used for ESEF is an extension of the IFRS taxonomy.

Preparers of the files need to mark-up disclosures using the taxonomy element with the accounting meaning closest to the marked up disclosure. If the closest taxonomy element misrepresents the meaning, the issuer needs to create a taxonomy element titled an "extension" and anchor the extension to the core taxonomy element.

When producing an XHTML file for submission, issuers must mark up in detail the primary financial statements, such as income statement, balance sheet, statement of cash flows and statement of changes in equity.

The ESEF Reporting Manual

ESMA has created the ESEF Reporting Manual to present companies with guidance on how to adhere to the ESEF requirements as well as outline common issues related to creating iXBRL documents.

The manual was originally published in December 2017, but it has since been updated in July 2019 and July 2020.

It is expected that ESMA will further update the ESEF Reporting Manual as they have stated that they will continually monitor developments in the market and gather feedback from key stakeholders, so they can provide further guidance.