Understanding iXBRL tagging for ESEF: What, When, & How?
ESEF requires you to tag your report with iXBRL. But what is iXBRL, and how can you ensure compliance with the ESEF mandate? We’ll explore the basics of iXBRL, explain the two types of iXBRL tagging for ESEF including Block Note Tagging, and provide you with a comprehensive guide on what, when, and how to properly tag your report.
Table of Contents
What is iXBRL?
The meaning of iXBRL
iXBRL, also known as Inline Extensible Business Reporting Language, is a significant advancement in financial reporting technology and is built upon the foundation of XBRL, which is an open-source language designed specifically for financial reporting.
iXBRL is a digital format that allows financial reports to be created in a format that can be read by humans and machines alike, while allowing filers to retain the flexibility of a report format.
iXBRL, as the name suggests, is “inline” and can be integrated into xHTML pages. This is achieved by embedding iXBRL tags directly into the xHTML content of a document, allowing users to view the tagged data directly within the document itself.
iXBRL for ESEF
To comply with ESEF, annual reports must be prepared in iXBRL. ESEF uses a combination of HTML and XBRL that creates a digital annual report that is both ‘human-readable’ and ‘machine-readable’.
With iXBRL, the financial data in your annual report is tagged to the ESEF taxonomy, which acts as a standardized dictionary to assign meaning to it.
This creates a structured format for the data that can be easily processed by software programs.
iXBRL tagging example
This illustration showcases an income statement that has been tagged using iXBRL.
iXBRL report example
This example shows the annual financial report of a publicly listed European company that is required to comply with the iXBRL-based ESEF reporting standard.
The appearance of the report remains the same as it was originally intended, but the financial data, such as the balance sheet, income statement, and cash flow statement, are all tagged according to the proper ESEF taxonomy element.
You maintain total control over the layout of your report with iXBRL.
In the world of financial reporting, iXBRL bridges the digital divide between humans and computers.
Revolutionising financial reporting: How iXBRL increases accountability and transparency
The importance of iXBRL lies in its ability to increase the accountability and transparency of financial reporting.
iXBRL is used by millions of companies around the world to prepare financial statements in a format that provides the structured data that regulators and analysts require.
The structured data allows for easier comparison of information for regulators, investors, and across companies and industries over time, streamlining the review process and reducing the risk of errors in financial statements.
What you need to know about iXBRL reporting
Understanding the iXBRL taxonomy
What is an XBRL taxonomy?
An iXBRL taxonomy, or XBRL taxonomy, is essentially a dictionary or a set of definitions that help ensure that financial information is consistently reported across organisations and industries.
The taxonomy provides a standardised set of codes and definitions for financial concepts like net profits, assets, liabilities, and revenues, which are used to prepare financial reports.
The taxonomy is created by regulators to define the information that needs to be reported and exchanged between organisations and regulatory bodies.
XBRL taxonomy example
Different XBRL taxonomies for different reporting needs
Each business reporting purpose requires a different taxonomy. To reflect local accounting and other reporting laws, some national jurisdictions could require their own reporting taxonomies.
The following are examples of taxonomies that utilise XBRL and/or iXBRL:
- ESMA ESEF iXBRL Taxonomy
- EIOPA Solvency II XBRL Taxonomy
- EIOPA Pension Funds XBRL Taxonomy
- US GAAP XBRL Taxonomy
- German GAAP XBRL Taxonomy
- IFRS iXBRL Taxonomy
All XBRL taxonomies can be found in the XBRL Taxonomy Registry of XBRL International.
Who is required to submit financial statements in iXBRL?
iXBRL is impacting the financial reporting industry on a global scale. However, who must report in iXBRL is determined by local reporting regulations and entity characteristics.
iXBRL reporting in Europe
- In Europe, the iXBRL-based ESEF reporting standard became mandatory for all publicly listed companies.
- In Denmark, listed companies and investment funds are required to submit financial statements in iXBRL format.
- In the Netherlands, various GAAP filers are required to submit their financial statements in iXBRL.
iXBRL reporting worldwide
- In the US, all companies are now required to file in iXBRL format with the SEC.
- In Japan, investment funds adhere to the iXBRL standards when submitting financial statements to the Japanese Financial Services Agency.
- British businesses must file iXBRL when submitting their tax information and business registration details to HMRC and Companies House.
Guide on iXBRL tagging for ESEF
What is ESEF tagging?
ESEF tagging involves the mapping of financial information according to the ESEF taxonomy, which is based on the IFRS taxonomy.
The process of iXBRL tagging for ESEF involves detailed tagging of the primary financial statements (such as the income statement and balance sheet), in addition to block tagging of notes.
Two types of tagging for ESEF
To comply with ESEF, two types of tagging are required: tagging primary financial statements and tagging notes to the financial statements.
Note that in order to comply with ESEF, the annual financial report must be formatted in xHTML. Using iXBRL technology, the required iXBRL tags are then embedded in the xHTML report.
1. Tagging primary financial statements
Tagging primary financial statements (PFS) involves tagging each line item contained in the IFRS financial statements with the appropriate iXBRL tag.
This allows financial data to be structured in a consistent and uniform way, making it easier for investors and other stakeholders to access and analyze financial information.
Example of a consolidated balance sheet being tagged
This consolidated balance sheet example, tagged with iXBRL, showcases the seamless integration of our ParsePort Inspector into your compliance workflow. By using the Inspector, not only can you easily view your ESEF report and iXBRL tags, but you can also validate your entire report in a matter of minutes.
2. Tagging notes on the consolidated statements
Block tagging is a method of applying iXBRL tags to notes and accounting policies.
The process entails utilizing XBRL tags from the ESEF base taxonomy to mark up “blocks” of text containing multiple pieces of information, unlike the process of individually tagging each piece of information when tagging preliminary financial statements.
This approach not only saves time and effort in tagging notes and policies, but also ensures that all pertinent information is tagged with accuracy.
Anchoring financial notes
Text block tagging is much more subjective and requires human validation. All extensions must be anchored, i.e. “linked”, to the closest ESEF taxonomy element.
The taxonomy can be extended if no existing ESEF tag exists, which reflects the intended accounting meaning of the disclosure.
The differences between PFS tagging and Block Note Tagging
Unlike tagging primary financial statements (PFS), which focuses on line-item data within the financial statements, block note tagging allows for more detailed tagging of notes and accounting policies.
In other words, when tagging PFS, issuers add a specific XBRL tag to each line item.
However, when block tagging notes and accounting policies, the iXBRL tagging process is more subjective, and issuers must determine how granular they want to tag the information and which block tags to use.
Download the Ultimate Block Note Tagging Guide (Free)
Complete block note tagging guide with step-by-step instructions, examples, and popular method comparison. Learn from our ESEF experts.
ESEF tagging requirements: What needs to be tagged?
Confused about which elements in your financial report need to be tagged? Look no further.
Our handy flow chart simplifies the iXBRL tagging process and helps you easily determine if and how to tag specific elements.
Let us guide you through the tagging process.
Selecting the correct taxonomy element
Choosing the right taxonomy element is essential for the successful validation of your annual report. This decision ultimately impacts the credibility of your report.
Your taxonomy element selection cannot be overlooked.
The dire consequences of incorrect taxonomy elements
Choosing the incorrect taxonomy element can lead to stakeholders, authorities, and other parties being unable to accurately analyse your annual report. This may result in presenting them with flawed and incorrect data.
It is crucial to make the right selection to ensure reliable reporting and, most importantly, complaint reporting.
ESEF reporting with ParsePort’s tagging assistance: Save time and improve your financial report quality
Don’t risk unreliable and incomplete reporting. Selecting the right ESEF provider is crucial for compliance.
By choosing a provider that offers mapping assistance, you’ll save time and money while improving the overall quality of your report.
Don’t settle for less. Browse our ESEF solutions and choose the package that fits your ESEF reporting needs.
Save time with ParsePort's ESEF tagging assistance
Don’t risk unreliable and incomplete reporting. Selecting the right ESEF tagging service is crucial for compliance.
What if the element I need doesn’t exist in the ESEF taxonomy?
The majority of the elements required for your financial reporting are already present in the ESEF base taxonomy.
If a required element already exists in the ESEF taxonomy, you must utilise it.
A rule of thumb
The taxonomy elements chosen by issuers should have the closest accounting meaning to the disclosed information.
Creating and anchoring custom ESEF extensions
However, when you are unable to locate a taxonomy element that represents the accounting meaning, an extension must be created.
An extension is an entity-specific element that needs to be created by the filer.
When not to create an ESEF taxonomy extension
When creating an element extension, you must ensure that you are creating an extension of the taxonomy and not simply renaming an existing element.
If you have a line in your Statement of Changes in Equity titled “Balance as of January 1, 2021” which discloses your equity, you need to select a corresponding taxonomy element titled “Equity”.
You should not create an extension element titled “Balance as of January 1, 2021” to better reflect the text in your PDF.
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