ESEF: iXBRL for listed company consolidated financial statements

The European Securities and Markets Authority (ESMA) have issued the European Single Electronic Format (ESEF) rules, which apply to financial statements of listed companies from January 2020. It’s already a hot topic for preparers of annual reports.

What’s on your mind?

What will change?

A new version of the annual report, prepared in XHTML format and tagged with machine-readable data will be prepared by listed companies governed by EU rules. New preparation arrangements will be required, new software is involved and new processes and controls will be necessary. Investors and other stakeholders will be able to search the consolidated financial statements using computers as well as the human eye.

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Where do we start?

Before making any updates, improvements or changes to current annual report preparation arrangements, the first step is to become familiar with the new requirements and consider how the European Single Electronic Format (ESEF) may affect your company.

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Will existing iXBRL tagging arrangements for HMRC provide a solution?

Unfortunately not. There are new rules and taxonomies that require new software. The timeframe for this requirement will be four months after the year end, a much tighter deadline than for HMRC. Any errors will be open to public scrutiny rather than a private matter concerning only HMRC. Tagging consolidated financial statements will be different to existing arrangements.

 

 

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Will the auditors be checking the new tagging?

There may be a mandatory audit requirement, which is for the regulators to decide. If not, it is likely that some listed companies will ask their auditors to check the iXBRL tagging. 

 

 

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What are other companies doing?

Some companies are speaking with the service providers and advisers about their annual reports. Changes to shorten and simplify the annual report in readiness for the new requirement are on the agenda. Software vendors are speaking with current and prospective clients about how new systems and processes addressing iXBRL can be implemented.

 

 

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Will Brexit affect this?

We don't know for sure. The final negotiated terms of Brexit and the timing of the European Union's adoption of the ESEF rules will clarify the position in the coming months. But digitisation of financial statements is a global trend and listed companies plan changes to reporting processes years in advance so we are not surprised at the level of interest ESEF is already generating in the UK.

 

 

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Our point of view

Having freely-available, machine-readable access to the consolidated financial statements of every EU-regulated listed company will allow companies to manipulate the data and compare across a peer group - giving users of the information new possibilities.

ESEF is a technical format. It doesn’t prompt new information to be produced, it’s about making existing information available in both human-readable and machine-readable forms. So, it seems reasonable to view this as, primarily, a regulatory compliance exercise.

The preparation of annual reports can be costly and time-consuming. Some will use ESEF as a springboard to cost-savings and better processes, whilst others will delay engaging with the new requirement, take differing paths and achieve a range of cost outcomes.

What are the next steps

Right now, this will mean getting to grips with the emerging regulation - tasking someone in the organisation to assess the requirement, present the options and devise a plan. Doing it well can involve training on the requirements, understanding how existing processes work, knowing where judgements will be involved and entering into discussions with current and potential service providers.

Further ahead, this will lead to more cost-effective, high-quality, digital information for users of your consolidated financial statements.

How we can help

The ESEF services we offer include: eLearning and blended training, a tailored ESEF blueprint mapping report and a controls assurance review.

1. ESEF eLearning

We have created two eLearning modules to familiarise you with the ESEF requirements and the nuts and bolts of ESEF tagging. We explain the rules, show examples and provide exercises you can work through, including anchoring and extensions. Follow-up workshops are available as a blended learning opportunity to those who have licensed the training.

2. ESEF mapping report

We can map the relevant parts of your consolidated financial statements to tags in the ESEF taxonomy, using the ESEF rules. Your tailored ESEF mapping report is a blueprint illustrating which tags to choose and where they go, as well as which extensions are necessary and how to anchor them appropriately to the taxonomy. It can guide your tagging decisions, no matter what software solution you choose.

3. Controls assurance

Producing machine-readable financial statements in an annual report that complies with the new ESEF rules involves significant effort. We offer vendor selection support and a controls assurance review, including an evaluation of how ESEF will impact your processes, controls and annual report preparation timeline. You should consider three key areas: people, processes and technology.

Contact us

Jon Rowden

iXBRL leader, PwC United Kingdom

Tel: +44 (0)7715 457437

Olive Browne

ESEF eLearning, PwC United Kingdom

Tel: +44 (0)7715 034895

Michalis Georgiou

ESEF mapping report, PwC United Kingdom

Tel: +44 (0)7786 911914

Charlotte Hoyland

ESEF eLearning, PwC United Kingdom

Tel: +44 (0)7841 567333

Kashi Booluck

ESEF mapping report, PwC United Kingdom

Tel: +44 (0)7701 296167

James Russell (CISA)

ESEF process & controls, PwC United Kingdom

Tel: +44 (0)7525 282446

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