European single electronic reporting format (ESEF) is a new and potentially challenging remit for affected businesses which raises plenty of questions over the process and delivery, but which are fact or fiction?
Which businesses are impacted by ESEF?
ESEF is applicable for all main market listed businesses across the EEA and the UK, with the FCA adding DTR 4.1.14 to the handbook.
This is part of a global trend of the digitisation of financial statements, driving improvements in the quality and visibility for stakeholders, the public, regulators, and government.
Is debt funding included?
Whilst all main market listed businesses are in scope of the ESEF mandate there is still some confusion around how companies who only have listed debt on a main market are affected. Firstly, let’s look at the requirements.
- Main market listed companies who produce consolidated accounts in IFRS are in scope for full ESEF (iXBRL) tagging of their Annual Financial Report (AFR)
- Main market listed companies producing unconsolidated reports or reports prepared under local GAAP, will be required to file an XHTML file only with their national regulator
Businesses with listed debt will therefore need to ESEF tag their AFR if they prepare under IFRS. Whilst this may look straight forward there is a lack of consistency across Europe with the approaches that individual stock exchanges take with their listing requirements so businesses will need to careful to ensure they are meeting local requirements. To add further complications, EU countries require the ESEF tagging to be audited and an opinion given and signed in the AFR that is released to the market.
What about investment trusts?
Investment Trusts are listed but do not prepare consolidated accounts and therefore are out of scope of the full iXBRL tagging however they will still need to convert their AFR to xHTML format and file it with their national regulator before the deadline.
Does IXBRL link to ESEF?
ESEF is a separate requirement to HMRC’s iXBRL mandate, although the same inline extensible business reporting language is used for both, they use different taxonomies and tagging approaches.
- Under HMRC’s mandate, tags are applied to line items in the financial statements only where there is a corresponding tag available.
- Under ESEF the use of extensions and anchoring of tags means that all areas of the annual financial report must be tagged.
The filing regime is also different as ESEF tagging needs to be filed with the FCA rather than HMRC meaning there are no direct synergies between the two.
ESEF is a significant challenge for listed businesses, and it will only get more onerous once the first year requirement to only tag primary statements disappears and clients need to tag their entire AFR.
BDO can help alleviate this burden and offers a flexible approach for clients.
FIND OUT MORE ABOUT ESEF