ESEF Is Coming: 7 Things You Need to Know About ESMA’s New Mandate
ESEF. Who knew that four little letters could cause so much confusion? You’ve probably heard the acronym buzzing around lately—but what does it really mean, and how will it impact investor relations in fiscal years to come? Here, we cut through the jargon and share seven things you need to know about ESEF’s role in the future of financial reporting.
- ESEF stands for European Single Electronic Format.
Passed by the European Securities and Markets Authority (ESMA) on May 29, 2019, ESEF is a new law that affects all public companies in the European Union.
- ESEF filing is mandatory for annual reports with fiscal years beginning on or after January 1, 2020.
Was that a collective sigh of relief we heard? You won’t be required to submit your first ESEF report until 2021—phew!—but even so, it may be wise to start preparing for it now.
- ESEF is XHTML (i.e. a web page), viewable in a standard browser.
This means that ESEF is “human-readable,” so you have to decide how good you want it to look—whether that means choosing a “regulatory look and feel,” applying a corporate web style guide, or designing for best communication.
- The ESEF/XHTML page source contains inline XBRL tags to “tag” numbers in the annual report.
ESEF strives to make information better, more accessible, and easier to process by investors and regulatory bodies. As a “machine-readable” framework that embeds business reporting data into a human-readable page, inline XBRL contributes significantly to that goal.
Under ESMA’s new mandate, tagging will be done using the ESMA IFRS taxonomy.
Want to dig into the specifics? We’re writing a detailed follow-up article, “7 Things Finance Managers Need to Know About ESEF”—contact us to be notified when it’s live.
- Only the numbers in the primary financial statements need to be tagged.
For fiscal years starting on or after January 1, 2022, ESMA will also require “block tagging” of notes—meaning that the text and tables within a note must be tagged as a block.
(Keep in mind that these are the minimum requirements set by ESMA. Individual countries can set additional requirements.)
- Regulatory bodies (like the Netherlands’ AFM) will no longer accept PDF annual reports.
Nevertheless, you’ll probably still create PDFs for the purpose of printing and downloading annual reports. Meanwhile, companies that already publish annual report microsites will likely continue to do so for optimal shareholder engagement.
- All required-by-law parts of the annual report must be included in ESEF.
Some examples are the notes, parts of the directors’ report and corporate governance section, and any required non-financial information. These items, however, do not have to be tagged—as a reminder, you only need to tag the primary financial statements of your annual report.
With ESEF integrating machine-readable and human-readable formats, the future of financial reporting is rapidly changing. Considering that ESEF is XHTML—and thus, a website itself—it will be fascinating to see how it converges with annual report microsites in years to come.
Want to prepare for the future of financial reporting? Schedule a demo here to learn how Tangelo supports the production of ESEF-compliant reports, PDFs, and microsites—all from a single source.