WHAT IS THE ESEF REGULATION?
The European Commission published a Delegated Regulation on use of the European Single Electronic Format (ESEF) on 29 May 2019 (the ESEF Regulation).
In the UK, the ESEF Regulation will apply to all companies with securities admitted to trading on a regulated market and that prepare their consolidated accounts in accordance with IFRS. This is irrespective of where they are incorporated. By contrast, there is no such requirement for UK and EU issuers that only prepare individual accounts, though they may do so voluntarily.
The intention of the ESEF Regulation is to ensure that certain sections of the annual accounts of many companies within the scope outlined above are ‘machine readable’. This is achieved by requiring certain issuers to ‘tag’ specified disclosures in the accounts using structured data formatting processes. The annual accounts in ESEF will include the ‘normal’ visual copy of the accounts in an electronic format, as a file in XHTML format, with specified XBRL tagging to ensure that sections of the accounts are ‘machine readable’.
WHAT REQUIREMENTS WILL COME INTO EFFECT AND WHEN?
The ESEF Regulation came into force on 18 June 2019 and applies to annual accounts for financial years beginning on or after 1 January 2020.
When directors consider whether to approve company accounts as having been prepared in accordance with the Companies Act, there is no requirement for them to consider the tagging of the accounts in ESEF. In practical terms this means the directors’ confirmation that the accounts meet the requirements of the Companies Act, and give a true and fair view of the company’s financial position, does not extend to consideration of the iXBRL tagging. This is the case even if the company chooses to tag the accounts before submitting them to be signed off by the directors.
In terms of their process, companies may choose to create a single filing, a parallel tagged document, or the creation of a tagged document once the annual report has been completed in paper format. Notwithstanding the various approaches that companies may take, in all cases, the directors’ confirmation relates to the human-readable version of the annual report and therefore does not extend to consideration of the iXBRL tagged data.
OUR POINT OF VIEW
ESEF is already a hot topic for preparers of annual reports and may disrupt the supplier landscape and your current processes.
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. This will lead to more cost-effective, high-quality, digital information for users of your consolidated financial statements.
WHAT ARE THE NEXT STEPS?
Right now it is getting to grips with the regulation. JTC are in discussions with software suppliers to enable us to be able to provide this additional service to clients both to the word and design versions of the annual accounts. An update on our solution will follow in due course.
If you would like to have a chat about the options available to you with regards to ESEF please contact Susan directly.