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ESEF RTS – Q&A summary

European Single Electronic Format – Questions & Answers summary (ESEF Q&A)

The European Commission has published the ESEF RTS and, at the same time, has accompanied it with an ESEF Q&A; providing the whole sector with answers to the most common questions.

Here you can find the full European Single Electronic Format Reporting Technical Standard and the Q&A document; and, besides this, a brief resume of each Question and Answer document:

What is the ESEF?

ESEF (European Single Electronic Format) is the financial reporting rules for the listed companies in the European Union from 2021. It means, it will be a single electronic reporting format for the annual financial reports published onward.

Based on International Financial Reporting Standards (IFRS) Taxonomy; ESEF reports will show the AFR´s, the organization report and the accountability statements of the company.

ESEF reports will be human-readable as a webpage format; and, because of the file will also tag information according to the IFRS Taxonomy using inline specifications (iXBRL), it will make the financial statements machine-readable.

Why is the European Commission introducing ESEF and what are the benefits?

ESEF arrives to establishing a single structured electronic format for EU annual financial reports; enhancing comparability and usability of financial data information to investors and analysts using the inline specifications (iXBRL). This will, in turn, enhance the transparency of EU capital markets.

Which companies will have to prepare their annual financial reports in ESEF?

  • All natural and legal persons with securities listed on an EU regulated market.
  • EU issuers who tag its financial statements using the IFRS Taxonomy EU-endorsed. Individual financial statements will be provided by its Member State.
  • Third-country issuers will tag according to the International Accounting Standard Board (IASB) IFRS Taxonomy.

When will the preparation of annual financial reports in compliance with ESEF become mandatory?

ESEF will become mandatory from 1 January 2020. So, ESEF reports will be published in 2021 in relation to annual financial reports of fiscal year 2020.

Will preparation costs increase for companies?

Costs will depend on whether a company decides to prepare its annual financial reports using iXBRL internally or by outsourcing it to a third party. Depending on the chosen option, we disclosure a cost estimation:

  • Preparation in-house. We can estimate around EUR 8,200 for the first filing, and around EUR 2,400 for each subsequent filing.
  • Outsourcing. The costs would be around EUR 13,000 for the first filing, and around EUR 4,600 for each subsequent filing.

Does ESEF bring any other benefits?

The iXBRL introduction will positively impact in a range of jurisdictions (EU Member States, equity capital and stock liquidity cost, bank funding access, audit reports timeless and audit fees reduction

What kind of assurance will be provided for financial statements prepared in compliance with ESEF? Will auditors check ESEF-compliant reports?

ESEF Regulation will be a binding legal instrument; so the provisions shall be considered as “statutory requirements” by the Audit Directive.

What is the Commission doing to facilitate the audit of ESEF and to clarify the practical implications?

The Commission is working in a kind of guidance to the market and is exploring whether the audit of ESEF could warrant possible modifications in the existing transparency rules.

Do the human-readable and the machine-readable rendering of ESEF constitute two different versions of the ESEF file?

XHTML file that contains the annual financial reports will always be human-readable and, when marked-up with iXBRL, machine-readable as well.

Is there a reporting manual to help companies preparing their ESEF compliant annual financial reports?

There is the ESEF Reporting Manual for the preparation of AFR´s according to ESEF Regulation.

Are there taxonomy files available in all EU languages to facilitate the preparation of ESEF-compliant annual financial reports?

Download here for free the ESEF Illustrated Taxonomy draft in all EU languages.

Will Business Registers accept ESEF filing for listed companies that are limited liability companies?

The Commission encourages Business Registers to accept ESEF filing in order to avoid that listed limited liability companies duplicates documents in different formats, (i.e. XHTML files with iXBRL tagging embedded).

Will the delegated act on ESEF have to be periodically updated?

Delegated act will be amended yearly to update changes made by (IASB) in the IFRS Taxonomy.

What else is the Commission doing to further support the digitalization of corporate reporting?

ESEF is only the first step in the digitalization of public corporate financial information. Still, other initiatives have to complement ESEF. The Commission is exploring digitalization making information more accessible and usable for users/investors, (i.e. Fitness Check or the European Financial Transparency Gateway).




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