Stephanie Buhagiar Camilleri from Securities and Markets, MFSA, delves deeper into the electronic reporting format developed by the European Securities and Markets Authority, in this second part of the write-up which continues from the previous edition of MFSA NewsHub.
Part 1 in a nutshell: European listed companies (issuers of shares and bonds operating in regulated markets) will have to report their entire annual financial reports (‘AFR’) in ESEF starting with financial statements for 2020. The AFR will be prepared in XHTML format, and IFRS consolidated financial statements data included in the XHTML document will be marked up with XBRL tags. XBRL tagging will be done using iXBRL technology (InlineXBRL[1]).
On 28 February 2019, the European Securities and Markets Authority (‘ESMA’) published the second tutorial on the process of preparing an inline XBRL report. This tutorial builds on the first tutorial[2] on the Regulatory Technical Standard (RTS) on ESEF which ESMA published in November 2018.
In order to prepare an inline XBRL report, one needs to get familiar with the requirements set out in the RTS[3] specifying the electronic reporting format in which issuers should prepare their AFRs from 1 January 2020, the ESEF Reporting Manual[4] and the ESEF Taxonomy.
‘The ESEF Taxonomy is made up of two components: (i) the schema of the core taxonomy, which is the list of all human readable labels contained in Annex VI of the RTS, and (ii) the ESEF XBRL taxonomy files, which are published on ESMA’s website’[5].
The ESEF taxonomy builds on the IFRS Taxonomy, whereby the latter lists and defines the specific elements which can be used to tag the information disclosed within IFRS financial statements.
Tutorial 2 provides examples on the process of mapping the IFRS financial statements to the ESEF taxonomy. In using the IFRS Taxonomy, issuers can create ‘extensions’ or an ‘entity-specific taxonomy element’. These ‘extensions’ allow issuers to tag information which is unique about a company, which information cannot be found in the core taxonomy.
The RTS on ESEF further requires that extension taxonomy elements are anchored to the closest wider base taxonomy element. Extensions and the anchoring process are further explained in the tutorial mentioned above.
The requirements to tag the Primary Financial Statements - and therefore to create extensions if necessary and anchor them - will come into force in 2020 for AFRs containing financial statements for financial years beginning on or after 1 January 2020. In addition, a small number of mandatory mark-ups applicable from 2020 as listed in Annex II of the RTS on ESEF, need to be applied to all corresponding disclosures made in IFRS consolidated financial statements or made by cross-reference to other parts of the AFR.
The requirement to block tag the Notes will come into force in 2022. The same Annex II lists the mandatory tags which need to be applied to all corresponding disclosures made in IFRS consolidated financial statements or made by cross-reference to other parts of the AFR.
The RTS on ESEF also allows voluntary tagging of additional data and disclosures. As explained by ESMA, ‘it should also be highlighted that on top of these requirements, the RTS on ESEF allows, on a voluntary basis, tagging of much more, on a more granular basis: for example, numeric data contained in text, or in images, data in graphics, or disclosures in footnotes and so forth. Providing more detailed information than the minimum required might provide end-users with additional meaningful information for their analyses.’[6]
On 21 March 2019, ESMA has published taxonomy files to facilitate the implementation of the requirements set out by the draft RTS on ESEF. As reiterated, the taxonomy files are based on the IFRS taxonomy. Users can access the taxonomy in the form of a set of electronic XBRL files (‘ESEF XBRL taxonomy files’) that are available in a machine-readable and freely downloadable format.
Through this publication, ESMA aims to facilitate the implementation of the RTS on ESEF by providing XBRL taxonomy files that are compliant with all relevant technical and legal requirements in the RTS, and which issuers should use as a starting point to create their own taxonomies. The taxonomy files intend to facilitate the accessibility, analysis and comparability of AFRs in the ESEF format. A copy of the taxonomy files can be obtained through ESMA’s official website. The publication of the ESEF XBRL taxonomy files is accompanied by the publication of a set of documentation material presenting their architecture and content.
Validation and Submission of the Report
Prior to submission, various checks and rules need to be run in order to ensure that the file is correct, complete, accurate and consistent. As also outlined by ESMA in their tutorial, some of the checks and rules will be included directly in the taxonomy itself while others may be implemented by software developers.
The RTS on ESEF does not change the way issuers publish or disclose regulated information. The obligation to submit AFRs to the Officially Appointed Mechanism will remain unchanged.
[1] The ESEF Reporting Manual, Preparation of Annual Financial Reports in Inline XBRL (14 December 2017 | ESMA32-60-254) defines ‘Inline XBRL’ as a mechanism for embedding XBRL tags in HTML documents. This allows the XBRL benefits of tagged data to be combined with a human-readable presentation of a report, which is under the control of the preparer.
[2] ESMA32-60-403, ‘Video Tutorial on the European Single Electronic Format – Introduction to the draft RTS and ESEF’, 19 November 2018.
[3] Final Report on the RTS on the European Single Electronic Format, 18 December 2017 | ESMA32-60-204.
[4] The ESEF Reporting Manual, Preparation of Annual Financial Reports in Inline XBRL (14 December 2017 | ESMA32-60-254).
[5] ESMA32-60-456, ‘Tutorial on the European Single Electronic Format – Overview of the preparation of an Inline XBRL Report’, 28 February 2019.
[6] ESMA32-60-456, ‘Tutorial on the European Single Electronic Format – Overview of the preparation of an Inline XBRL Report’, 28 February 2019.
