ESEF – European Single Electronic Format for listed companies starting with financial statements for 2021 (*)
(*) The wording of the Transparency directive has been changed so that application of ESEF is mandatory, starting from the financial year beginning on or after January 1st 2021. In Finland, the change of the directive has been implemented in the Securities Markets Act by making changes to Section 5 of Chapter 7. The requirement to make the annual financial report public in ESEF-format according to the ESEF RTS, has now been moved until the yearend 2021. As the change in the act was not effective on January 1st 2021, FIN-FSA published an announcement on December 21 2020 according to which it refrains from enforcement actions if the issuer does not publish the annual financial report for the financial year beginning on or after January 1st 2020 in ESEF-format. For more information see FIN-FSA’s news release.
It will be possible to compare and utilise financial statement data of different companies better when, in the future, financial statements are reported in a single electronic format (ESEF). Retrieving and analysing data will be facilitated. Reporting in an electronic, structured format will also enable new technology, such as artificial intelligence, to be used more effectively in analysing data.
What is ESEF and to whom does it apply?
European listed companies (issuers of shares and bonds operating in regulated markets) will have to report their entire annual financial reports in a single electronic format (ESEF) starting with financial statements for 2021. The annual financial reports will be prepared in XHTML format, and IFRS consolidated financial statement data included in the XHTML document will be marked up with XBRL tags. XBRL tagging will be done using iXBRL technology (InlineXBRL).
The ESEF XBRL requirement applies only to IFRS consolidated financial statements, and it does not apply to parent companies’ separate financial statements or management reports. The ESEF XHTML and XBRL requirements do not apply to financial statement releases or half-yearly reports. Reporting of companies listed in alternative marketplaces is also outside the new reporting requirements.
Behind the new reporting requirements are the amendments made in 2013 to the Transparency Directive concerning the harmonisation of listed companies’ transparency requirements. The amendments to the Directive included the requirement for listed companies to prepare annual financial reports in a single electronic format (ESEF). As a consequence of the amendments to the Directive, the European Securities and Markets Authority (ESMA) was tasked with developing a draft Regulatory Technical Standards (RTS), which further specify the electronic reporting format. On 29 May 2019, the European Commission published the RTS as a delegated regulation (ESEF RTS) on the ESEF approved in the EU and it is directly binding on listed companies. The regulation entered into force on 18 June 2019. A link to the delegated regulation in all official languages of the EU can be found here.
The technical implementation of ESEF is based on XHTML and iXBRL. According to ESEF plans, listed companies will have to prepare annual financial reports in XHTML format in stages starting with financial statements for 2021:
Financial statements for 2021:
- The XHTML-format document will include the primary financial statements, tagged with the XBRL language in accordance with a taxonomy: consolidated statement of profit and loss and comprehensive income, statement of financial position, statement of cash flows and statement of changes in equity.
- XBRL data will be embedded into the XHTML document using the Inline XBRL (iXBRL) mechanism.
- In financial statements for 2021, the notes to the consolidated financial statements, the management report and the parent company’s separate financial statement will be included in the XHTML document without XBRL tags.
Starting with financial statements for 2022:
- In addition to the primary financial statements, the notes to the financial statements must be tagged with XBRL tags. Notes will be marked up in accordance with ESEF minimum requirements as block tags, i.e. each note as a whole will be one XBRL tag, and individual line and column data within the note will not need to be tagged separately.
Structured electronic reporting with XBRL requires the use of a taxonomy. The taxonomy acts as a reporting account dictionary. ESMA’s ESEF taxonomy, which is based on the IFRS Foundation’s IFRS taxonomy, will be used in the reporting of financial statements. The ESEF taxonomy includes ESMA’s own extensions to the taxonomy, e.g. for the identification of companies.
In addition to the ESEF taxonomy, companies can use and create their own extensions to the taxonomy if they cannot find in the ESEF taxonomy an accounting meaning that describes the content of a line sufficiently well. Extensions, however, must be anchored to the closest accounting meaning of the ESEF taxonomy. In practice, the new accounting meaning is linked to the existing line of the taxonomy that is closest to this accounting meaning. The use of extensions reduces, however, the comparability of XBRL format data between different companies.
Detailed tagging with XBRL is applied to primary financial statements
The consolidated primary financial statements , i.e. consolidated statement of profit and loss and comprehensive income, statement of financial position, statement of cash flows and statement of changes in equity are marked up with XBRL tags specified by the taxonomy at the same level of detail with which the primary financial statements according to IFRS are prepared.
Notes as block tags
Notes to consolidated financial statements are covered by a reduced requirement, such that notes to the financial statements are marked up with XBRL as block tags, in which case one note as a whole is one XBRL tag, and there is no need to itemise the contents of a note with separate XBRL tags. More details might be added to the reported information later, after experiences gained in use. The ESEF taxonomy includes, however, the opportunity for more detailed XBRL tagging.
Currently, there is no legally binding EU regulation on the assurance of ESEF. Regarding the audit or assurance requirement on ESEF, a Q&A by the European Commission has been published (Questions and answers nr 7), as well as the Commission Interpretative Communication. However, there are different interpretations about their legal validity in a situation where an obligation to audit would be established. The assurance on ESEF is arranged differently and with different time schedules in the legislation of different EU countries. In Finland, however, there is no national requirement for the audit or other assurance on ESEF. Although the audit or assurance on ESEF financial statements is not required in Finland, the issuers can arrange for the assurance on it, on a voluntary basis. The FIN-FSA recommends compliance with the Finnish Association of Authorised Public Accountants’ recommendation on the assurance of ESEF. The link to recommendation can be found here. The FIN-FSA considers the assurance of ESEF to be important from the standpoint of investor protection and the sound operation of the markets.
The Securities Markets Act was amended (19.11.2021/942) as of January 1st 2022 to include a requirement for issuers to publish an auditor’s statement on ESEF financial statements. If the issuer declares that its ESEF financial statements have been audited or have been subject to other type of assurance by auditors, the auditor’s statement on this should also be made available to the market.
The requirement added to the Securities Markets Act already applies to the financial statements for 2021. The additions to chapter 7, section 8 of the Securities Markets Act (4th and 5th subsections have been added, additionally the title of section 8 has been amended):
Auditor’s report and its publication
If the issuer’s auditor has audited the financial statements prepared in accordance with the Commission’s technical regulatory standard or has performed other type of assurance work, the auditor shall state in its statement the extent of the work performed. The statement of the auditor is appended to the financial statements.
If the issuer’s auditor has not audited the financial statements prepared in accordance with the Commission’s technical regulatory standard or performed other type of assurance work, the issuer shall state this in the financial statements.
Currently, listed companies submit their annual financial reports as a stock exchange release attachment file (pdf) to the national central storage facility for regulated information, either as a separate document or as part of an annual report. Following the entry into force of the Commission Regulation on ESEF, the consolidated financial statements in structured format and non-structured other information, such as e.g. the report of the board of directors and the parent company’s separate financial statements, will be included as zip-file in the XHTML document submitted to the central storage facility .
In Finland, the Helsinki Stock Exchange (Nasdaq Helsinki) acts as the maintainer of the central storage facility (Officially Appointed Mechanism, OAM) required by the Transparency Directive, to which listed companies submit regulated information.
Comparability of financial statement information requires detailed reporting using an XBRL taxonomy. Numerical data of financial statements can be compared or otherwise utilised across corporate and language boundaries when the numerical data has the same “name tag” in different companies and different countries, translated into each company’s own language. XBRL format information is easily transferable to different systems.
ESEF reporting permits the addition of a company’s own extensions to the taxonomy if the company cannot find in the ESEF taxonomy an XBRL tag corresponding in content to the accounting meaning of an item presented in the financial statements. A company’s possible own extensions to the taxonomy may, however, reduce the comparability of data between different companies.
It is recommended that companies assess what benefits they themselves can gain from also providing information in XBRL format to other purposes than only to regulatory reporting. Available information in XBRL format could be utilised, for example, in companies’ own sector peer analyses.
XBRL format reporting is used in many countries. The US Securities and Exchange Commission (SEC) already currently requires both US and foreign listed companies to report their financial statements in XBRL format. XBRL format information is also currently accepted by the trade register and tax authorities of a number of European countries, and XBRL is commonly used in the banking and insurance sector official reporting, including in Finland.
In Finland, the Tax Administration, the Finnish Patent and Registration Office and Statistics Finland are planning to accept financial information digitally in the future. Responsibility in Finland for maintaining the reporting code set and XBRL taxonomies for official reporting of financial information rests with the State Treasury. The State Treasury will activate companies with respect to digital official reporting of financial information.
ESMA has established a permanent working group to promote the implementation of ESEF. The purpose of the working group is to prepare the necessary additional guidance to listed companies and software suppliers for implementing the requirements of the ESEF regulatory standard. The aim is to apply the equalisation of the regulatory standard in the same way in different countries. Finland is participating in this ESMA work.
The 2021 amendment to the Delegated Regulation on the European Single Electronic Format (ESEF) was published in the Official Journal on 7th of March 2022. It will enter into force on 27th of March 2022. The latest consolidated version of the Commission Delegated Regulation (1/1/2021), can be accessed from this link.
The 2021 ESEF XBRL Taxonomy files have been published on ESMA’s website on the 10th December 2021. When reporting financial statements for the year 2021, the issuers can continue to use the taxonomy files of 2020 as the 2021 taxonomy files can only be used when the updated ESEF regulation will have entered into force, following the completion of the legislative process (approximately in March 2022). ESMA has also published the updated ESEF Conformance Suite 2021 on the 10th December 2021. Issuers can continue to use conformance suite 2020 for their annual financial reports concerning financial years beginning on or after 1 January 2021. ESMA’s announcement is available here.
The European Securities and Markets Authority (ESMA), has published on July 12th 2021 an update of its European Single Electronic Format (ESEF) Reporting Manual (Clean). The update expands existing guidance and reflects relevant developments in the technical specifications. The Manual is aimed at all market participants involved in the implementation of the requirements set out in the ESEF Regulation, and in particular in the first-time preparation of IFRS consolidated financial statements in Inline XBRL. The content of the Commission’s Regulation on ESEF is clarified in the manual on a more concrete level and instructions given for ESEF reporting. Here you find the link to track changes version.
XBRL International has published a blog series on the first year ESEF filings and the most common validation errors in them. XBRL has also published a repository which puts together into one place the ESEF-reports for companies from different countries. In the About-page you can find more information about the use of the repository.
ESMA has published in its Final Report of May 25th 2021 a draft of an updated ESEF-RTS. The European Commission has three months to decide whether to endorse this technical standard. The Final Report is available here.
The 27th XBRL Digital Week, organized by XBRL Europe on 29th of April 2021, consisted of interesting topics on first ESEF experiences, including a survey on Finnish listed companies’ ESEF-filings https://www.xbrleurope.org/?p=4302
XBRL Finland has published on Feb 3rd 2021 a current state of affairs of ESEF reporting in Finland
Nasdaq Helsinki (OAM of Finland) has updated the documents related to the ESEF-reporting on its website https://www.nasdaq.com/solutions/rules-regulations-helsinki - see bottom of the page under section Supporting documents.
xHTML Reporting to OAM
Postponement of ESEF by year: application of ESEF will be mandatory starting from the Annual Financial Reports for financial years beginning on or after 1 January 2021. For more information look at the announcement by the Ministry of Finance (in Finnish) of and FIN-FSA’s newsletter.
The 2020 ESEF XBRL Taxonomy files have been published on ESMA’s website on 7 December 2020. When reporting financial statements for the year 2020, the taxonomy files of 2019 can be used. ESMA has also published the updated ESEF Conformance Suite 2020 on 7 December 2020.
Useful information on XBRL can be found on XBRL Finland’s web-page, e.g. frequently asked questions (FAQ)(in Finnish only)
European Commission has published on November 10th, 2020 Commission Interpretative Communication on preparation, audit and publication of ESEF-reports.
A postponement by one year of the application of the requirement to prepare and disclose the Annual Financial Reports in ESEF-format, may become possible –An article on current ESEF related issues in FIN-FSA’s Market Newsletter 2/2020
You can find here the link to the recommendation of the Finnish Auditors’ Association on assurance of listed company’s ESEF financial statements (only in Finnish).
ESMA has published on June 17th, 2020 on its website an example of an annual financial report which is in line with ESEF-regulation. The report was prepared by the Global LEI Foundation in cooperation with ESMA and it aims to provide issuers with an example of an annual report in the ESEF format for their submissions to the national Officially Appointed Mechanisms. Additional publications (such as an Inline XBRL viewer) are available on GLEIF’s website in order to provide the visibility of XBRL-tags
Listed companies’ digital financial statements coming soon – An article on current ESEF related issues in FIN-FSA’s Market Newsletter 1/2020
The Eurofling Conformance suite seminar on the 28th of May 2020, widely dealt with the contents and the use of the ESEF conformance suite –package, with the aim to improve the quality of the software and ESEF-reports. You can see all slides and videos of the seminar here.
ESMA has published on 23rd of March 2020 the ESEF Conformance Suite to facilitate implementation of the ESEF Regulation. The ESEF Conformance Suite is a way to test and provide assurance on whether software tools are able to create and / or consume filings which are in line with all ESEF requirements.
The 2019 ESEF XBRL Taxonomy files have been published on ESMA’s website on Friday 20 December. You may find at the following links:
- The news item
- The taxonomy and accompanying documentation - including the downloadable zip folder
- The list of all taxonomy entry points
CEAOB (Committee of European Auditing Oversight Bodies) has published non-binding guidelines regarding auditor’s work on ESEF related issues.
RTE (Real-Time Economy)/ESEF (European Single Electronic Format) seminar 2019 - Espoo Otaniemi - 14.11.2019 presentations. Behind the link you can also find the websites to the software providers, who were presenting their solutions to ESEF-reporting during the day.
On the 11th of September 2019 ESMA has published the third video tutorial on ESEF. In the video ESMA answers the most common questions that stakeholders have asked about the ESEF regulation. You can find the link to the video is here.
Useful presentations on ESEF and XBRL – Eurofiling Conference Frankfurt June 2019, open the link here.
Aalto University School of Business, XBRL Finland and the Financial Supervisory Authority (FIN-FSA) conducted a survey in 2019 and 2020 on the current stage of XBRL implementation and planned deployment models of Finnish issuers that are impacted by the ESEF reporting requirements. Open link here for the results of the survey for 2020 and comparable data for 2019.
On 29 May 2019 The European Commission published Q&A for ESEF RTS. A link to Q&A can be found here.
ESEF Digital HUB, information on webinars and iXBRL tools (Software and Services)
Video Tutorial / ESEF 2020: Implementation support for preparers - ESMA has published a new video tutorial on ESEF for preparers
ESEF at ESMA web pages, information on ESEF and links.
In summer 2017, ESMA carried out a field text in which listed companies’ financial statements were converted to XBRL format. The field test results and the test financial statements marked up with XBRL can be found here.
Follow these pages – in the future, ESMA will provide more material in the form of webinars and other guidelines.