Electronic Reporting
Digitalisation enhances the accessibility, analysis, and comparability of annual financial reports. The European Single Electronic Format (ESEF) is the mandated electronic reporting format for issuers with securities traded on EU regulated markets. ESMA develops the regulatory technical standards (RTS) that define this format, along with providing guidance and implementing tools.
ESEF background
In 2013 the Transparency Directive (Directive 2004/109/EC), which sets rules on harmonisation of transparency requirements of issuers, was amended to include, amongst others, a requirement for issuers to prepare their annual financial reports (AFRs) in a single electronic reporting format (ESEF).
ESMA was assigned the responsibility to develop regulatory technical standards (RTS) to specify this electronic reporting format. The detailed provisions of the ESEF and the underlying policy choices are contained in the original Final Report on the RTS on ESEF. ESMA yearly amends the RTS on ESEF (latest Final Report on the RTS on ESEF) to incorporate the necessary updates on the ESEF taxonomy and developments in the market.
ESEF scope and requirements
The ESEF requirements apply to all issuers that are required by the Transparency Directive to issue public AFRs. The ESEF requires that:
- All AFRs are prepared in XHTML (eXtensible HyperText Markup Language), which is human readable and can be opened with standard web browsers;
- Where AFRs contain IFRS consolidated financial statements, these are marked-up with the labels or tags contained in the ESEF taxonomy using Inline XBRL (eXtensible Business Reporting Language), which make the labelled disclosures structured and machine-readable;
- The XBRL ‘tags’ are embedded in the XHTML document using the Inline XBRL technology, which allows the benefits of XBRL tagged data to be combined with the human readable presentation of AFRs;
- Primary financial statements (statement of financial position, statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows ) are marked up in detail; while the Notes to the financial statements are, as of 1 January 2022, marked up by applying mark-ups to larger pieces of information (block tagging) such as explanatory notes and accounting policies. A block tag may include text, numeric values, tables and other data. ESMA has recently concluded a Consultation Paper on ESEF for sustainability reporting and amendments to the European Electronic Access Point (EEAP), proposing revisions to the marking-up rules for the Notes to IFRS consolidated financial statements. The review of the responses to the Consultation is currently ongoing.
ESEF taxonomy
A taxonomy provides the hierarchical structure used to classify financial information and is essential for structured electronic reporting using XBRL. The taxonomy used for ESEF is an extension of the IFRS Accounting Taxonomy. The human-readable labels of the core ESEF taxonomy, listing and defining the specific elements that issuers can use to identify (‘tag’ or ‘mark up’) the information disclosed within IFRS consolidated financial statements, are included in Annex VI of the RTS on ESEF.
The IFRS Foundation updates the IFRS Taxonomy on a yearly basis to reflect the issuance of new or amended IFRSs, the analysis of disclosures commonly reported in practice, or improvements to the general content or technology of the IFRS Taxonomy. Accordingly, ESMA publishes on a yearly basis a Final Report amending the RTS on ESEF to incorporate the necessary amendments on the ESEF taxonomy to be aligned with the IFRS Taxonomy.
ESEF Reporting Manual
The content of the ESEF reporting manual is aimed at issuers who are required to prepare annual financial reports in ESEF format and software firms developing software used for the preparation of annual financial reports in Inline XBRL.
Since 2019, ESMA annually updates the ESEF reporting manual to provide guidance on common issues that might be encountered when creating ESEF documents and explains how to address and resolve them.
The purpose of the document is to promote a harmonised and consistent approach for the preparation of annual financial reports in the format specified in the RTS on ESEF.
ESEF XBRL Taxonomy files
The schema of the core ESEF taxonomy is included in Annex VI of the RTS on ESEF which contains the human-readable labels to mark-up the information disclosed within the IFRS consolidated financial statements.
The ESEF XBRL taxonomy files are a set of electronic files providing a structured representation of the elements that substantively constitute the core taxonomy. These XBRL taxonomy files, compliant with all relevant technical and legal requirements, are published on ESMA’s website in the form of a taxonomy package prepared in accordance with the XBRL Taxonomy Packages 1.0 specification to provide guidance to issuers in creating their own entity-specific taxonomy. The package includes labels in all EU languages.
ESMA annually updates the XBRL taxonomy files to reflect the requirements contained in the last update of the RTS on ESEF as well as the update on the ESEF reporting manual.
ESEF Conformance suite
The ESEF Conformance Suite is aimed primarily at a technical audience (i.e. XBRL software developers) as 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. In particular, the Conformance Suite permits to determine if a software is able to detect and flag infringements to the ESEF requirements contained in a filing.
The Conformance Suite builds on the rules and guidance set out by the ESEF Regulation and the ESEF Reporting Manual. It consists of 214 packages grouped into 71 tests, packaged in a zip file. It is accompanied by an Excel file which describes the rules and guidelines and the test cases, together with the expected error codes in case of incompliance. For each identified rule and guideline there is at least one valid and one invalid test case.
ESEF Educational material
To help a common understanding of the ESEF framework, ESMA has produced a series of video tutorials summarising the key requirements of the ESEF regulation and explaining basic features for its implementation:
- First video tutorial: An introduction to the RTS on ESEF
Follow tutorial 1 with the script.
- Second video tutorial: Implementation support for preparers: how to prepare an Inline XBRL report
Follow tutorial 2 with the script.
- Third video tutorial: Further implementation support for preparers and FAQs on ESEF
Follow tutorial 3 with the script.
ESMA and the enforcement of the RTS on ESEF
Supervisory convergence
ESMA’s activities on supervisory convergence of enforcement in the ESEF space are mainly carried out through the ESEF Project Team (ESEF PT), a forum of approximately 23 enforcers from the various EEA countries. The ESEF PT coordinates the supervision related to the application of the RTS on ESEF.
Regular publications
Establishing European Common Enforcement Priorities (ECEP) is one of the important ways of fostering supervisory convergence across the EEA. ESMA has been publishing annual ECEP since 2012; these priorities are essential to prevent misstatements and to enhance the quality and consistency of corporate reporting across the EEA. Starting in 2024, ESMA has introduced ECEP for the enforcement of the RTS on ESEF:
Annual European Common Enforcement Priorities
Each year, ESMA also publishes an annual report detailing the activities related to the supervision and enforcement of corporate reporting carried out for the past calendar year by the national enforcers in the EEA, and by ESMA. The previous editions of the annual report incorporate general enforcement statistics in relation to examinations performed to check compliance with the requirements of the RTS on ESEF. In 2025, the annual report will also provide key messages arising from examinations of how issuers have complied with the requirements and recommendations set out in the 2024 ECEP statement.
Annual Report on corporate reporting enforcement and regulatory activities
ESEF on the horizon: digitalising sustainability reporting
While financial reporting under ESEF is mandatory, digitalising sustainability reporting is currently under development. According to the Corporate Sustainability Reporting Directive (CSRD), EU companies are required to disclose sustainability information in a digitalised and comparable manner, making it easier for stakeholders to assess corporate sustainability performance alongside financial data. Nevertheless, until rules on the marking up of sustainability reporting are adopted by way of a Delegated Regulation, undertakings shall not be required to markup their sustainability reporting.
ESMA has recently concluded a Consultation Paper on ESEF for sustainability reporting and amendments to the European Electronic Access Point (EEAP). The Consultation Paper outlines ESMA's proposals for digitalising sustainability reporting within the ESEF framework, including the incorporation of European Sustainability Reporting Standards (ESRS) and disclosures required under Article 8 of the EU Taxonomy Regulation. It also addresses revisions to the marking-up rules for the Notes to IFRS consolidated financial statements and amendments to the EEAP framework.
ESMA plans to consider the feedback received and expects to publish a final report and submit the draft technical standards to the European Commission for endorsement later in 2025.