All You Need To Know About The ESEF Mandate

As we have mentioned before, the ESEF mandate requires companies to prepare their annual financial reports (AFRs) in the xHTML format. Moreover, companies preparing consolidated financial statements need to have XBRL tags embedded in their xHTML annual reports.

Moving on, what does the creation of an instance document entail? There are three main activities involved in instance document creation. They are tagging – or mapping the disclosures in an annual report to the appropriate ESEF taxonomy concept; creation of extensions or custom tags to represent disclosures for which the right fit element cannot be found in the ESEF taxonomy; and, anchoring, or the act of ‘connecting’ extensions to ESEF taxonomy concepts with the nearest accounting meaning.

The XBRL tags embedded in an xHTML annual report lend the document its machine readability. The act of tagging, or mapping the line items in an annual report to the right ESEF taxonomy concepts requires a good understanding of the ESEF taxonomy. It would also help to know how an XBRL or machine-readable tag looks. Here’s an example:

‘ifrs-full_Revenue’ is the machine-readable tag for revenue. The ‘ifrs’ portion indicates that this is an IFRS tag. ‘ifrs-full_CurrentAssets’ is the IFRS tag for current assets. A machine-readable tag has three attributes – data type, balance type, period type.

The Data Type of a tag explains whether a disclosure represents a monetary value, shares, or percentage. For instance, the data type for the tag ‘ifrs-full_Revenue’ is ‘monetaryItemtype’.

The Balance Type explains if a monetary concept is a ‘debit’ or ‘credit’. For revenue, the balance type would be ‘credit’.

The Period Type explains if the value of disclosures is measured as of a particular date or over a period of time. Balance sheet disclosures have an ‘instant’ period type since they are reported on a particular data. Income statement disclosures, since they are measured over a 12-month period, will have the ‘duration’ period type.

Scope of ESEF Tagging: Phase 1 of the ESEF Mandate requires companies to tag all the numbers in the primary financial statements. Phase 2 of the mandate requires all the numbers in the AFR to be tagged, along with the notes to accounts – which will need to be block tagged.

While tagging their annual reports, companies will find that there are no appropriate ESEF taxonomy elements for certain disclosures. Companies may create extension elements or customized XBRL tags to represent such disclosures. However, it is good practice to create extension elements sparingly, since inappropriate use of extension elements might affect the quality of information and make the analysis and comparison of iXBRL reports difficult.

In the example above, the XYZ Company is reporting two types of revenues. The first is ‘Crude Oil and Electricity Revenue’ – which we understand to be the primary source of revenue for the company. The second is ‘other revenue’, which combines all the other types of revenue that are not disclosed.

The ESEF Taxonomy contains the element ‘ifrs-full-Revenue’, which combines revenue from primary sources and other sources. If the XYZ Company had only one revenue disclosure – Crude Oil and Electricity Revenue – it could have been tagged with the ‘ifrs-full-Revenue’ element. But since the company is also disclosing other sources of revenue under Other Revenue, it would not be appropriate to accord the ‘ifrs-full-Revenue’ element to Crude Oil and Electricity Revenue – which represents only one part of the company’s revenue.

Furthermore, XYZ Company cannot use the element ‘ifrs- full_RevenueFromSaleOfCrudeOil’ to tag the Crude Oil and Electricity Revenue disclosure, because the element does not mention revenue from the sale of electricity. Hence, there’s a need to create an extension element in this case.

An extension element needs to have a prefix that represents the company name, followed by the element. So, the extension element, in this case, would be ‘xyz_ CrudeOilAndElectricityRevenue’.

Now we come to disclosures for which extension elements needn’t be created.

In this second example, both the revenue disclosures of ABC Company have a corresponding, appropriate ESEF Taxonomy element. Crude Oil Revenue can be tagged with the element ‘ifrs-full_RevenueFromSaleOfCrudeOil’ and Other Revenue with ‘ifrs-full_OtherRevenue’ from the ESEF Taxonomy.

We have seen that companies preparing ESEF annual reports need to create extension elements to represent disclosures that do not have corresponding ESEF Taxonomy elements to tag with. Per ESEF tagging guidelines, such extension elements also need to be ‘anchored’ to ESEF Taxonomy elements with the closest accounting meaning possible.

At times, the closest concept might be a broader ESEF Taxonomy element, while at other times it could be a narrower element. We explain the various scenarios with examples.

One-on-one Anchoring: One-on-one anchoring involves the anchoring of a single extension element to a single ESEF Taxonomy element.

In the example above, the extension element ‘xyz_CrudeOilAndElectricityRevenue’ needs to be anchored to the broader ESEF Taxonomy element ‘ifrs-full_Revenue’.

Disaggregations: Disaggregations are also a form of one-on-one anchoring.

In this example, the extensions for both Petroleum Revenue and Petrochemicals Revenue will be anchored to the broader ESEF Taxonomy concept ‘ifrs-full_ RevenueFromSaleOfPetroleumAndPetrochemicalProducts’.

For the line item ‘Property, plant, equipment, and investment property’, the extension element combines two ESEF Taxonomy concepts – one for ‘property, plant, and equipment’ (ifrs-full_PropertyPlantAndEquipment) and the other for ‘investment property’ (ifrs-full_InvestmentProperty). This extension element that has been created needs to be anchored to the two ESEF Taxonomy concepts we have mentioned.