In 2013, the European Union’s Transparency Directive defined rules to bring transparency to the financial information submitted by issuers across the 27-member bloc. European Securities and Markets Authority (ESMA) was mandated to develop Regulatory Technical Standards (RTS) for coming up with European Single Electronic Format (ESEF). Per ESEF, annual financial reports (AFRs) need to follow the XHTML format. Consolidated annual reports even need to have XBRL tags embedded in the XHTML, making the document both human-readable and machine-readable. The benefit of using this format is that any standard web browser can open the required AFRs.
ESMA came with a mission:
- To promote transparency in Europe’s regulated markets
- To increase investor protection
- To make financial reports comparable regardless of language, structure, or format
- To enable investors, public authorities, and issuers to carry out automated analyses of financial information
Mandatory ESEF compliance was supposed to kick in from 2021. But due to the adverse effects of the pandemic, compliance with ESEF became mandatory from January 1, 2022.
We have come up with questions that must be answered when complying with the ESEF iXBRL Mandate –
Who Should Companies File Their ESEF Reports With?
Any company with securities listed on financial markets or exchanges in the EU will be required to conform to the ESEF format. They need to file their financial information in the accepted XHTML format.
What Is An OAM?
In Europe, an Officially Appointed Mechanism (OAM) is a national database for regulated financial information. OAM is a centralized system for data storage. All data published by European issuers are made available on an OAM, which is specific to each EU member country.
The EU member states act in a decentralized manner. Hence, OAMs was entrusted with collecting, storing, standardizing, and disseminating corporate data.
Why Is An OAM Needed?
OAMs comply with the minimum standards of data security, the certainty of information sources (their authorization and authentication), easy access by end-users, and alignment with the filing procedure. They allow a complete and correct assessment of information by the public. OAMs provide accessibility, comparability, and analysis of data.
Here’s what OAMs help with:
- Receiving annual financial reports in the format to be provided by the issuer (XHTML/iXBRL)
- Storing annual financial reports following minimum quality standards
- Making annual financial reports downloadable for end-users in the format provided by the issuer
How Do OAMs Accept ESEF Information?
Per the ESEF iXBRL mandate, issuers are required to tag their primary financial statements in accordance with the ESEF taxonomy.
Issuers can publish their Annual Financial Reports (AFRs) and enclose the ZIP-packaged archive files in the OAMs. This ZIP-file attachment should be named per the ESMA Reporting Manual Guideline convention.
i.e {base}-{date}-{lang}.zip
End-users of ESEF information can simply download the ZIP file and open it with a compression tool. Where:
- The .xHTML file can be accessed with a browser to view the report in HTML, and
- The iXBRL files can be viewed with an iXBRL viewer, enabling the tagged data in the iXBRL file to be displayed and reviewed.
Remember that AFRs are produced in multiple languages, and each language version should have its own zip file.
What Are The OAMs For Each EU Member State?
Here is a list that compiles and provides links to the relevant Regulatory Authority for each member state, as well as their Officially Appointed Mechanisms (OAMs). This can be used by companies to submit their reports.
Several OAMs allow ESEF issuers to test their filings before the actual submission. This helps the issuers ensure their filings are acceptable to OAMs.
Find the Access to regulated information (Member State-Wise) here.
Learn more about ESEF iXBRL Compliance.
