ESEF Reporting: Tips And Tricks From An XBRL Expert

The ESEF mandate is now live across the EU and the UK, and companies will be filing their 2021 Annual Financial Reports in Inline XBRL (iXBRL) soon. Here’s a short list of things to watch out for and avoid last-minute struggles in ESEF reporting.

Adhere To The Scope Of The Mandate

Companies preparing consolidated annual reports under the ESEF mandate need to tag their primary financial statements – including the balance sheet, income statement, cash flow statement, and statement of equity – using elements from the ESEF Taxonomy wherever appropriate. For concepts that do not have a right fit element in the reference or base taxonomy, the filers can create extensions or custom elements.

Every number in your financial statement needs to have an XBRL tag embedded against it. And mere tagging is not enough. A tagged concept should be supported with information such as the appropriate unit, scale, and period to which it pertains.

Filers also need to bear in mind that the ESEF mandate requires you to submit the entire consolidated annual report and not just the tagged portion.

Get Familiar With XBRL Tagging Concepts

The ESEF and XBRL formats are new for companies in the EU. So, it’s important to get a hang of XBRL tagging before starting the report creation process.

You need to get familiar with what tagging is, what parts of your annual report need to be tagged, and what can be done when you cannot find appropriate tags for your disclosures. The specifics of tagging requirements include extensions, anchoring, dimensions, labels, etc.

Apart from tagging, you also need to prepare the company taxonomy – which forms an integral part of the filing package. The company taxonomy is nothing but a mirror image of your annual report which lists all the ESEF Taxonomy elements and custom tags you might have used in your annual report.

The ESEF Reporting Manual helps you understand the requirements of the ESEF iXBRL Package. The manual can be accessed here.

Plan Your Filing Calendar Well In Advance

Since ESEF is a new format, you need to budget time for the auditing process as well as for designing your annual report. Time proves to be the biggest constraint when it comes to compliance. Compliance involves a huge data collation exercise from across the organization, and hence, budgeting time for the same and filing ESEF reports on time might be a challenge. There would be instances where auditors ask for some changes to be incorporated in the iXBRL document. You need additional time to make these changes.

Designing is another process that needs much time since the annual report is an important marketing document to be published on your company website. You need to factor in the auditing and designing as well as suggestions from the board into your time budgeting.

Watch Out For Validations At Three Levels

In order for your iXBRL package to pass through the regulator’s gateway, you need to consider the following validations while preparing your iXBRL.

  • Software Validations: The software you use to create the ESEF package must include the latest Validations per the ESEF Conformance Suite. This would enable you to clear most of the validations required to pass through the regulator’s portal.
  • Auditors’ Validations: Auditors would review the iXBRL document and check validations using their own tools, and this may trigger certain Errors or Warnings. It’s important to check whether these errors or warnings would block your filing.
  • Regulator’s Validations: Regulator’s validations may include Errors or Warnings. Errors will need to be rectified or fixed for your filings to go through the regulator’s gateway, while warnings may not be as critical to block your filings.

Some of the errors that may block your ESEF filings are duplicate tags, incorrect valuations, and incorrect folder structures. It is also vital to maintain arithmetic accuracy throughout the document to ensure that inconsistencies do not pop up during the submission.

Structure Your Zip Package Correctly

Your company’s iXBRL package needs to be structured in a particular way per ESMA Guidelines. The structure of the package is to be maintained to avoid schema-related or structure-related issues. The naming convention of the iXBRL package needs to be in accordance with the {base}- {date}_{suffix}.{extension} pattern. Your folder placements should also follow ESEF Reporting Manual requirements.

Please note: Some ESEF software solutions may prompt errors owing to attribute inclusion requirements. However, not complying with such attribute requirements in the XML document may cause the document to be rejected by the regulator’s gateway. Hence, you need to be cautious while dealing with customized validation tools, taking care not to hamper the quality of your document.

Do A Test Filing With Your Regulator

We highly recommend that issuers test their iXBRL .Zip package with a regulator’s test facility (if enabled) at least three days prior to the actual filing in order to avoid last-minute surprises. In 2020, many ESEF issuers took the early bird opportunity to do a dry run and get their 2020 iXBRL package tested with the authorities.

A test filing helps issuers understand the regulator’s filing procedure and specific requirements if any. The long and short of the matter is that an iXBRL filing is much more than mere tagging. Your software and support team can definitely help make your iXBRL filing easy. So, choose your ESEF software wisely.

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Get ESEF Reporting Right the First Time and File High-quality iXBRL Documents with your Regulator