ESEF Taxonomy and Tagging Concepts

ESEF Taxonomy and Tagging Concepts

With ESMA’s move to eliminate PDF reporting and move to a digital format, companies are now required to submit their Annual Financial Report (AFR) to the national regulators through a European Single Electronic Format (ESEF) named Inline XBRL (iXBRL).

Most companies have questions about what is required from a mandate perspective and what it takes to get an iXBRL document prepared. In this article, we cover some basic terms that companies should familiarize themselves with respect to converting the Annual Financial Reports into a digital format.

Taxonomy

Taxonomy is a dictionary of concepts (called tags or elements)– both financial and non-financial. When any regulator introduces digital reporting, companies are required to know what the regulator is expecting them to report in an electronic format. For this purpose, each regulator publishes a ‘taxonomy’ that defines the scope of what is needed from an electronic reporting perspective.

For country GAAP reporting there is usually a country GAAP taxonomy published. Eg: In Denmark, companies follow Danish GAAP for preparing financial reports. Therefore when Denmark introduced digital reporting in XBRL, they created a ‘taxonomy’ on the basis of accounting rules in the country and published a Danish GAAP taxonomy. Companies are required to follow the Danish GAAP taxonomy to prepare the digital reports for regulatory submissions.

ESEF Taxonomy

For companies following IFRS, ESMA has introduced the ESEF taxonomy, the taxonomy that companies in the EU are required to use for preparing their iXBRL. The ESEF taxonomy has 4 620 concepts and it is primarily based on the IFRS taxonomy.  ESMA has introduced specific concepts that it requires companies to report and also have used Legal Entity Identifier (LEI) concepts. Following is the overall count of disclosures in the ESEF taxonomy and its classification.

Details         Count of disclosures
IFRS 4 604
ESMA specific concepts      14
LEI concepts        2
Total 4 620

Below is a screenshot of how the ESEF taxonomy looks. It has a classification of the information under several headers.

ESEF taxonomy with 23 EU  language

Image-1a-23-EU-lang-labels

An expanded view of the ESEF taxonomy

Image-1b.-Multi-language-label

Eg: Elements or tags related to the general information of the company are available in the link 110000-General information about the financial statements. Similarly, the concepts which ESMA expects companies to report in the Statement of Stockholder’s Equity are available in the link 610000-Statement of changes in equity.

XBRL Tag (also known as Tag or Element)

The ESEF taxonomy has concepts that are referred to as XBRL Tag, Element, or sometimes just tag. Below is an example of an element from the ESEF Taxonomy for the concept of Revenue.

Element Name Ifrs-full-Revenue
Data Type monetaryItemtype
Balance Type Credit
Period Type Duration

An element has the following attributes:

  1. Data Type which explains what is being reported (eg: monetary, shares, percentage),
  2. Balance Type which denotes whether a monetary concept is a ‘debit’ or ‘credit’
  3. Period Type denotes whether a concept is measured on a particular date or over a period of time. Concepts that are measured on a specific date will have a period either:
  • Instant- eg: Balance sheet concepts will have period type instant since a Balance sheet is reported on a particular date
  • Duration- eg: Income statement concepts will have period type duration since items reported on an Income statement are measured over a 12-month period.

Companies are supposed to use the ESEF taxonomy and apply the tags available in the ESEF taxonomy to their AFR.

Company Taxonomy

During the process of tagging elements to the ESEF taxonomy and creating extensions where needed, companies are required to create a company taxonomy – which is a tree structure to mirror the presentation of disclosures in the company’s own AFR. The company taxonomy will include elements from the ESEF taxonomy that are applicable for its own disclosures, as well as extension elements that it has created where the company disclosure does not have an appropriate element in the ESEF taxonomy. ESMA encourages using the ESEF taxonomy elements to the best extent possible. ESEF taxonomy

View of Company Taxonomy

.taxonomy

Extensions

What happens if there is no specific element in the ESEF taxonomy? Can the Company skip ‘mapping’ or ‘tagging’ such disclosures? The answer is NO.

 Companies are required to create custom elements called ‘extensions’ so that they can then map such unique disclosures present in the AFR. Companies are required to follow the LC3 naming convention while creating their custom elements. For more information on this naming convention please refer to point 2.1.4 -Concept names SHOULD adhere to the LC3 convention in the technical guidelines document provided by XBRL.org.

In the below example, for the disclosure ‘OPERATING INCOME FROM ORDINARY ACTIVITIES,’ there is no appropriate element available in the ESEF taxonomy therefore the company will have to create a custom element as follows.

.extension

Element Name* demo_OperatingIncomeFromOrdinaryActivities
Data Type monetaryItemtype
Balance Type Credit
Period Type Duration

*In the above example, the prefix ‘demo’ has been used for illustrative purposes. The prefix is the ticker or trading symbol or code of the company which is used for trading its stocks on the stock exchange.

Eg: AXA Insurance Company trades its stocks with the trading symbol CS. So if AXA Insurance company were creating this extension element, it would report it as cs- OperatingIncomeFromOrdinaryActivities.

Anchoring

Anchoring is a new concept introduced first time in the EU. What does anchoring mean and why is it introduced?

As companies create extensions, different companies could create extensions in different ways. Extensions come with a disadvantage in that the data is no more comparable.

Below is an example:

anchoring

Two companies that seek to extend a disclosure on Mining Revenues could do it completely differently. Company A could report ‘Mining Revenue’ as ‘a_MiningRevenue’, however Company B could report ‘Revenue from mining’ as ‘b_RevenueFromMining’. Though both mean the same thing, the way companies create their extensions could be completely different, and thereby lose the ability to standardize and compare the information.

To remove this limitation, the concept of anchoring has been introduced where all company-specific extensions need to be ‘anchored’ to an element from the ESEF taxonomy. Such ‘anchoring’ can be with either a broader or narrower element in the ESEF taxonomy, with the closest accounting meaning to the extension element that the company is reporting.

In this case company, A will have to anchor ‘a_MiningRevenue’ to the ESEF taxonomy element ‘IFRS-full-Revenues’ and so will company B will have to anchor the extension ‘b_LicenseRevenue’ to the element ‘IFRS-full-Revenues’.

There are clear rules provided by ESMA in what cases companies should anchor their extensions and in which cases they should not. Companies are advised to follow such rules for the purpose of anchoring their custom elements.

Contact Us For a Free Consultation on ESMA ESEF iXBRL Tagging