Close to 8 months from now, the European Single Electronic Format (ESEF) will commence. As briefed in our introductory blog, ‘What is the ESMA Mandate all about?’ the Inline XBRL (iXBRL) reporting standard will be applicable to all public companies in the EU. Therefore, this is the best time to start preparing for this mandate.
The European Securities and Markets Authority (ESMA) has pushed for the digitization of data and financial information in an electronic format under the EU’s Transparency Directive. The practice of a European Single Electronic Format (ESEF) mandates that from January 1st, 2020, all public companies in the European Union use a single electronic reporting format while submitting their financial statements to ESMA.
In this blog, we walk you through the steps you need to start in preparation for the ESMA mandate
Start planning early
“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”
Abraham Lincoln said it all; the efforts you put into planning your ESEF iXBRL reporting is how it will turn up.
The ESEF iXBRL reporting needs careful planning. This comes directly under the purview of the CFO’s office involving the Compliance teams. It is important that your compliance teams start planning as early as 2019 as it involves critical activities that have an impact on your company’s ability to file in time and share results with investors and other stakeholders.
Evaluate your business requirements
Does your business require conversion services or are you looking for a self-filing solution and make the process completely in-house?
If you intend to file by yourself, a number of fit-for-purpose staff may be required. The resources will need to have a background in finance and also have a working knowledge of the IFRS standards. This will help them understand the ESEF taxonomy in greater depth. (A Taxonomy is a dictionary of financial concepts against which each disclosure in the annual report needs to be mapped).
Plan for a budget
‘We didn’t actually overspend our budget. The allocation simply fell short of our expenditure.’– Keith Davis
Failing to plan is planning to fail. Budget planning is key to financial planning, and of course, compliance.
Based on your budgetary requirements, there are software solutions available that you can license on an annual basis and take the process completely in-house. On the other hand, there are also options to outsource the conversion of your Annual Report to iXBRL to service providers.
The budget varies on the strategy you choose. If you want to take the entire process in-house you will need to plan for higher budgets, on the other hand, there are several outsourcing options available that come with varied price ranges.
A concrete evaluation of the strategy by mid-2019 would be ideal
Involve your teams and plan your calendar
Our experience in countries where a new mandate commences shows that companies prefer to outsource iXBRL conversions- at least for the first year-round. If you consider an outsourcing option, it’s best to set aside 1-2 weeks’ time to review your iXBRL tagging once you have it ready from your provider. If you wish to take the process in-house, it is even more important that you get started early and learn XBRL, which might need at least about a week of training and close to 1-2 months’ time for XBRL preparation, review, etc. Budget at least 20% time for review and approval of all stakeholders.
How can IRIS CARBON® help you?
IRIS CARBON® is a global leader in compliance reporting. The platform comes with a robust set of intuitive features designed to seamlessly file in compliance with the ESMA Mandate. IRIS CARBON® participated and completed the ESMA field tests and is ready for European markets.