ESMA Updates Reporting Manual and Annex II of RTS on ESEF for Harmonized Annual Financial Reports

July 16, 2024by Neha Gajbhiye0

The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, has recently published an updated Reporting Manual on the European Single Electronic Format (ESEF). This update is part of ESMA’s ongoing efforts to support a harmonized approach for the preparation of annual financial reports. In addition to the updated Reporting Manual, ESMA has also revised Annex II of the Regulatory Technical Standards (RTS) on ESEF. These changes are intended to enhance the consistency and clarity of financial reporting across the European Union, ensuring that all stakeholders have access to accurate and comparable financial data. 

 

Key Technical Improvements and Guidance

Tagging Recommendations

The updated Manual provides specific recommendations for tagging empty fields or dash symbols within financial reports. This guidance is crucial for ensuring that these elements are accurately represented in the ESEF format. By standardizing how these empty or placeholder fields are tagged, ESMA aims to eliminate discrepancies that could arise from different interpretations of how to handle such fields. This uniform approach facilitates better data analysis and comparison across different financial reports. 

Extension Elements

One of the significant enhancements in the updated Manual is the clarification regarding extension elements. These are elements that extend the core taxonomy to capture company-specific information not covered by the standard ESEF taxonomy. The Manual now specifies that these extension elements should be anchored to core elements that share the same data type. This anchoring ensures that the extension elements are consistently and accurately integrated into the financial reports, preserving the integrity and comparability of the data. 

Readability Improvements

The updated Manual also provides guidance on practices to enhance the readability of information extracted from a block tag. Block tags are used to mark up larger sections of text, such as notes or disclosures, in financial reports. The new guidance focuses on ensuring that the information extracted from these tags is easily readable and understandable for users. This improvement is aimed at making financial data more accessible, which is particularly beneficial for analysts and other stakeholders who rely on clear and comprehensible financial information. 

Unique Identifiers

To further enhance data traceability and avoid confusion, ESMA encourages the use of unique identifiers for each tagged fact. These unique identifiers help in precisely locating and referencing specific pieces of data within financial reports. By promoting the use of unique identifiers, ESMA aims to improve the accuracy and reliability of financial data, making it easier to track and verify information across different reports and systems. 

 

Next Steps for Issuers and Software Firms

Issuers are expected to follow the updated guidance when preparing their 2024 annual financial reports. This adherence is critical for ensuring compliance with the latest ESEF requirements and for promoting a harmonized approach to financial reporting. Software firms developing tools for the preparation of these reports in Inline XBRL must also incorporate the updated guidelines. By doing so, they will facilitate seamless reporting and ensure that their software solutions are fully compliant with the latest standards. 

Correction to Annex II

On 28 May 2024, ESMA published a Final Report proposing amendments to the RTS on ESEF. These amendments are designed to align the ESEF taxonomy with the latest updates to the International Financial Reporting Standards (IFRS) Taxonomy and new XBRL specifications. However, an error was identified in the Table “Mandatory elements of the core taxonomy to be marked up for financial years beginning on or after 1 January 2025” within Annex II. Specifically, three taxonomy elements/labels related to dividends were omitted from the list of mandatory mark-ups. 

ESMA has promptly corrected this error by updating the table, replacing the document on its website, and submitting the corrected version to the European Commission. This swift correction ensures that the taxonomy remains accurate and comprehensive, covering all necessary elements for financial reporting. 

 

Highlights

The 2024 amendment to the ESEF reporting manual also takes into consideration the planned 2024 modifications to the RTS on ESEF. These modifications reflect the most recent revisions to the XBRL specifications and the International Financial Reporting Standards (IFRS) Taxonomy, which were published in 2023 and 2024. By incorporating these updates, the ESEF reporting manual remains current and relevant, providing clear and up-to-date guidance for financial reporting. 

Summary table of updates

The updated Reporting Manual includes detailed guidance on various topics to assist issuers and software developers in complying with the latest ESEF requirements. Here is a summary of the key updates: 

Guidance number/section  The topic of the Question 
Guidance 1.1.2  AFRs presented in more than one language 
Guidance 1.2.2  Use of elements available in the IFRS Taxonomy that were not yet included in the ESEF taxonomy 
Guidance 1.4.1  Anchoring of extension elements to elements in the ESEF taxonomy that are wider in scope or meaning 
Guidance 2.1.2  Formatting of the period element in the context of the Inline XBRL document 
Guidance 2.2.5  Tagging of dashes or empty fields 
Guidance 2.2.6  Readability of the information extracted from a block tag 
Guidance 2.2.7  Technical construction of a block tag 
Guidance 2.2.8  Use of the ID attribute on facts [July 2024 [new]] 
Guidance 2.6.1  Including Inline XBRL document in taxonomy packages 
Guidance 2.6.2  Including multi-html Inline XBRL documents and multiple Inline XBRL document sets in report packages 
Guidance 2.6.3  Naming convention for report packages 
Guidance 3.1.3  Taxonomy packages 
Guidance 3.2.2  Data types to be used on extension concepts 
Guidance 3.3.1  Relationships to anchor extension taxonomy elements to elements in the ESEF taxonomy 
Guidance 3.4.1  Documenting arithmetical relationships in the calculation linkbase 
Guidance 3.4.8  Documenting arithmetical relationships in the presentation linkbase [July 2024 [Split from G 3.4.1]] 
Guidance 4.1.5  Naming convention for stand-alone XHTML documents 

 

Conclusion

The updates to the ESMA Reporting Manual and Annex II of the RTS on ESEF represent significant steps towards ensuring a harmonized and consistent approach to financial reporting within the EU. These changes will enhance the accuracy, readability, and comparability of financial data, benefiting both issuers and users of financial reports.  

As issuers and software firms prepare for the 2024 reporting season, adherence to these guidelines will be crucial for compliance and effective financial communication. The continued evolution of the ESEF standards reflects ESMA’s commitment to maintaining high-quality financial reporting across the European Union. 

 

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