Guidelines for ESEF Compliance from the Latest Reporting Manual

ESEF Mandate Rollout Status

In 2020, due to the Covid-19 pandemic, the rollout of the ESEF mandate was postponed by one year in most EU countries. Many issuers, however, used the opportunity provided by the postponement to comply with ESEF on a voluntary basis with their 2020 annual reports. Due to the voluntary nature of the filings and since companies were preparing iXBRL reports for the first time, the early ESEF reports had a number of common errors, various analyses showed.

There were also countries where ESEF submissions were mandatory right from the first year (2020 AFRs); namely, Germany, Austria, Czech Republic, and Slovenia.

The Background

The latest ESEF Reporting Manual, which was released on July 12, 2021, focuses on the common issues that the early ESEF filers encountered while preparing iXBRL reports and lists guidelines on how those issues can be overcome. Moreover, there are additional scenarios that filers of Consolidated Financial Statements as well as Standalone Financial Statements need to consider in their ESEF filings. In most jurisdictions, companies preparing Consolidated Financial Statements are required to tag their documents in iXBRL format, while companies preparing Standalone Financial Statements need not tag in iXBRL.

The latest reporting manual will familiarize ESEF filers with various filing scenarios, including cases not covered in earlier manuals. The broad classification of new guidelines is listed below.

Guidance 1.1.2: Multilingual reports

An issuer preparing annual reports in two or more different EU languages needs to submit separate zip files for each of those reports. Further, the definition of extension concepts should be consistent across those annual reports, irrespective of their language.

Example: The following example shows that the extension element (Element Name) for the concept ‘Reserves And Retained Earnings’ is identical in both English and French reports.

Guidance 4.1.6:  References pointing to resources outside the XHTML document

The XHTML document needs to be a standalone, self-explanatory document with complete information. Issuers shall not include references pointing to external resources in the XHTML document. Since ESEF is a digital format and is not expected to impact the “human-readable layer” of a report, this guidance should not be seen as limiting the inclusion of links to external websites, other documents, or other sections of the annual financial report.

Guidance 4.1.3:  Inclusion of content other than xHTML in a standalone xHTML file

Software firms need to ensure that the ESEF file does not include any content other than xHTML as it could constitute a threat and cause security issues. They should further ensure that no malicious or executable code is included in images, the image header, style properties, and external link references.

To avoid potential threats that may be brought by specific formats used for saving images included in the XHTML document, issuers shall only use PNG, GIF, SVG, or JPG/JPEG graphic files. ESMA, therefore, recommends that software firms include appropriate validations in their tools.

Preparers shall not embed images carrying financial information in an XHTML stand-alone document. Images can only be used for content such as branding information, graphical layout, photographs, etc.

Guidance 4.1.4: Use of the Cascading Style Sheet (CSS) language to style XHTML stand-alone documents

The Cascading Style Sheet (CSS) language may be used to format the xHTML documents. However, the transformations need to be used appropriately. For instance, CSS cannot be used to hide information by making it not visible, for instance, by applying the ‘display: none’ style on the contents of the report.

 Moreover, it is recommended that the same style is used throughout the report, rather than be defined separately for each part of the report.

Example:  The following example shows how the attribute ‘display: none’ is used for the values reported in the iXBRL document. If the values are assigned the ‘display: none’ attribute, then the XBRL tags will be hidden from view in the xHTML document.

Guidance 4.1.1 : Reporting of standalone xHTML files

Issuers who are not subject to tagging obligations are only required to prepare their reports in the xHTML format. ESMA recommends that such files are submitted as standalone XHTML files (with either .xhtml or .html file extension) and not packaged as zip files.

Guidance 4.1.2 : Tagging obligations for Investment Entities exempted from consolidation

The Regulatory Technical Standards on ESEF require preparers of annual financial reports that include IFRS consolidated financial statements to mark up those consolidated statements.

Investment entities that fall under the consolidation exception as per IFRS 10 Consolidated Financial Statements are only required to prepare individual IFRS financial statements and therefore are not required to tag their IFRS financial statements.

Guidance 4.1.5: Naming convention for standalone xHTML documents

A standalone xHTML document should follow predefined naming conventions to help end users process the document better. ESMA encourages issuers to adopt a naming convention that follows the {base}-{date}-{lang}.xhtml or {base}-{date}-{lang}.html format.

1. The {base} component of the filename should indicate the Legal Entity Identifier of the issuer or the issuer’s name (or its abbreviation); it should be no more than 20 characters long.
2. The {date} component of the filename should indicate the end date of the reporting period of reference. The {date} component should follow the YYYY-MM-DD format.
3. The {lang} component of the filename should indicate the language of the report contained within the report package. The {lang} component should follow ISO 639-1 format (two-letter code).

The following example shows how the naming convention should be used for standalone HTML/xHTML documents:

1. The Legal Entity Identifier should have 12 digit characters: ‘528810H35S83NE4UQ833’
2. The date should be in the YYYY-MM-DD format — ‘2021-06-03’
3. Language should be in the ISO 639-1 format (two-letter code). For instance, an English report will be represented by the letters ‘en’ format.

Here’s how the naming appears:

“528810H35S83NE4UQ833-2021-06-30-en.html”

   OR

“528810H35S83NE4UQ833-2021-06-30-en.xhtml”

If the local Officially Appointed Mechanisms and/or National Competent Authorities indicate a different naming convention at the national level, then the issuers must comply with that requirement.

The ESEF reporting manual is a vital document for both the software vendors facilitating ESEF compliance as well as the issuers themselves.