All listed issuers in the EU are currently submitting PDF documents with the national regulator as part of regulatory submissions annually. This will change with the ESEF reporting coming into effect for Annual Financial Reports (AFR) beginning 1st January 2020.
The AFRs of most issuers are highly stylized – meaning PDF files with a lot of design, color themes, images, graphs, and pictures. There is a whole design team (either external or internal) that is involved in the creation of pretty-looking AFR using specialized design software.
Question: Is stylization of AFR required for ESEF reporting?
Well, the answer is that ESMA does not provide any guidelines on the design or style of the AFR that needs to be submitted as per ESEF requirements. Let’s take a look at some perspectives here to determine an ideal approach.
Across the world
Countries like UK and Ireland have adopted iXBRL since early 2011 and 2012 respectively. Most issuers in these countries submit their AFR in a non-stylized format. For printing purposes, issuers may choose to send their AFR to a design team. Even in the US where iXBRL is being filed by issuers on a voluntary basis, most of the filings are non-stylized. However, there are few issuers who submit stylized reports.
National Regulators
Most issuers in the EU have been submitting stylized documents with their national regulator. At this point in time, neither ESMA nor the national regulators of the EU countries have given any guidelines on how the iXBRL document should look like, therefore issuers are free to choose and decide how they want to submit the AFR. Since the objective of introducing iXBRL is to enable both machines and humans to go through reports in a quick and easy manner, the design aspects of the AFR may not be of much use from a regulator’s perspective, however, we still need to see if there are going to be any guidelines issued from any of the regulators in the EU.
Issuer
The compliance reporting team of an issuer prepares and presents stylized reports to the Board and investors for approval and printing purposes. With Inline XBRL, the compliance teams will find it useful when the XBRL tags can be embedded within a stylized report. In this way, they can review just one document for both ESEF reporting purposes and also for their management and stakeholder approval purposes as well. It may be dual review efforts if the compliance teams have to review a stylized PDF for printing purposes and a non-stylized report for regulatory submission perspective.
With Inline XBRL, issuers can have an interactive Inline XBRL Previewer link on the IR section of the website so that investors and market analysts tracking the issuer can see a smart, interactive document and access and analyze the data in the reports easily. For the stylized reports to be able to handle tagging using the ESEF taxonomy, it is important that the solution/software they choose for ESEF reporting should be able to handle both the design pieces and the XBRL tagging as well.
Ground Reality
While there is specialized software for designing an AFR, most design software does not come with the capability of handling iXBRL or the tagging aspects of ESEF (such as ESEF taxonomy, extensions, and validations). On the other hand, there are many XBRL and iXBRL software solutions in the market. Not all XBRL software can handle iXBRL and not all iXBRL software are able to handle design and stylization.
Our Recommendation
Considering the overall time and efforts compliance teams need to put in preparing and finalizing their AFR, it will be best if the iXBRL document is a stylized one. In this manner, the Board can still see the same pretty-looking document, and so do the investors. The big hurdle to solve- make sure that the solution you choose for ESEF reporting handles style and ESEF requirements in one solution.
