All You Need to Know About ESEF Block Tagging
ESEF text block tagging is a notable inclusion in the filing requirements for the upcoming 2022 reporting cycle in the EU. In addition to phase 1, where the issuers were only required to tag the primary financial statements, phase 2 of the ESMA ESEF mandate also requires tagging all notes to financial statements using block tagging. Here’s everything you need to know about ESEF block tagging for the phase 2 mandate.
What is Block Tagging?
ESMA requires all issuers to tag each note to financial statements with XBRL tags as per the ESEF taxonomy. The Regulatory Technical Standards (RTS) on ESEF include several elements defined with the “TextBlockItemType.” These elements tag larger pieces of information included in the IFRS Consolidated Financial Statements. Each note to the financial statements is treated as a single fact and tagged with an element from the taxonomy.
For disclosures corresponding to more than one element with different granularity, issuers should multi-tag the information to the extent that corresponds with the information’s underlying accounting meaning.
When Did ESEF Phase 2 Block Tagging Become Mandatory?
The mandate is effective for financial years starting on or after 1st January, 2022. Mandating text block tagging for year 2 of ESEF reporting helped facilitate the smooth implementation of financial reporting in a machine-readable format and allowed issuers time to adapt to the iXBRL technology in phases.
Which Companies are Affected?
ESEF text block tagging is only required for EU-listed companies that prepare IFRS consolidated financial statements. Companies subject to ESEF requirements must use the mandatory elements listed in Annex II, Table 2 of the ESEF RTS to tag their consolidated IFRS financial statements.
Tagging Elements of Annex II
The RTS on ESEF requires issuers to mark up disclosures corresponding to the elements in Table 1 and Table 2 of Annex II only when these disclosures are present in their financial statements. However, the disclosures need not be tagged if they are not in the issuer’s financial statements. Furthermore, issuers are not required to include those disclosures in their financial statements or add an indication that they are not present for the sole purpose of tagging such information using elements listed in Annexe II’s tables.
The Granularity of Block Tagging
In certain cases, block tagging of notes includes tables with different rows and columns. ESMA recommends applying the corresponding elements to the lowest level of granularity, i.e., the entire table, instead of applying them to selected rows and columns. If the disclosure includes certain numerical values in tabular format, then you are not required to tag such data with ‘Monetary Concept’ XBRL tags.
Example: The granularity to block tag a table in the notes to the consolidated IFRS financial statements of a company
Other Considerations for Block Tagging
There is no obligation to create an extension element to block tag notes and accounting policies that do not correspond to any element in Annex II. However, ESMA encourages creating an extension element to block tags, as this information can be useful to the end users. Furthermore, there is no obligation to anchor such extensions in the notes to the financial statements. For further details, you can access the latest version of the ESMA ESEF Reporting Manual here.
What are the Next Steps?
Given the new requirement of ESEF block tagging, marking up the financial statements with text block tags will demand detailed knowledge and experience. If you do not have sufficient internal resources to prepare an error-free ESEF report compliant with the phase 2 requirement of text block tagging, you can outsource your ESEF requirements to a trusted service provider.
DataTracks has an experience of more than 17 years of preparing error-free, compliance reports globally. While block tagging may be new to your company, it is not for DataTracks , as our experts have prior experience in the field for other regulators. So without further delay, get in touch with a DataTracks professional @ +31202253702 or email firstname.lastname@example.org to know more about how we can assist you in complying with the new ESEF block tagging requirement.