Common Challenges With ESEF Reporting

ESMA mandated the listed companies in the EU to prepare their annual financial reports in the new European Single Electronic Format (ESEF). Before 2020, companies were required to prepare their financial statements in PDF format. However, after 2020, as per the ESEF mandate, listed companies in the EU must prepare their annual financial reports in an XHTML format. The company must also include the relevant iXBRL elements according to the ESEF taxonomy if the annual financial report contains the consolidated financial statements prepared in IFRS.

ESEF reporting is an opportunity for entities to move to the digital world away from PDFs. However, it is not free of challenges. Let’s delve deeper and understand some common challenges with ESEF reporting that companies in the EU face.

What are the Challenges in ESEF Reporting?

  • Clarity on Input Document Source Format

In ESEF reporting, the companies that have to file their reports with ESMA use their current PDFs and convert them into an electronic, XHTML format. However, it requires certain technical factors. The current PDFs must follow the set standards. For example, all the fonts included in the PDF must be embedded while creating the PDF. If the fonts are not embedded properly, the contents within the PDF will be converted into an unrecognised format in the XHTML file. Furthermore, if too many images are included in the PDF, it may impact the file size for iXBRL submission.

A document design team prepares the input document with rich text and image format. However, the tagging of the document with iXBRL tags is done by iXBRL professionals. This results in a gap where the design team is unaware of the compatibility issues faced during the conversion process. This gap is a serious hurdle in the seamless conversion of PDFs to iXBRL format.

  • Validation Issues

ESEF does not recommend any specific validation platform. All the countries in Europe have different regulators, and the companies within each country have to report their financial statements to their respective regulators. Every regulator has its own validation. Furthermore, the validation tools for preparers, auditors, and regulators differ. There are several differences between these three validation tools. The unavailability of a single authenticated validation tool is a serious challenge in ESEF reporting.

The auditor’s validation system rules are derived from the ESEF regulations. However, some rules are additionally included that provide additional errors or warnings. Some of these errors and warnings are inlined with the ESMA requirements; however, others are not.

  • Difficulty in Using Review Systems

A review system should facilitate the review of all the components of an iXBRL document. Moreover, it should show all aspects of the tagged information to the user. It should also allow users to collaborate to make changes in an iXBRL document and maintain an audit trail of such changes. Unavailability or difficulty in using these review systems can be a challenge in ESEF reporting.

What is the Solution? Outsource to a Trusted Vendor Like DataTracks!

DataTracks has a pool of iXBRL experts who provide end-to-end ESEF reporting services catering to all your filing needs. With DataTracks as your ESEF vendor, you can rest assured about error-free filing with ESMA. Here’s how DataTracks can help you in the filing process:-

  • DataTracks’ certified XBRL software accepts rich design PDF and generates the XHTML whilst retaining the same design layout.
  • You can export the output in various formats, including HTML, XHTML, PDF, Excel and Word. And not just that, the specific requirements of each EU member state are also covered while preparing the reports.
  • The cloud-based software can help you prepare compliant reports by directly uploading or copy-pasting data. Moreover, you can highlight or insert comments in the document wherever discussion is required.
  • Last-minute changes with DataTracks are no big deal! Not only are these changes handled quickly, but the changes made to the content are also automatically updated in all the output files.

With 17+ years of experience and the expertise of trained iXBRL professionals, DataTracks is now a well-known name within the ESEF reporting framework. So what are you waiting for? Get in touch with an iXBRL expert @+31202253702 or email to simplify your compliance process.



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