ESEF – The Future of Financial Reporting
ESMA mandated The European Single Electronic Format (ESEF) to help investors and stakeholders better analyse and compare annual financial reports. Through greater transparency, ESEF has become the future of financial reporting and has brought it into the digital age. Thus, one can rightly say that the future of financial reporting in Europe is comparable, digital, and broad in scope.
Annemie Rombouts, Chair of the Corporate Reporting Standing Committee of the European Securities and Markets Authority (ESMA), said, “ESEF is a huge and significant first step, but many steps are still to be made. In five to ten years, we will reach the overall objective of comparability not only of financial information but also key non-financial information of all listed companies, be they large or small.”
In the first phase of the ESEF mandate that lasted for two years, ESMA limited the tagging of primary financial statements to the basic information concerning the company. However, from 2022 in the second phase of the ESEF mandate, tagging will be extended to all notes, applying block note tagging.
European companies have several benefits of reporting financial data in the ESEF format. Let’s find out the benefits of ESEF that make it the future of financial reporting.
Why is ESEF the Future of Financial Reporting?
The move towards a single electronic reporting format, ESEF, is intended to improve the accessibility of financial information for investors, analysts, and other stakeholders. It also enhances the analysis and evaluation of data by eliminating time-consuming, manual data entries. Traditionally, these reports were presented in printed formats, created in PDFs. But now, regulatory authorities, like ESMA, have increasingly required companies to report their financial statements in electronic formats like iXBRL (Inline eXtensible Business Reporting Language), which enables both human and machine-readability in a single document.
The Need of iXBRL for Businesses
One of the objectives of making iXBRL data more transparent and accessible for investors and regulators is to encourage investments and technological innovations, and as a result, bring financial reporting into the digital age. The benefits of mandating financial reports in iXBRL format include:-
- Improved quality of data
- More structured data
- Reduced filing preparation cost
Companies moving towards iXBRL can achieve greater simplicity. How? The companies will need to create only one report- the iXBRL report. This is especially beneficial for small companies, who rely primarily on manual data input, as it will remove the need to update both XBRL and HTML documents.
The Road Ahead
Due to all these benefits that ESEF provides businesses, it is the future of financial reporting in Europe. Although companies may consider it another compliance burden, ESEF can help you bring your information chain in order. Preparing iXBRL files in compliance with ESEF requirements requires specialist software. Therefore, outsourcing your ESEF requirements to a specialist vendor can be more cost-effective than creating an in-house solution.
The digital future of financial reporting requires machine-readable reports. With a trusted partner like DataTracks, you can ensure getting error-free and accurate reports. DataTracks constantly updates its software and offers best-in-class XBRL certified solutions to comply with regulations laid down by ESMA.
So if you want to streamline your ESEF filing, contact a DataTracks expert @+31202253702 or email at email@example.com TODAY!