ESEF Reporting – What’s in it for you?
The European Single Electronic Format (ESEF) was introduced as part of a Transparency Directive amendment. To make information about EU listed entities more accessible, this mandate called for all financial reports to be prepared in a single electronic format called iXBRL – a technology enabling both machine and human readability in one document.
From the regulator’s perspective, this is the most efficient way to ensure standardization in regulatory reporting across the board. To comply with the rules, you’ve probably already conceded to adopting ESEF; no questions asked. Did you know that there may be more benefits to you than meets the eye?
ESEF can give you an edge like no other. It helps:
– Encourage investors to fund more due to increased visibility on the workings of your company
– Allows you to benchmark your company’s performance against other market disruptors
– Presents data in a more structured configuration paving the way for enhanced quality.
– Passively contributes to less market volatility and susceptibility to financial crises through improved transparency.
Why is ESEF important?
Company accounts have always been characterized by textual content and statistical data. However, there was no standardization in how these data were presented. In iXBRL, information can be read and accessed by both regulators and investors. At the same time, automated systems can run formulas and processes for intelligence gathering. To a trained eye, this can uncover indispensable business intelligence for transformative growth.
ESEF thus stimulates investment and technological innovation – digitizing the world of financial reporting.
What can iXBRL do for you?
From 2020, all annual financial reports have been submitted in the new ESEF format that integrates iXBRL. This essentially means that the reports have been tagged with ESEF taxonomy labels(extension of IFRS taxonomy) to make the disclosures both machine and human-readable. Apart from the benefits to regulators and investors, this language can do a lot for you:
– The foremost advantage of creating financial reports in iXBRL is the lucidity it brings to data.
– Secondly, it eliminated the need for manual entry of data. Eventually, only one report will need to be submitted – the iXBRL one. No more does one have to prepare and upload both HTML and only machine-readable XBRL.
– The transition to iXBRL is likely to be seamless. Development in technology has already led to software that allows:
integration of data from disparate sources or,
create different documents from centralised data.
– iXBRL will be integral in increasing operational efficiency and reducing compliance costs even as it delivers an output where data is of the highest quality and structure.
– This transition is still in the initial phase to give users time to build expertise and develop familiarity with usage of the taxonomy and associated tags.
Preparing an ESEF iXBRL report
Understanding the nature and extent of tagging is imperative in the successful preparation of an iXBRL report. It is also prudent to assess internal capabilities and consider outsourcing requirements if need be. Outsourcing can help with access to specialist software and can prove to be cost-effective in the long run.
Any service provider or software you pick should be:
– Efficient
– Easy to implement
– Have a track record of error-free output generation
– Give you the steering wheel to control the report creation process
New mandates come with trepidation as you strive to be compliant and not suffer from cost implications. Starting ahead ensures that your adoption of new approaches is ahead of the curve and that your output is structured.
Explore DataTracks Rainbow, a tried and tested software that has helped over 100 companies with their compliance needs.
For a demo or to discuss with an ESEF expert, contact enquiry@datatracks.eu