Good to Know: Key learnings from ESEF Voluntary filings
The European Commission published a Delegated Regulation on the use of the European Single Electronic Format (ESEF) whereby companies will be required to file and publish machine-readable accounts in iXBRL beginning on or after 1 January 2021. The regulation also states stipulates mandatory tagging of basic financial information with the taxonomy of the iXBRL language.
Learnings from ESEF Voluntary Filings
According to the ESMA – European Securities and Markets Authority, the objectives of this provision are to make reporting easier for issuers and to facilitate accessibility, analysis and comparability of annual financial reports.
Now, the time has come for first-time filers of European Single Electronic Format (ESEF) reports to keep track of what experts and voluntary filers have learnt from early trials of this submission. With activity increase over the next year, it will be helpful to know some early perspectives from voluntary filings. Here’s what we’ve learned thus far:
Input File Type Compatibility: Voluntary filers found this to be an important aspect of being prepared for ESEF. Be it a simple excel, or a document with your own company’s unique schema, you will need to ensure that your data can be converted into iXBRL without too much change to your existing processes.
Identify Errors, Avoid Penalties: Voluntary filing helped in identifying potential errors that can lead to hefty penalties. A file with even minor errors won’t get through a regulator’s digital gateway. Invest in software that has automated checks to flag key problems and in-built validation mechanisms. Reserve time in the process for addressing frequency and likelihood of errors and keep an open mind. Practice runs before the final stretch leading up to mandatory submission, the better. These tests and trials help you identify errors and obstacles in your system early.
Process is Key for Deadlines: The importance of a plan that clearly outlines and delegates a plan cannot be underestimated. You may want to consider outsourcing tagging, a service provider to manage the process or get your auditors involved at a crucial phase leading to hand-off events. Despite all of this, voluntary filing taught us that last minute changes were a given. You need someone or a software which will help you implement these final edits even in the last stretch for a successful submission before the deadline.
iXBRL is Not Easy: Rendering a machine- readable document needs care. Apart from the right tagging, there is also the question of a good-looking layout. Also, converting the file to iXBRL isn’t always straightforward and comes with a host of well-known source of problems. The best solution is to hire experts who have years of experience in this field.
Let’s Play Tag: iXBRL comes with nomenclature of its own called a taxonomy. Each reportable fact of your data will be tagged to a taxonomy element. Since all the attributes of a tag are important, choosing the right tag from the taxonomy is crucial and often involves judgement. But that’s not the end of the story. Dates, scale and currency attributes can all go wrong, if not tagged right.
At DataTracks, our experts who have worked with iXBRL conversion recognize a familiar theme: smoothening the rough edges of your ESEF compliance process is your key to efficient, cost-effective filing success. Use these learnings to investigate your shortcomings – whether they relate to software, process or understanding and get ready to file your first ESEF this year! Our ESEF experts would love to hear about your learning experiences. If you are currently in the planning phase and would like to know more, please reach out to us at firstname.lastname@example.org