Reviewing XBRL Tag Selection in ESEF Reporting
The European Securities and Market Authority (ESMA) mandated a new financial reporting format, ESEF, for all issuers on the EU regulated market from 1 January 2020. ESMA devised a set of rules for the issuers to make their Annual Financial Statements (AFS) compliant with the ESEF reporting format. One of its rules includes XBRL tags in the ESEF report to make the consolidated financial data readily available to the public.
But the question is, what are XBRL tags?
The XBRL tags are created in the report to uniquely define the contents, compliance, and performance of ESEF reporting, using categorization schemes called taxonomies. XBRL tags help replace human-readable reports with a more accurate and effective machine-readable format, allowing easy comparability and shareability.
However, the selection of XBRL tags can be tricky as they will be rendered useless if they do not closely match the financial meaning of the targeted information. Therefore, it is essential to select and assign accurate XBRL tags for reporting the company’s financial data.
How to Accurately Select XBRL Tags?
XBRL tagging adds value to every activity in ESEF reporting, from preparing and validating financial reports to analyzing and exchanging financial details. While preparing financial statements, issuers must select tags based on the disclosed information’s closest financial meaning. When no standard element exists in the taxonomy that accurately represents the financial meaning, the issuer can create and anchor an extension to a tag that reflects the closest meaning.
Various factors need to be examined while considering the closest financial meaning, which includes:-
- Accounting reference
- Documentation or definition
- Standard label
- Calculation relationships
- Additional attributes like balance type, period type, etc.
With several attributes to analyze, selecting the wrong XBRL tag is a common error. Therefore, issuers must thoroughly review XBRL tags to meet the ESEF reporting regulations successfully.
Why Do You Need to Review the XBRL Tag Selection?
Creating error-free, compliant reports is the aim of financial reporting. Merely scanning through the standard tags in the taxonomy isn’t enough for a proper and practical selection of XBRL tags. It is also necessary to consider the accounting standards and the various factors of choosing the closest standard tags from the taxonomy.
Apart from assigning accurate tags to ESEF reporting, reviewing XBRL tags has the following benefits:-
- Reduces Time and Cost: As the data quality increases and the preparation time decreases, the cost of creating ESEF complaint reports reduces.
- Requires Minimal Human Effort: An effective XBRL tagging review helps companies lower their efforts of creating and submitting accurate consolidated reports with the regulator.
- Reduces Extensions: Creating and anchoring several extensions to the standard tags can make the report complicated to understand. However, an effective review can help minimize the extensions, properly representing the financial information.
XBRL tagging is known for being error-prone. This is why reviewing XBRL tags before submitting the reports with the regulator is the best practice for businesses to avoid any errors or anomalies in the process.
Make Your Way Towards Error-Free ESEF Reporting
Reviewing XBRL tags, creating reports, and submitting them with ESMA can be a tiring process, diverting your attention and efforts from your core activities. But not when you have a trusted ESEF partner like DataTracks! By keeping their software up-to-date, DataTracks provides reliable and flexible ESEF solutions. With the experience of 16+ years and 200,000+ successful reports, DataTracks can help you streamline your financial reporting process.