The European Single Electronic Format – An Overview

In December 2018, the European Commission approved the draft Regulatory Technical Standards (RTS) for the European Single Electronic Format (ESEF) as a Delegated Regulation.

Although there is still some time for the European Council and the European Parliament to express any objections they have, this article highlights what the ESEF is, who it impacts, and when it is expected to come into effect, assuming its current form remains unchanged.

What is the European Single Electronic Format?

The ESEF refers to the electronic reporting format that should apply to issuers on EU regulated markets in respect of their annual financial reports.

Some key features of the Final Report for the RTS related to the ESEF specify that:

  • Annual financial reports should be prepared in XHTML format;
  • Annual financial reports that contain consolidated financial statements under IFRS should be labelled with XBRL tags. These tags should be embedded into the XHTML report using iXBRL;
  • Initially, detailed markups should only be required for IFRS consolidated primary financial statements, meaning that the notes to the financial statements can be block tagged; and
  • The core taxonomy that should be used is “an extension of the IFRS Taxonomy.”

The move towards XBRL reporting is perhaps unsurprising, given the many benefits that it can bring to the financial reporting landscape. What’s more, the use of XBRL should also help achieve the goal of making reporting easier for issuers, while also improving the accessibility, comparability, and analytical potential of annual financial reports.

When is the European Single Electronic Format coming into force?

The ESEF is expected to apply from 1 January 2020. Although the start of the ESEF is now just under a year away, it’s actually taken quite a few years to get to this point.

The origins of the ESEF began back in 2013 when the European Securities and Markets Authority (ESMA) was given the task of developing RTS in respect of a single electronic reporting format.

ESMA published a consultation paper in September 2015 as part of its development of the RTS and released the feedback in respect of the consultation in December 2016. Additionally, ESMA carried out field tests on 25 volunteer issuers in the summer of 2017. Further information related to the field tests can be found on ESMA’s website.

How can issuers get prepared?

The European Securities and Markets Authority has taken steps to try to ensure that affected issuers can prepare for the ESEF as painlessly as possible.

In December 2017, ESMA released the ESEF Reporting Manual. It was released with both issuers and software providers in mind, with the intention of promoting “a harmonised and consistent approach for the preparation of annual financial reports in the format specified in the RTS on ESEF.”

More recently, in November 2018, ESMA released a YouTube tutorial video – the first of a series of videos intended to help explain more about the ESEF and its requirements.

You can read the ESEF Reporting Manual here and watch the ESMA tutorial in full here.