European single electronic format for financial statements mandated
The European Commission has issued rules requiring all listed companies across EU member states who report under IFRS to submit their annual financial statements digitally as iXBRL documents from 1 January 2020
6 Jun 2019
The new European single electronic format (ESEF) is designed to improve accessibility and to make information more user-friendly. The move will also facilitate the availability of key financial information in all EU official languages.
Any company – regardless of whether their registered office is in the EU or in a third country – with securities (including both shares and bonds) listed on an EU regulated market will have to prepare their annual financial reports in XHTML.
EU issuers who prepare International Financial Reporting Standard (IFRS) consolidated financial statements will have to tag them using the elements of the IFRS taxonomy that correspond to the EU-endorsed IFRS. The tagging of individual financial statements by EU issuers is allowed provided that they use iXBRL and that a taxonomy is provided by the member state in which they are incorporated.
Third-country issuers will tag in accordance with the elements that correspond to the IFRS as issued by the International Accounting Standards Board (IASB). Third-country issuers using third-country GAAPs are not yet allowed to tag their financial statements.
The Commission expects the move to involve limited costs for companies in the initial stage, which will vary depending on whether a company decides to prepare its annual financial reports using iXBRL internally or by outsourcing it to a third party.
For in-house developments, the implementation costs per company are estimated at €8,200 (£7,264) for the first filing, and around €2,400 for each subsequent filing, compared to around €13,000 and €4,600 for outsourced solutions. The Commission says initial costs will decrease significantly after the first year of filing.
To support the new rules, the European Securities and Markets Authority (ESMA) has prepared an ESEF reporting manual and taxonomy files to help companies in their preparation. The new provisions will be updated annually to reflect possible updates to the IFRS taxonomy.