From January 2020, listed companies across the EU reporting under IFRS will have to use a specific digital format to present their financial statements to comply with the EU Transparency Directive
Following extensive consultation, the European Securities and Markets Authority (ESMA) has confirmed that from 1 January 2020, all companies in the EU reporting under International Financial Reporting Standards (IFRS) will have to produce their annual financial reports in the Extensible Hyper Text Markup Language (XHTML) format.
Inline XBRL will be the de facto standard language to meet the EU requirement for issuers to report their annual financial reports in a single electronic format as it enables both machine and human readability in one document.
This follows the reporting requirements set out under the EU Transparency Directive.
The new structured format for electronic reporting will apply to companies producing consolidated financial statements prepared under IFRS.
ESMA is preparing a draft Regulatory Technical Standard (RTS), which will set out the technical requirements and timeframe for implementation.
There will be a two-year implementation phase to allow companies to roll out the system across their entire reporting process.
The original stakeholder feedback to the consultation gave no clear preference on the part of preparers in terms of the choice of digital mark-up language, although there was wide support for the use of the IFRS Taxonomy as a basis for the approach.
During the two-year implementation phase the XHTML tagging would only be required for the primary financial statements, however voluntary tagging of the notes of the consolidated IFRS financial statements will be allowed.
From 2022, after the transition phase, the full consolidated financial statements drawn up in accordance with IFRS will have to be marked-up using XBRL.
A document in XHTML format can be viewed within standard browsers without the need of specialised tools, and can be prepared and displayed by the issuer as intended.
Third country issuers with securities listed on a regulated market in the EU drawing up their financial statements according to GAAPs deemed equivalent to IFRS should not be required to prepare their AFR in structured electronic format.
The 245-page ESMA feedback statement on the consultation on the Regulatory Technical Standard on the European Single Electronic Format (ESEF) is here