ESEF – European Single Electronic Format for listed companies starting with financial statements for 2021
It will be possible to compare and utilise financial statement data of different companies better when financial statements are reported in a single electronic format (ESEF). Retrieving and analysing data will be facilitated. Reporting in an electronic, structured format will also enable new technology, such as artificial intelligence, to be used more effectively in analysing data.
What is ESEF and to whom does it apply?
European listed companies (issuers of shares and bonds operating in regulated markets) have had to report their entire annual financial reports in a single electronic format (ESEF) starting with financial statements for 2021. The annual financial reports are prepared in XHTML format, and IFRS consolidated financial statement data included in the XHTML document are marked up with XBRL tags. XBRL tagging is done using iXBRL technology (InlineXBRL).
The ESEF XBRL requirement applies only to IFRS consolidated financial statements, and it does not apply to parent companies’ separate financial statements or management reports. The ESEF XHTML and XBRL requirements do not apply to financial statement releases or half-yearly reports. Reporting of companies listed in alternative marketplaces is also outside the new reporting requirements.
Behind the new reporting requirements are the amendments made in 2013 to the Transparency Directive concerning the harmonisation of listed companies’ transparency requirements. The amendments to the Directive included the requirement for listed companies to prepare annual financial reports in a single electronic format (ESEF). As a consequence of the amendments to the Directive, the European Securities and Markets Authority (ESMA) was tasked with developing a draft Regulatory Technical Standards (RTS), which further specify the electronic reporting format. On 29 May 2019, the European Commission published the RTS as a delegated regulation (ESEF RTS) on the ESEF approved in the EU and it is directly binding on listed companies. The regulation entered into force on 18 June 2019. A link to the annually updated delegated regulation in all official languages of the EU can be found here.
Structured electronic reporting with XBRL requires the use of a taxonomy. The taxonomy acts as a reporting account dictionary. ESMA’s ESEF taxonomy, which is based on the IFRS Foundation’s IFRS taxonomy, is used in the reporting of financial statements. The ESEF taxonomy includes ESMA’s own extensions to the taxonomy, e.g. for the identification of companies.
In addition to the ESEF taxonomy, companies can use and create their own extensions to the taxonomy if they cannot find in the ESEF taxonomy an accounting meaning that describes the content of a line sufficiently well. Extensions, however, must be anchored to the closest accounting meaning of the ESEF taxonomy. In practice, the new accounting meaning is linked to the existing line of the taxonomy that is closest to this accounting meaning. The use of extensions reduces, however, the comparability of XBRL format data between different companies.
Detailed tagging with XBRL is applied to primary financial statements
The consolidated primary financial statements , i.e. consolidated statement of profit and loss and comprehensive income, statement of financial position, statement of cash flows and statement of changes in equity are marked up with XBRL tags specified by the taxonomy at the same level of detail with which the primary financial statements according to IFRS are prepared.
Notes as block tags
Notes to consolidated financial statements are covered by a reduced requirement, such that notes to the financial statements are marked up with XBRL as block tags, in which case one note as a whole is one XBRL tag, and there is no need to itemise the contents of a note with separate XBRL tags. More details might be added to the reported information later, after experiences gained in use. The ESEF taxonomy includes, however, the opportunity for more detailed XBRL tagging.
The assurance on ESEF is arranged differently and with different time schedules in the legislation of different EU countries.
The Securities Markets Act was amended (21.12.2023/1260) as of 21 December 2023 to include a requirement for issuers to acquire an audit or other type of assurance work on ESEF financial statements. Issuer’s auditor shall audit the financial statements prepared in accordance with the Commission’s technical regulatory standard or perform other type of assurance work and the auditor shall state in its statement the extent of the work performed. The statement of the auditor is appended to the financial statements. Similarly to statutory auditor’s report, chapter 7, section 24 of the Accounting Act shall be applied to the digitalization of the statement of the auditor. The change made to chapter 7, section 8, subsection 4 of the Securities Markets Act applies to the financial statements for the periods beginning on or after 1 January 2024.
The assurance on ESEF financial statements for 2023 is still voluntary. If the issuer’s auditor has audited the ESEF financial statements or has performed other type of assurance work, statement of the auditor shall be appended to the financial statements. If the issuer’s auditor has not audited the financial statements prepared or performed other type of assurance work, the issuer shall state this in the financial statements.
Listed companies submit their official annual financial reports in ESEF format as a stock exchange release attachment file to the national central storage facility for regulated information.
In Finland, the Helsinki Stock Exchange (Nasdaq Helsinki) acts as the maintainer of the central storage facility (Officially Appointed Mechanism, OAM) required by the Transparency Directive, to which listed companies submit regulated information.
Comparability of financial statement information requires detailed reporting using an XBRL taxonomy. Numerical data of financial statements can be compared or otherwise utilised across corporate and language boundaries when the numerical data has the same “name tag” in different companies and different countries, translated into each company’s own language. XBRL format information is easily transferable to different systems.
ESEF reporting permits the addition of a company’s own extensions to the taxonomy if the company cannot find in the ESEF taxonomy an XBRL tag corresponding in content to the accounting meaning of an item presented in the financial statements. A company’s possible own extensions to the taxonomy may, however, reduce the comparability of data between different companies.
ESMA has established a working group to promote the implementation of ESEF. The purpose of the working group is to prepare the necessary guidance to listed companies (ESEF Reporting Manual) and software suppliers (ESEF Conformance Suite). The aim is to apply the equalisation of the regulatory standard in the same way in different countries. Finland is participating in this ESMA work.
On 28 May 2024, ESMA has published a Final Report containing the proposed amendments to the RTS on ESEF. The Final Report has been formally submitted to the European Commission for initiating the due approval process. According to the draft ESEF RTS, issuers are expected to use either the 2022 ESEF taxonomy or the 2024 ESEF taxonomy introduced by this draft RTS for annual financial reports including financial statements beginning on or after 1 January 2024.
ESMA’s ESEF website: Reporting Manual, taxonomy files, Conformance Suite
Commission Delegated Regulation (EU) 2018/815 (ESEF RTS)
Commission Interpretative Communication on preparation, audit and publication of ESEF-reports.
FIN-FSA’s Market Newsletter 2/2022: Statutory ESEF reporting began
FIN-FSA's Market newsletter 1/2021: Legislative proposal on the publication of the assurance report on ESEF financial statements
FIN-FSA’s Market Newsletter 1/2020: Listed companies’ digital financial statements coming soon
XBRL International has published a blog series on the first year ESEF filings and the most common validation errors in them. XBRL has also published a repository which puts together into one place the ESEF-reports for companies from different countries. In the About-page you can find more information about the use of the repository.
Nasdaq Helsinki’s (Finnish OAM) documents related to the ESEF-reporting: https://www.nasdaq.com/solutions/rules-regulations-helsinki - see bottom of the page under section Supporting documents - xHTML Reporting to OAM.