The European Commission has put forward new rules to support the digitalisation of corporate reporting with the aim of achieving greater transparency of the annual information disclosed by companies listed in the EU capital markets. The new European Single Electronic Format (ESEF) aims to make companies' financial records more readable and accessible.
Under the new rules, for financial years beginning on or after 1 January 2020 all companies with securities listed on EU markets will need to finalise their annual financial reports using up-to-date digitalised business reporting systems (XHTML and iXBRL). The move will also facilitate the availability of key financial information in all EU official languages.
In support of these new rules, the European Securities and Markets Authority (ESMA) has provided an ESEF Reporting Manual and ESEF taxonomy files to help companies in their preparation. The new provisions will be updated on a yearly basis to reflect possible updates to the International Financial Reporting Standards (IFRS) taxonomy.
The regulation represents another step for the digitalisation of corporate reporting, in line with the political commitment of the 'Ministerial Declaration on eGovernment', signed in Tallinn on 6 October 2017.
The ESEF format provides for one single file that will include the financial statements, the management report and the responsibility statements of the persons responsible within the company. This file is human-readable, just like a normal webpage.
As an additional obligation, companies who prepare consolidated financial statements, on the basis of International Financial Reporting Standards (IFRS), will also have to tag certain information in their financial statements in accordance with the IFRS Taxonomy using inline specifications (iXBRL). Ultimately, this will make the financial statements machine-readable.