What is ESEF and XBRL reporting?
XBRL for (eXtended Business Reporting Language) requires that annual reports are now produced in a web-native XHTML language rather than a downloadable format such as PDF.
- Beginning with the first fiscal year ending after January 1, 2020 : Only by dentifying” the primary financial statements
- Beginning with the first fiscal year ending after January 1, 2020 by directly “identifying” the notes to the financial statements
Companies filing annual reports under IFRS are also required to produce consolidated financial statements in XBRL format. The ESEF taxonomy, published on the ESMA – European Securities and Markets Authority website, structures and identifies information and also allows information to be tagged via an electronic channel.
The aim of this measure is to enhance the transparency of EU capital markets and to make it possible to easily compare financial statements with those of other companies.
The formalities to be implemented
The first step is to define a mapping between the annual report and the taxonomy. This first step is essential as it will have a direct impact on the acceptance of the file prepared by ESMA, especially for situations where extensions to the ESEF taxonomy are required.
The mapping must be elaborated in a dedicated tool before a test phase of the file generated on the server by ESMA. Finally, each company must provide its own taxonomy using the ESEF taxonomy dictionary and definitions.
Each company must define its presentation according to its practices and the options of the taxonomy. Then, the calculations that accompany the elements of the presentation. Finally, other specific elements and their wording that are not included in the taxonomy.
The rules for adding ancillary elements (anchoring) are also very strict. These must be linked to the element of the taxonomy that has the closest accounting definition.
The definite advantages of using XBRL
Unlike a consultation file, the XBRL language allows you to quickly identify a precise data and to exploit its information without retyping it.
Thus, financial analysts save a considerable amount of time and no longer have to re-enter certain data to complete it. Financial communication is made easier thanks to the format, which is more easily readable and thus usable.
XBRL also simplifies the analysis of reports, particularly those in Excel format. This facilitates the consolidation of data from different sources.
Finally, XBRL stands out for its independence from both hardware and software platforms. Its uniqueness allows it to use other existing standards and to create data that can be reused in any country and in any language provided that the necessary taxonomy is available.
Gain efficiency with Talentia XBRL
The Talentia XBRL offer is integrated into the Consolidation offer. It allows you to manage your consolidation in a collaborative way in multi-standards and to respond to regulatory changes. You can produce your reports in XBRL format simply and in compliance with the new ESEF regulatory standards, with the updated taxonomy. Compared to manual reprocessing processes on spreadsheets and report writing, Talentia XBRL allows you to reduce your risk of errors.
It also guarantees the reliability of your reports, improved security, and the control and synchronization of your analyses and data. In addition, it streamlines your consolidation and frees up time for your business performance.
Talentia expert opinion
Rolf Niedermann, Principal Solution Architect, Talentia Software
What are the complexities of implementing XBRL in reporting?
There are two challenges fulfilling the iXBRL requirements for the ESEF reporting.
For one there is the requirement to produce a syntactically and technically correct output. This includes the necessary flexibility to adapt to the announced changes by ESMA in the taxonomy structure of the iXBRL output.
The other challenge is the requirement to ensure 100% synchrony between all output formats, like print, board presentations, iXBRL/XHTML, press releases, etc.
What are the advantages and disadvantages of XBRL?
For companies with publicly traded shares: There is no question of advantage or disadvantage but only the legal requirement to produce the ESEF reporting output.
For non-traded companies : if electronical external reporting is required this could be done in electronical form using XBRL/XHTML.
Why will XBRL profoundly transform financial reporting?
XBRL allows to specify taxonomies for electronical reporting systems, which in turn enables the comparing of those synchronized reporting structures across enterprises and over time. This furthers the transparency and the efficiency of the external reporting processes.