The ESEF Reporting Manual is a document produced by the European Securities and Market Authority (ESMA) to help issuers and software developers to create ESEF documents that are compliant with the ESEF Regulatory Technical Standard (RTS).
This week, ESMA released an updated version of the Reporting Manual to replace the previous version released in July 2020. I have summarised some of the new additions and changes that relate to issuers/preparers for the upcoming year.
ESMA has added a new sub-section giving information regarding annual reports that are produced in two (or more) different languages. If there is a requirement to submit more than one copy of the annual report to a regulator then they should be submitted as separate zip folders. All extensions elements created in one file should be consistent across all reports, regardless if there is a change in language. This includes element properties (duration, balances, signage), not just element names.
ESEF reports not subject to tagging obligations:
While ESEF requires all main market listed companies to prepare their annual reports in xHTML format, only those who prepare consolidated financial statements using International Financial Reporting Standards (IFRS), need to be tagged. In this new update, ESMA has given more information relating to ESEF reports not subject to tagging, which was previously lacking.
This requirement means investment entities that fall under the consolidation exception (IFRS 10) do not need to tag their financial statements. They will however need to submit the ESEF filing in xHTML format.
For filers submitting their non-tagged xHTML documents, ESMA has introduced a new naming convention to follow (assuming there are no specific OAM requirements for naming conventions).
Markup of ‘Mandatory’ Text Tags:
One of the more debated topics within previous ESEF guidance involved the interpretation of rules for the tagging of ‘mandatory’ tags (found in ANNEX II in the RTS). This interpretation stems from the fact that a ‘Validation Warning’ is given when a ‘mandatory’ tag is missing.
If the report did not contain the information needed, there were 2 options used by preparers across Europe.
- Preparers did not tag these ‘mandatory’ tags when the information was not present in the report and ignored the validation warning. This is acceptable, as validation warnings are not the same as validation errors, and the ESEF filing is still valid.
- Some preparers manually inputted a filler tag such as “non-applicable” within a hidden section to bypass the validation rule. In ARKK’s opinion, this method does not constitute comprehensive reporting and increases the risk of human error.
ESMA has now, thankfully, cleared this up by removing all forms of interpretation and stating that if the information is not present it should not be tagged. ESMA has clearly stated in its ESEF reporting manual that
“The RTS on ESEF requires that issuers shall mark up all disclosures that correspond to the elements in Table 1 and Table 2 of Annex II if those disclosures are present in the issuer’s financial statement. If those disclosures are not present in the issuer’s financial statement, they should not be tagged.”
In conclusion, it has been a welcome update to the Reporting Manual which has cleared up many of the questions left from submissions year to date. We will keep you up to date with all updates in our ESEF and UKSEF Knowledge Centre on LinkedIn.