To kick off our September blog series on the Reporting Manual updates, we’re taking a closer look at three key issuer guidance given for ‘block tagging’.
- The European Securities and Market Authority (ESMA) have released a new update for their ESEF Reporting Manual, which finally establishes the highly sought-after guidance for ‘block tagging’. For annual reports with reporting periods starting on 1 January 2022, the ESEF requirements call for issuers to block tag their policies and notes with XBRL mark-ups, alongside their primary financial statements.
Marking up notes and accounting policies
ESMA has defined a block tag as “A single fact that contains the content of an entire or a part of a section of a report. A block tag may include text, numeric values, tables, and other data”. When we consider a block, it could contain information that is relevant to more than one tag within the taxonomy.
ESMA has stated that if a disclosure can represent more than one tagging element of different granularities, then preparers should multi-tag this information with the relevant tags of each layer of granularity.
For example, we could have a policy for ‘Financial instruments at fair value through profit or loss,’ and the piece of information within this policy could be found within four block tags. From narrowest accounting meaning to widest, this piece of information may be tagged within the ‘Description of accounting policy of financial instruments at fair value through profit or loss’, ‘Description of accounting policy of financial instruments’, ‘Disclosure of significant accounting policies’ and ‘Disclosure of notes and other explanatory information’.
This may at first cause concerns for issuers who anticipate additional time requirements for ensuring all the layers of granularity are met, especially within an already-time pressured period.
Granularity of block tagging
As stated in ESMA’s definition, a block tag can contain tables. Tables can also contain many different columns/rows disclosures which are relevant to different tags within the taxonomy. ESMA has stated that issuers do not need to consider each column/row to be tagged separately, but to tag the whole table as part of the block.
For example, we could have a table within a note for ‘Finance income and cost.’ This table contains a split showing the ‘finance income’ components and then the ‘finance costs’ components. An issuer does not need to tag the ‘finance income’ components and then separately tag the ‘finance costs’ components.
Instead, they will just need to tag the whole note (which includes the table) with both the ‘Disclosure of finance income’ and ‘Disclosure of finance cost, (and of course as per point 1, the ‘Disclosure of finance income (cost)’ and ‘Disclosure of notes and other explanatory information’ too).
This is good news for prepares who will not need to heavily analyse each row and column to decide the multiple tags that may be needed within each table, as this could seem an impossible task. This decision will heavily decrease the technical complexity of block tagging tables.
In the guidance for software firms, included in the reporting manual to ensure technical validity, ESMA has discussed how a block tag is constructed and displayed. ESMA is aware that the table formats (due to many constraints) will not be the same as the full document. The XBRL community will be monitoring and trying to improve these mechanics for the future.
Other considerations for block tagging of notes and accounting policies
ESMA has stated that if a note or policy does not have a corresponding tag within the Annex II (of the RTS) that accurately represents its accounting meaning, it is not required to be block tagged. Although not required, it will still be useful for end-users to mark-up these bits of information.
There are two possibilities for preparers to tag these regardless, which ESMA do encourage. The issuer can either use a textblock tag that is not found within the Annex II that corresponds to the taggable information, or failing this, create an extension. Unlike disclosures in the financial statements, who need to anchor their extension to a taxonomy tag with the closest accounting meaning, block tag extensions within the notes do not need anchors.
The update to the ESEF Reporting Manual provides welcome guidance for ESEF’s Block Tagging. Now that ESMA has given more information, hopefully this will reduce the many different interpretations across Europe and create more consistent ESEF filings. However, as expected this does potentially mean increased work and time pressure with the block tagging requirements to meet the new guidance.
Whilst taking the time to understand the full requirements in granular detail and upskill the expertise internally seems daunting. There are opportunities to outsource ESEF filings, and partner with firms like ARKK who have submitted to 10 jurisdictions and completed over 400 ESEF filings in Year One.
Keep an eye on the ARKK blog as we will be releasing more guidance over the next few weeks on how to navigate the reporting manual updates for Year Two of ESEF filings.