7 Things Everyone Needs to Know About ESEF

ESEF. Who knew that four little letters could cause so much commotion? You’ve heard the acronym buzzing around lately—but what does it really mean, and how will it impact annual reporting for years to come?

Already, ESMA’s new mandate is affecting everyone from investor relations teams to finance departments to corporate secretaries—and beyond. Here, we cut through the jargon and share seven things you should know.

1. ESEF stands for European Single Electronic Format.

   Passed by the European Securities and Markets Authority (ESMA) on May 29, 2019, ESEF is a new law that affects all companies with securities in the European Union and the UK.

2. ESEF filing is mandatory for annual reports with fiscal years beginning on or after January 1, 2020.
   Yes, you heard us right. That means the best time to start preparing is now—not when you’re already hard at work on the annual report.

3. ESEF is XHTML (i.e. a web page), viewable in a standard browser.

   This means that ESEF is “human-readable,” so you have to decide how good you want it to look—whether that means choosing a “regulatory look and feel,” applying a corporate web style guide, or designing for best communication.

4. The ESEF/XHTML page source contains inline XBRL tags to “tag” numbers in the annual report.

   ESEF strives to make information better, more accessible, and more easily processed by software programs. As a “machine-readable” framework, inline XBRL makes this possible—embedding business reporting data into a human-readable page.

   Under ESMA’s new mandate, tagging will be done using the ESMA IFRS taxonomy.

5. Only the numbers in the primary financial statements need to be tagged.

   For fiscal years starting on or after January 1, 2022, ESMA will also require “block tagging” of notes—meaning that the text and tables within a note must be tagged as a block.

   (Keep in mind that these are the minimum requirements set by ESMA. Individual countries can set additional requirements.)

6. Regulatory bodies (like the Netherlands’ AFM) will no longer accept PDF annual reports.

   Nevertheless, you’ll probably still create PDFs for the purpose of printing and downloading annual reports. Meanwhile, companies that already publish annual report microsites will likely continue to do so for optimal shareholder engagement.

7. All required-by-law parts of the annual report must be included in ESEF.
   Some examples are the notes, parts of the directors’ report and corporate governance section, and any required non-financial information. These items, however, do not have to be tagged—as a reminder, you only need to tag the primary financial statements of your annual report.

With ESEF integrating machine-readable and human-readable formats, the future of financial reporting is rapidly changing.