Most reporters will have been well aware of ESEF and UKSEF for some time – it’s been on the reporting agenda for years. Trouble is, the details are still being ironed out. So what’s the latest?
What is it?
The European Single Electronic Format, or ESEF, regulations (part of the EU Transparency Directive and absorbed into UK regulation) require all issuers to provide their annual reports in both a human and machine-readable format.
All annual financial reports should be prepared in human-readable XHMTL format that can be opened with any standard web browser (that’s front cover to back cover - not just the Financial Statements). If you prepare your accounts under IFRS then you must wrap certain information with XBRL tags to make the information machine-readable. These tags contain attributes such as accounting concept, currency, scale, date applicable and so on (XHTML + XBRL = iXBRL).
In the UK, under the Companies Act 2006 you are still required to send a copy of your annual report to a shareholder if they request it. Now you need to produce a web version (ESEF) and a print version of your annual report.
When does it apply?
New ESEF-related requirements come in phases based on financial periods starting on or after the following dates:
Phase one: 1 January 2021
Tagging of IFRS primary financial statements and some minimal entity identification data.
Phase two: 1 January 2022
Phase 1 and Block tagging of the Notes to the financial statements (wrapping the complete Note but not individual facts within) and also some more data within the front half of the report.
What do I need to think about?
The way you approach ESEF will affect your reporting processes. The two biggest questions facing issuers are what needs to be audited, and whether the report needs to be printed. This is because since Brexit there has been some small but significant divergence between the UK and the EU on ESEF.
The UK has extended the taxonomy that forms the basis for the tagging with the aim of aligning the ESEF submission for the FCA with the Companies House filing. This is known as UKSEF.
In the EU auditors are required to express their audit opinion on the ESEF file. In the UK however, the UK Department for Business, Energy & Industrial Strategy (BEIS) announced that the ESEF file wasn’t required to be audited – that the auditors and directors only had to sign-off on the ‘content’ as usual not any tagging. BEIS have suggested that auditors supply an ‘assurance’ on the ESEF file. They recommend getting your own legal advice to clarify requirements.
In terms of printing an annual report, UK filers are required to supply copies of the annual report to shareholders if requested. In contrast to ESEF which requires web-ready artwork, this also requires setting up print-ready artwork. The two types of files require different colours, high and low-resolution imagery, and your browser can alter the flow of text in the ESEF file. At RY we have a process for ESEF production which converts the master print-artwork file to an exactly matching ESEF file which delivers a much smoother sign-off process.
There’s no one-size-fits-all solution here. The best process for you will depend on your company systems, ambitions, audit requirements and more. We’ve spent the last few years trialling and fine-tuning our approach and have a range of options ready to go. We’d love to help you find the right fit for you – for more information on UKSEF/ESEF or to chat more about any of your reporting challenges, get in touch.