Become ready for the ESEF implementation! (2)

| Blog 2 of 3 | 5 minutes read |

Everything you need to know about ESEF

From now on, all companies with securities in the European Union and the UK will have to publish their annual financial report in digital form in accordance with the new guidelines of the European Securities and Markets Authority (ESMA). ESMA has developed a ‘European Single Electronic Format’ (ESEF) for this purpose. What does this mean for your organization?

In the first blog of this blog serie we pointed out what ESEF is. In this second blog we address the following question:

How to implement ESEF in your organization?

The impact of ESEF – and so the implementation – varies from organization to organization. It is mostly dependent on the complexity of the chart of accounts (its ease of mapping to IFRS) and the way current Disclosure Management software supports for ESEF.

We have however identified one generic approach to implement ESEF. We will introduce it in this blog. But first we start with providing some valuable tips for the ESEF implementation.

Tips for ESEF implementation

Tip 1. Plan for resources

The main requirements of ESEF for companies are twofold. Firstly, companies have to deliver a XHTML version of the annual financial report. Secondly, companies have to include iXBRL tags for all consolidated IFRS Financial Statements.

The implementation of these requirements will consume a significant amount of resources during the first year. To give an idea, you can think about:

• Software. Software is needed to support for generating the XHTML and to apply the iXBRL tags.
• People. For instance, members from the finance group department are needed to map the company’s group accounts to the ESEF taxonomy
• A process-/workflow needs to be defined to ensure the correctness of the report.

Therefore: it’s wise to plan well in advance for the availability of these resources!

Tip 2. Act timely

In order to meet the ESEF requirements on time and in an efficient way, it is important not to underestimate the impact of it. Since the biggest part of the implementation can already be performed well before the annual reporting process for the Fiscal Year 2020 starts, it is recommended to act on time. In this way the ESEF implementation does not overlap with the already busy period during the annual reporting process.

Therefore: it’s wise to act timely and start soon!

Tip 3. Define a project

This tip is strongly related to tip 1 (availability of resources) and tip 2 (start well in advance): define a project for the implementation of ESEF. You’ll need a (small) project team that is dedicated to fulfill the requirements of ESEF and to develop an efficient workflow for it.

The ESEF implementation process

We have identified a generic approach to implement ESEF. It basically defines the main activities to be incorporated in your project plan (see tip 3).

The implementation of ESEF consists of four steps, see the figure below.

Figure 1. ESEF Implementation process

As you can see, the implementation starts with making up a plan (step 1). It is important to familiarize yourself with the ESEF requirements and the ESEF taxonomy. In this way, you are capable to assess the impact of ESEF on your organization. How easy will it be to map your group accounts to the ESEF taxonomy? What is the need for new software tooling?

In step 2 you can already start preparing the mapping and define extensions. You can simply prepare your mapping in your current Group Reporting System or a spreadsheet. The extensions allow for tagging information which is unique about your company, for which there is no available appropriate tag with an equivalent accounting meaning in the ESEF base Taxonomy.

In step 3 you apply the iXBRL-tagging as prepared in step 2 and also link (‘anchor’) extensions to the ESEF-taxonomy elements. In this step you’ll need the software tool as selected in the plan (see step 1).

The final step consists of generating and publishing the report. The XHTML report is being generated by the software tool as selected in the plan. The most time-consuming part is the review of the report format and the validation of the correctness of the figures. After this review, the XHTML report can be sent to the authorities and published.

How does CPMview helps organizations?

CPMview helps organizations to meet the ESEF mandate. We therefore provide organizations the resources and knowledges for executing the four main ESEF implementation steps on time. But we also take it a step further: in the next blog of this blog series we will discuss the need for new software tooling and show how the ESEF mandate can serve as a trigger to further improve your current disclosure management processes.

Thank you for reading this blog. If you want to know more about this topic or in case you have questions about our services related to ESEF, feel free to contact us.