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ESEF – A New Format and Guidance for Audit; a Chance for Change

12/19/2019
Posted By eu_admin
Category : ESEF;


mandate for ESEF reporting

The start of a new decade is just around the corner. It may now be the right time to evaluate and take stock of some fundamental financial processes that run your company like a well-oiled machine. ESEF (European Single Electronic Format) is a new regulation introduced by ESMA (European Securities Markets Authority) that may disrupt your reporting landscape and cause key current processes to warrant a change.

Inline XBRL (iXBRL) for listed company consolidated financial statements:

ESEF requires all the companies whose securities are listed on a regulated stock exchange in the European Union to report their annual reports in XHTML format for financial years beginning on or after 1 January 2020. Further, if the annual report has consolidated financial statements prepared in accordance with IFRS (International Financial Reporting Standards), then those financial statements should be marked up with XBRL (eXtensible Business Reporting Language) tags using ESEF taxonomy released by ESMA and should be submitted in Inline XBRL (iXBRL) format.

Keeping the change in a format of regulatory reporting in mind, CEAOB (Committee of European Auditing Oversight Bodies) have issued non-binding guidance on the auditor’s work to facilitate auditors align with ESEF.

Hey, don’t fret yet! Before you go ahead and make changes in your working to update or improve processes, let us first take a look at the guidelines specified and how this may affect your organization.

According to CEAOB, the auditor should perform the following checks to provide an opinion on whether the reporting company complies with ESEF requirements:

  1. Ensure whether the human-readable component included in the new electronic format is either audited or identical to the audited information.
  2. Ensure that the information in the electronic report marked up with XBRL tags (when necessary) in line with ESEF.

CEAOB envisages the following scenarios for the auditors:

  1. Auditor performing the audit directly on the human-readable component of the electronic report. The advantage of this approach would be that the auditors need not worry about the integrity between the multiple versions (for example, PDF and iXBRL). The flipside is that the auditors should wait till the annual report is prepared in iXBRL to perform the audit.
  2. Auditor performing the audit in some other format such as PDF initially and perform reconciliation between the electronic version (when it’s ready) and the PDF version. The advantage of this approach would be that the auditors need not wait until the electronic version is prepared to perform the audit. Still, on the flip side, auditors should ensure the integrity of data between two releases.

It is left to the auditor’s discretion to evaluate and adopt a suitable approach on how and when the annual report is made available to him for audit. While most other organizations resist change, take different paths and routes, or even indulge in activities that may have expensive outcomes, you could give a simple, agile, and affordable reporting software a try.

DataTacks’ Rainbow iXBRL reporting software facilitates the entire process of preparing the annual report in iXBRL format by accepting input data in multiple formats such as PDF (including a rich design PDF), HTML, Word, and Excel. Further, Rainbow facilitates auditors’ reviews with an iXBRL viewer that shows the tag tooltip for each marked-up fact. This online preview tool will also include the validation, ability to capture comments, and the ability to compare multiple versions of the iXBRL document.

Begin your cost-effective digital transformation of your regulatory reporting today. To discuss more on the next steps and how you can get started, get in touch with DataTracks at enquiry@datatracks.eu or call +31 (0) 20 2253 702

About DataTracks:

DataTracks, Singapore, is a global leader in disclosure management software. DataTracks serves more than 17,000 business enterprises in 24 countries. DataTracks software and services have been used to prepare more than 172,000 compliance reports so far for filing with regulators such as SEC in the United States, ESMA, EBA and EIOPA in European Union, HMRC in the United Kingdom, ACRA in Singapore, SSM in Malaysia, CIPC in South Africa and MCA in India.



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