{"id":1630,"date":"2020-04-02T18:00:53","date_gmt":"2020-04-02T18:00:53","guid":{"rendered":"https:\/\/prathamconsult.com\/eu\/?page_id=1630"},"modified":"2023-04-24T09:25:57","modified_gmt":"2023-04-24T09:25:57","slug":"faq","status":"publish","type":"page","link":"https:\/\/prathamconsult.com\/eu\/faq\/","title":{"rendered":"FAQ"},"content":{"rendered":"\t\t
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EUROPE \u2013 ESEF<\/u><\/strong><\/span><\/p>

URL-1:<\/strong>https:\/\/ec.europa.eu\/info\/sites\/info\/files\/business_economy_euro\/banking_and_finance\/documents\/190529-faq-rts-esfs_en.pdf<\/a><\/span><\/p>

Q&A on the RTS on European Single Electronic Format (ESEF) <\/strong><\/span><\/p>

1) What is the ESEF? <\/strong><\/span><\/p>

ESEF (European Single Electronic Format) is the new single electronic reporting format for the preparation of annual financial reports to be published by listed companies in the European Union from 2021 onwards.<\/span><\/p>

This format provides for one single file (1)<\/strong> that will include the financial statements, the management report and the responsibility statements of the persons responsible within the company. This file is human-readable, just like a normal webpage. As an additional obligation, companies who prepare consolidated financial statements, on the basis of International Financial Reporting Standards (IFRS), will also have to tag certain information in their financial statements in accordance with the IFRS Taxonomy using inline specifications (iXBRL). Ultimately, this will make the financial statements machine-readable.<\/span><\/p>

2) Why is the European Commission introducing ESEF and what are the benefits? <\/strong><\/span><\/p>

ESEF is being introduced pursuant to Article 4(7) of the Transparency Directive to reflect the will of the European Parliament and the Council to establish a single structured electronic format for EU annual financial reports.<\/span><\/p>

ESEF will enhance the comparability and usability of financial information. In particular, better and more comprehensive use of company data by investors and analysts is expected when using the inline specifications (iXBRL). This will, in turn, enhance the transparency of EU capital markets.<\/span><\/p>

3) Which companies will have to prepare their annual financial reports in ESEF?<\/strong><\/span><\/p>

  1. a) All natural and legal persons \u2013 regardless of whether their registered office is in the EU or in a third country \u2013 with securities (including both shares and bonds) listed on an EU regulated market will have to prepare their annual financial reports in XHTML;<\/span><\/li>
  2. b) EU issuers who prepare IFRS consolidated financial statements will have to tag them using the elements of the IFRS Taxonomy that correspond to the EU-endorsed IFRS. The tagging of individual financial statements by EU issuers is allowed provided that they use iXBRL and that a taxonomy is provided by the Member State in which they are incorporated;<\/span><\/li>
  3. c) Third-country issuers will tag in accordance with the elements that correspond to the IFRS as issued by the International Accounting Standard Board (IASB). Third-country issuers using third-country GAAPs are not yet allowed to tag their financial statements.<\/span><\/li><\/ol>

    (1)The file is formatted using eXtensible Hyper-Text Markup Language (XHTML). <\/strong><\/span><\/p>

    4) When will the preparation of annual financial reports in compliance with ESEF become mandatory?<\/strong><\/span><\/p>

    The use of ESEF for the preparation of annual financial reports will become mandatory for financial years starting on or after 1 January 2020. Depending on the length of the financial year, most companies\u2019 reports in ESEF will be published for the first time in 2021 in relation to annual financial reports of fiscal year 2020.<\/span><\/p>

    5) Will preparation costs increase for companies? <\/strong><\/span><\/p>

    The implementation of this new structured reporting format \u2013 especially as regards the iXBRL marking up of IFRS consolidated financial statements – might involve limited costs for companies in the initial stage. Costs will significantly depend on whether a company decides to prepare its annual financial reports using iXBRL internally or by outsourcing it to a third party, as follows:<\/span><\/p>