What does the ESEF mean for your next annual report?

There is now a new EU-adapted rule on electronic reporting for Swedish listed companies. It means that all annual and consolidated reports starting on 1 January 2020 or later must be delivered in the new standardized electronic format for financial reports called ESEF - European Single Electronic Format. Instead of a PDF, companies must now submit the annual report in XHTML format together with the company's XBRL taxonomy to the Financial Supervisory Authority. Does it sound complicated? Don't worry, we'll try to clarify the concepts.

What is the ESEF?

The new format is based on tagging key elements of the financial statements with XBRL (eXtensible Business Reporting Language) tags according to a specific taxonomy based on IFRS. At present, for example, the income statement, balance sheet, cash flow statement and changes in equity must be tagged. In the future, it will also become mandatory to label the notes. And at the moment, half-yearly reports and legal entity accounts are not covered.

What is the purpose of the ESEF?

An important purpose of converting the report to XHTML (Extensible HyperText Markup Language) is to enable machine reading. This will make the report accessible to more people. The new uniform reporting format will also make it easier for companies and groups to report according to the same standard so that investors and other stakeholders can more easily find, analyze and compare the financial information of companies with issued, listed securities on the regulated EU market.

What technical solutions are available?

There are different types of solutions for tagging the accounts against the ESEF taxonomy. One solution is to create the tags during the production process of the annual report itself, which can be done in CtrlPrint. The advantage of this is that you see versioning of the tags and much of the work is done for next year and more languages. Another solution is to use software when the annual report is ready that converts the report to XHTML. An example of a solution here that is well proven, as Denmark has had this format as a requirement for several years, is Parseport.

What do you need to do?

Start now by getting an overview of ESEF and mapping which tags according to the taxonomy you want to use. Also identify if the taxonomy needs to be expanded where you deviate from the standard. Make sure that you have the right process and tools to tag each item in each table in the annual report with an XBRL tag that corresponds to the taxonomy, and in cases where you do not follow the standard, prepare your own explanation referring to the closest accounting tag in the taxonomy. Remember that the tags will also need to be checked by the auditors.

What might the process look like?

• UNDERSTAND
  This is a new set of rules that requires reading and renewed knowledge. Start by familiarizing yourself with the taxonomy and XBRL so that you understand the approximately 5000 tags available and can choose the right one based on IFRS and your process.
• INVOLVE
  Set up a project team with clear responsibilities and appoint a dedicated manager for the ESEF. Make sure you have all the key functions on the team such as IR, IT, audit committee, finance department etc.
• INFORM
  Inform all relevant decision-makers and especially the board of the new requirements in good time so that they understand the work that needs to be done and why.
• MAPPA
  Review your current annual accounts against the ESEF taxonomy so that you can select the right tags and see where the accounts differ from the standard.
• CREATE
  Identify a partner or software that can support you in the process of creating the tags and/or converting the report into XHTML, either at the time of the production of the report or when it is finished.
• SUBMIT
  Submit a "package" of files to the FIN-FSA consisting of the annual report in XHTML format together with the company's XBRL taxonomy.
• Where can you find out more about the ESEF?

On the website of the Financial Supervisory Authority you can find more and continuously updated information on what applies.

Can Navigator help you?

We at Navigator have familiarized ourselves with ESEF and have collaborated with, among others, CtrlPrint and Parseport so that you can get your report in the right format. Here you can read more about our knowledge of annual reports. If you want to see some of the annual reports and sustainability reports that we have been involved in producing in recent years, you can find examples of annual reports here. Get in touch if you need help or want to know more.