ESMA Updates ESEF with 2025 IFRS Taxonomy: Critical Changes for Early IFRS 18 Adopters
ESMA has finalised amendments to the European Single Electronic Format (ESEF) incorporating the 2025 IFRS taxonomy, creating a crucial two-track system for companies based on their IFRS 18 adoption timeline. The updated taxonomy supports both IAS 1 and IFRS 18 presentation options within a unified framework. ESMA’s approach enables early IFRS 18 adoption while maintaining backward compatibility.
Companies planning early IFRS 18 adoption face different requirements than those that will continue to use IAS1 over the next year or so.
Early Adopters (2026 onwards): Must use the new Table 2 mandatory mark-up elements specifically designed for IFRS 18, requiring familiarity with restructured presentation elements and new disclosure requirements. These companies can begin testing IFRS 18 taxonomy elements immediately. Note that official EU endorsement isn’t expected till early 2026.
Standard Timeline Companies: Continue using existing Table 1 elements under IAS 1 until IFRS 18 becomes mandatory for fiscal years starting on or after 1 January 2027, providing additional preparation time. In practice, because of the need to provide up to three years of comparative restatements, many companies need to get ready now.
The 2025 taxonomy becomes mandatory for financial years beginning 1 January 2026, with voluntary early adoption permitted for 2025 reports if the RTS is adopted in time. Once it is, both the 2025 and the 2024 taxonomy will be permitted. Note that IFRS 18 taxonomy elements may only be used after formal EU endorsement of IFRS 18 itself. EFRAG made its recommendations in May this year, but the European Commission has not yet completed its work in analysing and (presumably) adopting the new standard.
Importantly, the update includes a requirement to use the Calculations 1.1 specification, which will materially reduce validation inconsistencies associated with rounding.
ESMA strongly encourages all companies to begin their familiarisation with the new taxonomy structure, particularly those considering early IFRS 18 adoption. Software vendors must prepare for the dual framework architecture. The draft RTS awaits European Commission approval. Importantly, note that ESMA indicated that it is planning to release an updated ESEF Reporting Manual “for 2025”.
Finally, this bit is worth quoting: “for annual financial reports including financial statements beginning on or after 1 January 2025, issuers are expected to use either the 2024 ESEF taxonomy or the 2025 ESEF taxonomy introduced by this draft RTS. It is important to note that the draft RTS does not permit the concurrent use of the 2025 and the 2024 ESEF taxonomies within one single ESEF filing.”
We are, of course, delighted to see the new RTS and encourage issuers and vendors to get ready. Read more, starting here.
