Exploring the landscape of ESEF implementation: insights and challenges

Posted on September 24, 2023 by Editor

The European Single Electronic Format (ESEF) made its debut in 2021, marking a significant milestone in the digital transformation of financial disclosures for European companies. ESEF’s introduction has opened new avenues for accessing issuer data, fundamentally altering the landscape for financial professionals. Investors, in particular, now have access to a wealth of digital, structured information, enabling faster and more informed financial decision-making.

A recent study conducted by Corporatings, with the support of KPMG, delves into the realm of ESEF implementation. This study offers valuable insights into the adoption of ESEF and aims to distil best practices observed during the most recent filings.

As European issuers continue to acclimate to the ESEF format and embrace new reporting practices, the Corporate Sustainability Reporting Directive (CSRD) looms on the horizon. This directive extends the digitisation scope to include sustainability data – making getting to grips with ESEF all the more important.

The study shines a spotlight on critical aspects:

  1. Scaling Issues: The electronic format necessitates careful selection of disclosed amounts, including currency, scale, and precision. Missteps in scaling can lead to inaccuracies. Effective error prevention involves cross-referencing data with prior reports and scrutinising the order of magnitude changes.
  2. Sign Issues: Negative signs in financial statements don’t always signify negative values but can indicate deductions for subsequent subtotal calculations. To ensure clarity and consistency the electronic format aligns signs with metric names, but this is sometimes different to what might appear on the printed page.
  3. Missing Calculations: ESEF mandates issuers to describe calculations in their financial statements, enhancing numeric validation and aiding end users in understanding financial structures.
  4. Use of Extensions and Core Metrics: The study highlights differences in tag selection between France and Europe, emphasising the importance of harmonisation.
  5. Tool Maturity: Despite improvements, tagging production tools still face challenges, including completeness of calculations, presentation linkbase compliance, limitations in tagging footnotes, language support, and control functionalities.
  6. Presentation Suitability: Some issuers adopt presentation options that diverge from IFRS, requiring extensions that may impair comparability or introduce errors.

The study reflects a pivotal moment where stakeholders can actively leverage the potential of digitalisation rather than passively adapt to it. Mastery of ESEF is crucial, especially as the digital format expands to cover sustainability data through the CSRD, enabling organisations to harness the green and digital transition together.

The transition to ESEF is not just a regulatory requirement but an opportunity for enhanced financial communication and performance through harnessing the many benefits of digitalisation.

Read the analysis here. (Requires you to opt in)

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