What Is the ESMA ESEF Mandate

In an aim to promote transparency across different companies, markets, countries, and languages in the European Economic Area (EEA), the European Securities and Markets Authority (ESMA) has introduced a European Single Electronic Format (ESEF) to be used for filing reports to ESMA. Under these regulations, companies listed on regulated markets across the EEA will need to file annual reports that are machine-readable and directly comparable with each other — making it easier for investors to make informed decisions and for regulators to assess the integrity of individual companies and market sectors.

The new standards will be mandatory for all annual financial reports (AFRs) filed for financial years starting on or after January 1, 2020.

ESEF Technical Requirements

ESEF requires reports to be filed using an electronic reporting format capable of being rendered in a standard web browser using XHTML. The XHTML requirement will apply to all 7,500 companies listed on regulated European markets, including those who file reports using local Generally Accepted Accounting Principles (GAAP).

For companies that produce consolidated financial statements using International Financial Reporting Standards (IFRS), there is an additional ESEF component requiring them to tag the reports using Inline XBRL, a human-readable version of the XML-based eXtensible Business Reporting Language.

iXBRL is a way of embedding hidden XBRL tags in financial statements so that the same statements can be easily read by both humans and machines. ESEF requires that all data in the consolidated financial statement is XBRL tagged. ESMA has produced a taxonomy of XBRL concepts specifically for IFRS reporting purposes, and companies can extend this with custom concepts for facts not covered in the ESMA taxonomy. For example, a software company that wants to report to the market on "income from cloud services" could create a custom concept to designate this specific source of income.