EC Finalizes Regulation on European Single Electronic Format
EC has finalized the Delegated Regulation (EU) 2019/815 that sets out the regulatory technical standards on specification of a single electronic reporting format in EU. EC has put forward the new rules to support the digitalization of corporate reporting and to achieve greater transparency of the annual information disclosed by companies listed in the EU capital markets. Additionally, EC released frequently asked questions (FAQs) on the European single electronic format (ESEF). Regulation (EU) 2019/815 shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. The use of ESEF for the preparation of annual financial reports will become mandatory for financial years starting on or after January 01, 2020. On June 04, 2019, EC published a corrigendum in the Official Journal announcing the correction in regulation number from 2018/815 to 2019/815.
ESEF is the new single electronic reporting format for the preparation of annual financial reports to be published by listed companies in EU from 2021 onward. The new ESEF will make companies' financial records more readable and accessible. Under the new rules, from January 2020, all listed companies will need to finalize their annual financial reports using the up-to-date digitalized business reporting systems (XHTML and iXBRL), which improve accessibility and make the information much more user-friendly. The move will also facilitate the availability of key financial information in all EU official languages. The new provisions build on financial transparency rules already agreed by European Parliament and member states. These rules will be updated annually to reflect possible updates to the International Financial Reporting Standards (IFRS) taxonomy, which aims to improve communication between "preparers" and users of financial statements. In support of these new rules, ESMA prepared an ESEF Reporting Manual (published in December 2017) and ESEF Taxonomy files (published in March 2019) to help companies in their preparation.
The ESEF format provides for a single file that will include the financial statements, the management report, and the responsibility statements of the persons responsible within the company. ESEF will enhance the comparability and usability of financial information. The filers of annual financial reports that would be required to use ESEF include all natural and legal persons, regardless of whether their registered office is in the EU or in a third country. 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. Third-country issuers will tag in accordance with the elements that correspond to the IFRS as issued by IASB. Third-country issuers using third-country generally accepted accounting principles (GAAPs) are not yet allowed to tag their financial statements.
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. In developing the draft regulatory technical standards on which this regulation is based, ESMA cooperated regularly and closely with EBA and EIOPA, to take into account the specific characteristics of the banking, financial intermediary, and insurance sectors, in an effort to ensure cross-sectoral consistency of work and the reaching of joint positions.
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Effective Date: June 18, 2019
Keywords: Europe, EU, Banking, Insurance, Securities, Taxonomy, Reporting, IFRS Taxonomy, XBRL, ESEF, ESMA, EC
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