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    EC Note on Application of EU Law for European Single Electronic Format

    November 06, 2020

    EC adopted an explanatory note on the way the European Single Electronic Format (ESEF) will work for listed companies in EU. Following requests from stakeholders, the note clarifies how to apply certain provisions of the EU law in the context of ESEF, including the audit of ESEF-compliant annual financial statements, the use of an electronic signature, and the responsibilities and liabilities of issuers. EC also published a set of frequently asked questions (FAQ) on ESEF. From 2021 onward, all listed companies in the EU will be able to use the ESEF—a new, single electronic document—when publishing their annual financial reports.

    The aim of ESEF is to make it easier for listed companies to meet transparency requirements and ultimately to enhance transparency on the capital markets in EU. These provisions in the ESEF regulation stem from Directive Transparency Directive, Audit Directive, and Accounting Directive. In particular, the note provides: 

    • Clarifications on existing EU provisions concerning audit. The note clarifies that EU law requires statutory auditors to provide an audit opinion on whether the financial statements included in the annual financial reports comply with the relevant statutory requirements laid down in the ESEF Regulation. Under the Transparency Directive, third-country issuers are required to disclose annual financial reports drawn-up in accordance with all the requirements in the ESEF Regulation, together with an audit report prepared in accordance with the Audit Directive. As a result, it is the responsibility of a third-country issuer to ensure that its auditors provide an audit opinion on whether the financial statements included in the annual financial report comply with the relevant statutory requirements laid down in ESEF Regulation.
    • Clarifications on EU provisions on use of an E-Signature. The note clarifies that the existing EU law does not prevent issuers or statutory auditors from using an e-signature for signing the annual financial reports, documents included therein, or the audit reports, respectively. In the absence of specific rules in force at the national or regulated market level, issuers and/or statutory auditors may apply their preferred option, including a handwritten or an e-signature.
    • Clarifications on EU provisions on the responsibility and liabilities of issuers. The note clarifies that an issuer’s administrative, management, or supervisory body is responsible for drawing up and disclosing the annual financial reports in compliance with the ESEF Regulation. EU law does not prevent issuers from expressing, on a voluntary basis, for instance, in the responsibility statement within the annual financial report, a specific statement regarding the compliance of the annual financial report with the ESEF Regulation. EU law does not prevent issuers from disclosing additional versions of their annual financial reports that are non-ESEF compliant or that include ESEF-compliant financial statements for which compliance with ESEF was not checked by the statutory auditors. However, it should be made clear that these additional non-ESEF compliant versions of the annual financial reports constitute non-official versions.

    The note also clarifies provisions concerning the use of ESEF files to fulfil other EU obligations. In case of a limited liability company with securities listed on the regulated markets in EU, the EU law does not prohibit the use of the audited financial statements prepared and published in accordance with the ESEF Regulation to fulfil legal obligations other than the ones stemming from the Transparency Directive. The EU law, therefore, does not prevent the implementation of national and/or administrative rules that would allow issuers to file the ESEF-compliant financial statements as accounting documents with a business register. Besides, the officially appointed mechanisms are also required to disseminate at least the ESEF-compliant annual financial reports submitted by issuers. 


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    Keywords: Europe, EU, Banking, Securities, ESEF, Q&A, EU Law, ESEF Regulation, Transparency Directive, iXBRL, EC

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