At a glance:
• As part of its transparency efforts, the European Securities and Markets Authority (ESMA) is demanding that issuers submit their consolidated financial statements in a uniform electronic format in the future (iXBRL).
•  ESMA’s aim is to make financial statements more comparable across Europe. With a mandatory implementation deadline in 2020, it remains to be seen whether these targets can be achieved with the roll-out of the “European Single Electronic Format” (ESEF).
•  This new reporting requirement poses a major accounting and technology challenge for many companies.


Regulation in the European Union continues to grow. Following the 2016 EU Market Abuse Regulation, things continued evolving at a rapid pace. Those responsible for financial reporting had to adapt to further reporting standards with IFRS 9, IFRS 15, and IFRS 16. Since the beginning of 2018, the EU Financial Markets Directive (MiFID II) has also come into effect, requiring new standards in addressing investors. With the recent ESEF reporting requirement introduced by ESMA, the next challenge is now on the horizon. Especially when looking at the financial and human resource constraints faced by many small and medium-sized issuers, ESEF may be a hurdle for many companies.

ESEF – A New Milestone in Reporting

With the new uniform electronic reporting format (ESEF), digitisation is clearly making its way into group reporting practices. After a slow introduction phase, for the first time ever, this new reporting format will be mandatory for 2020 financial reporting. By spring 2021, issuers whose securities are traded on a regulated market in the EU must implement the standards for reporting as per this EU standard digital format.

This roll-out was first flagged by ESMA’s 2004 Transparency Directive, yet even today, largely remains below the public radar: if you Google “ESMA” in conjunction with “ESEF”, you get a modest 20,000 hits. By way of comparison, another recent directive, MAR, has a hundred times as many hits on popular search engines.

Up until now, the adoption of ESEF has not enjoyed the highest priority among management teams. Feedback from the ESMA consultation phase (implemented by the EU Commission 5 years ago) shows that only 14 (!) issuers used this opportunity to actually take influence on this new reporting technology. To give a better picture of how many companies this will impact, according to estimates by the European Supervisory Authority, around 5,300 companies across Europe will be subject to this new reporting requirement.

XBRL Tags for a Clear Structure

ESMA has now defined the ESEF standard and what it will mean for companies across the EU. As per the directive, XHTML (Extensible Hypertext Markup Language), embedding inline eXtensible Business Reporting Language (iXBRL), offers the best prerequisites for rapid comparability of consolidated financial statements. The new format is machine-readable and can also be displayed in any standard browser, allowing for better transparency and access.

What does implementation of ESEF standards mean for companies?

  • XBRL tagging: The standardization of financial reports is achieved by using the IFRS taxonomy. Certain information contained in these reports must now be provided with XBRL tags. For a transitional period of 2 years, this tagging will initially be limited to company information (e.g. name, registered office, legal forms) and primary financial statement tables, such as the balance sheet, income statement, and cash flow statement. From 2022, the scope of required tagging grows enormously – an additional 234 (!) areas of financial statements must be tagged.
  • European comparability: The scope of what needs to be included in future financial reports is defined by ESEF down to the finest points, in the interest of creating a common EU reporting standard. With this new standard, key metrics (such as turnover or profit) can be easily identified across the reports of different European companies. For example, an Irish issuer or an issuer from Germany, will have reporting uniformity, regardless of the language used for reporting, or the company’s industry. This is intended to considerably simplify the efforts of investors, analysts, and auditors, who will no longer face varying definitions of key figures. With analysis software and report standardization, large amounts of financial information can then be analyzed and compared in a short period of time.

Using Software, or Using a Service Provider?

In addition to iXBRL know-how, ESEF reporting also requires in-depth accounting knowledge. A challenge of this reporting standard is the IFRS taxonomy, which has been created to make financial reports comparable. The IFRS taxonomy does not have a fixed definition. Instead, it has been modified on an ongoing basis to be in-line with new or revised accounting standards and adaptations to industry practices.

Today, mastering ESEF reporting and the IFRS taxonomy may be a Herculean task for companies that have limited themselves to producing consolidated financial statements solely in PDF or print formats. The low level of response to new ESEF standards in the run-up to its adoption indicated a certain regulatory fatigue on the part of issuers – or simply an effect of excessive demands posed by ever-increasing regulatory requirements.

In addition, the expenditures associated with onboarding ESEF practices will probably only be manageable for large corporations, as this will involve a complete revision of existing financial reporting processes. The need for increased personnel in Accounting and/or IR departments may not fully remedy the issue. ESEF may also require additional investment in unique software solutions, which will need integration with existing company systems. With all of these hurdles, what is a realistic option for small and mid-sized companies?

For most companies, the simpler way to tackle ESEF may be to rely on service providers who offer automated conversion of PDF documents into XHTML, including performing any relevant XBRL tagging. This was previously the case when tackling XML conversion needs in submitting financial reports to EU authorities. By partnering with service providers who possess this technology, budgets for many companies can be spared, and personnel resources can be allocated to the needs of daily business.


We are actively working on the new ESEF standards. We strive to ensure that our clients have the simplest submission and publication processes possible in the face of new regulations, and would be happy to keep you updated on our progress.