With the European Securities and Markets Authority's (ESMA) ESEF regulation now fully in effect, companies across the EU are navigating the complexities of this digital reporting standard. For a transition period filer in the UK can choose between ESEF or UKSEF, a special version of the ESEF taxonomy maintained by the Financial Reporting Council (FRC).
As we approach 2024, further developments in the form of the UK Sustainability Disclosure Standards (SDS) are on the horizon, tying financial and sustainability reporting closer together. This article will explore the current landscape of ESEF and UKSEF reporting, the challenges companies face, and anticipate the integration of UKSEF with the UK SDS reporting.
Grasping the ESEF reporting mandate
ESEF mandates that all issuers on EU regulated markets prepare their annual financial reports in an electronic format. This ensures that the annual financial reports are in a single, electronic reporting format (xHTML), with the core financial statements tagged using Inline XBRL (iXBRL). This requirement has increased the accessibility and analysis of financial information, aligning with global trends towards greater transparency.
The special case in the UK – UKSEF
From 2021 UK-based filers had the option of using the UKSEF taxonomy to file their annual reports. UKSEF is based on the ESEF taxonomy but has additional UK-specific tagging information that is legally required by Companies House. The UKSEF taxonomy, which is maintained by the Financial Reporting Council in the UK, has undergone some significant changes in the past three iterations but is now mature and ready to be used by a wider audience.
With the passing of the Economic Crime and Corporate Transparency Bill Companies House now has the authority to make all submitted accounts digital, moving away from a paper copy option. This will further the adoption of UKSEF soon.
Navigating full UKSEF/ESEF implementation
The full implementation of UKSEF/ESEF reporting not only involves iXBRL tagging of the primary financial statements but extends to the notes within the consolidated financial statements, applying a more extensive 'block tagging' approach for the narratives in the report. With the transitional phase having ended, companies must now ensure compliance with these enhanced tagging requirements.
The role of the UKSEF taxonomy
The ESEF taxonomy, which is based on the IFRS taxonomy, provides the structure needed for tagging the financial information accurately. By following this standardized classification system, companies can produce reports that are not only uniform but also easily comparable and analyzable. If issuers need to tag information where there is no equivalent in the IFRS taxonomy, they need to create an extension. Every ESEF report package contains not only the xHTML-based itself, but also an entity-specific extension taxonomy, containing information only relevant for the issuer.
For UK filers, the UKSEF consists of the ESEF taxonomy as described above, as well as an additional taxonomy that has UK-specific information. Filers must choose between either FRS102 or IFRS entry-points for the second taxonomy to be used in the report.
Addressing the complications of UKSEF/ESEF compliance
Interpreting the intricacies of the ESEF taxonomy and applying it correctly is a significant challenge for many businesses. To comply efficiently, entities need to leverage robust and supportive UKSEF and ESEF-compliant and XBRL-certified software, such as Lucanet XBRL Tagger and SmartNotes. Our solutions reduce the risk of errors and facilitate a streamlined reporting process.
Especially with the two-taxonomy-approach chosen by the UK, the technical challenges have increased over plain ESEF. With the right software, these additional challenges will be handled entirely by the tool, leaving filers to concentrate on finding the right tag for the right content.
The advancement of financial reporting with ESEF and iXBRL
ESEF's adoption marks a significant step forward in standardizing financial disclosure across Europe, enhancing transparency and comparability. With the upcoming inclusion of ESG information in the reporting framework, entities are urged to adopt continuous improvement practices in their reporting strategies. Adopting reliable software solutions that facilitate ESEF and future ESRS compliance will be essential.
Anticipating UK SDS
There is not yet a clear path forward for the Sustainability Disclosure Standards in the UK. It is currently anticipated that the UK will base their Sustainability Disclosure on the IFRS Sustainability Disclosure Standards issued by the International Sustainability Standards Board (ISSB). This will be a significant change from the implementation in the rest of Europe and probably require tools to be adjusted.
As the current Streamlined Energy and Carbon Reporting (SECR) is already a part of the UK taxonomy suite, it is to be expected that the UK SDS will follow ESMA’s approach and will be integrated into the UKSEF reporting process.
Join the UKSEF/ESEF reporting revolution with the XBRL Tagger
Are you ready to tackle UKSEF/ESEF iXBRL reporting head-on? Look no further - we have the cutting-edge solution you've been searching for. Our XBRL Tagger, integrated within Lucanet and our SmartNotes software, will empower you to effortlessly create compliant UKSEF/ESEF iXBRL reports, revolutionizing your reporting process.
How does the XBRL Tagger work?
- Our XBRL Tagger utilizes advanced XBRL technology to streamline the tagging of your financial data.
- With its intuitive interface, you can easily tag (or label) your data in the iXBRL-based language, ensuring compliance with the UKSEF/ESEF reporting standards.
Here's why the XBRL Tagger is a game-changer:
- Automated processing of your financial data, powered by an intelligent processor
- Seamless provision of various taxonomies, including IFRS, ESEF, HGB, US GAAP, and more
- Effortless tagging of your data, eliminating manual errors and saving you time
- Quick and accurate mapping of your data to the appropriate tags, enhancing report quality
- Flexible printing and output formats, giving you full control over the presentation of your reports
Embrace the power of the XBRL Tagger and simplify your ESEF reporting process today.