ARKK's Annual ESEF Forum, October 2023

ARKK hosted its annual ESEF forum at the beginning of October, which is a great opportunity for our clients to join us and our guest speakers to discuss and learn more about the world of ESEF. This year our panel included auditors from both the UK and Ireland, members of Companies House, FRC and XBRL Europe, and Corporatings (ARKK’s new partner) who focus on iXBRL data usage. Read on to find out what the panel discussed and discover how you can benefit from their expertise. 

Block Tagging Structure 

Block tagging structure was a controversial topic that was discussed, relating to the most recent ESEF reporting manual. In this, ESMA stated that the information contained within tables in the human-readable report should be ‘meaningfully transcribed’ in the extracted tagged information. As this is quite ambiguous, we have seen different auditors from the same and different jurisdictions having different interpretations of the term ‘meaningfully transcribed.’  

From discussions with many auditors across Europe and our guest speakers, the most common interpretation seems to be that tables in block tags should have table structure. i.e. there should be code in the XBRL tags that define columns, rows etc., making it easier for data users to understand the extracted information. ARKK is experienced in working with auditors and our 3rd party software is consistently adapting and improving. This will allow us to ensure that we meet the requirements of your audit (whether mandatory or voluntary) regardless of the interpretation of the guidance. We hope that ESMA will set a more obvious and clear guidance regarding the table structure in next year’s reporting manual. 

Audit Process   

The two main points discussed regarding audit process were timings and the importance of company’s taking more responsibility for their ESEF document. 

To allow auditors time to review the tagged ESEF document, it is important that you start your preparations as early as possible. The creation of your annual report is already time consuming enough so it is important that from the beginning, issuers should be having discussions with their auditors and scheduling review times into your timetable. By starting early, you will take some of the pain away from the end of the process. 

Despite the PDF still being treated as the main annual report, the ESEF document is the official document required to meet TD/DTR obligations*. Therefore, the XBRL tagging within the ESEF document is just as much the responsibility of the company as the rest of the annual report and should be viewed with high importance. Stakeholders should understand the ESEF guidance, should make sure to review the tags used, and get as involved as possible, rather than just pushing it aside and leaving it for the preparer and auditors to sort out.  

Companies House Reform 

The Economic Crime and Corporate Transparency Bill aims to reform the role of Companies House. The Bill intends to improve transparency over UK companies, thereby helping to strengthen the UK’s business environment and to combat economic crime. This Bill will give Companies House more authority over their submissions, with the plan to mandate digital submissions for all annual accounts, removing the paper filing option. 

Currently, not all companies in the UK are currently in scope of the HMRC or ESEF iXBRL mandate. With this Companies House change, millions of companies across the UK will now have to comply with an iXBRL mandate for the first time. Companies will also have to comply with the 9-month filing deadline for submission to Companies House. For those who are new to iXBRL, this will have to be worked into their timetable for the first time. For those who currently submit iXBRL to HMRC and have built timetables and processes around a 12-month submission deadline, iXBRL reporting will now have to be brought back by 3 months to comply with the Companies House deadline.  

Data Usability  

ESEF’s aim is to improve accessibility, analysis, and comparability of annual financial reports. It was discussed that despite the very short lifespan of ESEF, it is already transforming how financial data is being used. Users now have access to much larger quantity of information to make faster and better financial decisions. As data quality improves, so will the use of the data.  

It is important that issuers are consistently improving the quality of their ESEF tagging, making sure that they are following the ESMA guidance, following best practice and reducing the number of errors in their reports. The most common issues tend to come from scaling, signage, calculations, and extensions. By using XBRL experts and the right tools, you can eliminate these issues and improve your data quality. 

If you are interested in more information on data usage, Corporatings released a ‘Best practices & data utilisation’ report earlier this year. The FRC are also planning to publish their annual lab report on ESEF with a focus on data usage. 

Conclusion 

With so much changing over the next couple of years within digital reporting, it can feel daunting to be faced with so much information. However, it is essential that members of the iXBRL community continue to share as much information as possible with each other through webinars, conferences, and forums. Communication and transparency are key to success, so get in touch with ARKK to discover how you could benefit from our digital tagging expertise.