Most issuers have wrapped up filing their 2019 financial reports. Here are 5 things every issuer should be doing this summer to prepare for their first ESEF Inline XBRL filing. Most issuers have wrapped up filing their 2019 financial reports. Now, it’s time to begin focusing on what your company needs to do to be ready for the ESEF Inline XBRL requirements for your 2020 filing. January may seem a long way off, but here are five important things you can begin doing today to put your company in good position:
1. Select a vendor partner to help with XBRL tagging.
Because most companies are new to XBRL, aligning with XBRL expertise is the foundational step in preparing for your 2020 filing. Here’s what to look for as you evaluate your options:
In this case, accuracy is synonymous with quality. As I discussed in a previous blog, quality and accuracy in XBRL tagging is critical to ensure your XBRL tells the right story to the public. As you evaluate a vendor, consider how they will make sure the proper XBRL tags are selected — so this task won’t be left up to you in Year 1. Also consider how they will help you review and approve your XBRL data before filing. Ultimately, the question of quality comes down to experience: You want a vendor that has extensive experience in XBRL tagging and is intimately familiar with the IFRS Taxonomy used in the ESEF requirements.
Complying with the new ESEF requirements will undoubtedly add some time to your process of preparing and filing your 2020 financials. As you plan ahead for this additional time, evaluate how long a vendor will require for XBRL mapping and tagging of your face financials. Make sure you account for time needed for your internal team to review, as this will be new for them. Finally, if your financials will be audited before filing (we’ll discuss potential audit requirements later on), you need to consider if your vendor solution will allow enough time for the audit to be completed before the filing deadline.
There’s no avoiding some extra effort on your end, but you should aim to minimize the disruptiveness of the ESEF shift as much as possible. Seamlessness is the concept to keep in mind: A vendor solution should not require you to change your workflows (unless you want to change them), and it should allow you to use tools you’re familiar with (such as Microsoft Word and Excel). Best-in-class solutions can make it as easy as just following the exact same process you’re currently using to create a PDF of your financials — and the vendor can take it from there.
Some organizations are looking at the ESEF shift as an opportunity to make changes — to address recurrent pain points they experience every year in the creation of their financials. Leading solutions can layer on sophistication as you want. But sophisticated shouldn’t mean complicated. Again, seamlessness is key: You shouldn’t have to change anything you don’t want to change, and you should be able to continue working with the tools with which you’re familiar.
Most companies have budgeted for some additional expense in making the shift to ESEF Year 1 requirements. Cost is obviously a consideration in vendor evaluation, but make sure you’re looking at cost through the lens of value. Beware of low-price offerings that will not ultimately measure up to your accuracy and quality standards. But also know that more expensive doesn’t necessarily mean better. As mentioned in the previous point, you don’t need to completely transform your process and toolset — and this shouldn’t require a full-on enterprise software installation.
It really comes down to sensible value. Make sure you’re getting what your company needs — not more, not less.
2. Work with your vendor to prepare initial mapping
Once your 2019 financial statements have been completed and filed, your vendor can begin using them to conduct the preliminary mapping for XBRL tagging (“initial mapping”). This initial mapping will be particularly productive this year, because there are no significant changes to the IFRS Standards and IFRS Taxonomy between 2019 and 2020 (unlike 2018-2019, where more substantial changes had a big impact on face financials, for example in relation to leases). Initial mapping also gives you the opportunity to review and approve XBRL tags before your vendor begins tagging your 2020 financials.
3. Talk with local authorities to understand unique filing requirements
In some cases, there may be additional requirements or specifications from your local authorities. For example, in Germany, national authorities are considering retaining a traditional PDF submission, in addition to the xHTML filing. In Poland, the local authority has outlined a plan to build a new platform for accepting filings, to be operational in 2022. In any case, it is always useful to stay in touch with local authorities.
4. Familiarize yourself on XBRL and ESEF requirements
Even if you’ve partnered with an expert vendor, it’s smart to make sure you’re reasonably informed on the rules and requirements of this major reporting change. You certainly do not need to read the entire IFRS Taxonomy and learn its 5,000+ elements. But it’s helpful to have a basic understanding of what electronic reporting is — and why it’s ultimately a big step forward.
Here are some resources I frequently point people toward for more information:
- ESEF iXBRL Overview
- Blog: The ESEF Inline XBRL Mandate Essentials
- Blog: The ESEF Inline XBRL Mandate: Burden or Benefit?
- Blog: Will Your XBRL Tell Your Company Story the Way You Intended?
- Webinar: Navigating the ESEF Inline XBRL Mandate
- Weekly Webinar: ESEF Inline XBRL Mandate. What it Takes to be in Compliance.
- Official ESMA ESEF Site
5. Speak with your auditor in early Q3
Audit requirements for 2020 financials are being finalised, but we expect that some form of auditor’s attestation of XBRL will be required. The details are not sorted out yet — so if you call an auditor today, you likely won’t get any solid answers. But by early Q3, you should talk with your auditor to proactively share how you are approaching XBRL tagging — so there are no surprises at audit time. Discuss what your auditor will need from you, as well as timing/scheduling. Auditors will most likely focus on the initial mapping of face financials from 2019, since checking the mapping is the bulk of the work for the auditors (and IFRS Standards are not changing significantly for 2020).
It is natural to want to slow down a bit as you wrap up the busy season of filing the 2019 financial information. But it’s always smart to keep an eye on the coming year — especially given the major changes coming for the 2020 report. Start building your internal to-do list and checking these items off. You’ll find that you can get a significant portion of the work out of the way relatively early on — and you’ll appreciate that extra time and “breathing room” as the deadlines approach next spring.
This blog series features Bartek Czajka, Director of XBRL Consulting Services at Toppan Merrill. Bartek is one of the foremost experts on XBRL, having created the majority of updates and additions to the IFRS Taxonomy between the years of 2010-2017 during his tenure as Senior Technical Manager at the IASB, the organisation that issues the IFRS Standards. When ESMA was tasked with developing the European Single Electronic Format (ESEF), Bartek directly helped ESMA define the shape and form of the XBRL taxonomy to be used. He also participated in the field test organised by ESMA with 25 European issuers to assess the cost and benefit of using XBRL for ESEF. There is no one more qualified to help our clients understand, successfully implement, produce and confidently move forward with XBRL.