With the European Single Electronic Format (ESEF) mandate fully underway and most filers either through their first or second year, the European Securities and Markets Authority’s (ESMA) long-anticipated updated reporting manual was released in the autumn. With a host of changes looking to make life easier for filers, including an updated approach to warnings vs errors, the largest change – the long-anticipated ‘block-tagging’ – will create extra tagging expectations on filers.
Block-tagging refers to the new requirements to tag policies and notes, and in some cases where text could apply to more than one tag within the taxonomy, this will introduce the need to multi-tag blocks. This addition was expected following ESEF’s full implementation, and while filers had the option to block-tag voluntarily, it is now mandatory for any submissions with a reporting period after January 1, 2022. The hope is that this will further cement ESMA’s aim to improve analysis and comparability for financial statements and make information more accessible for both businesses and auditors.
What does block-tagging look like?
This of course means a much greater undertaking for filers, tagging not only the primary statements but also all associated notes and policies.
Apart from the obvious additional time required for extra tagging, for filers using auto-tagging software this will provide further challenges. In 2021, ARKK conducted research across more than 100 reports and found that roughly 20 percent of tags would need human guidance to accommodate extension and anchoring. Tagging of notes will push this further, as auto-tagging functionality is unlikely to correctly identify all sections aligned with the taxonomy and cannot support multi-tagging.
The good news for filers is that the same level of granularity will not apply to information in tables, as ESMA has given the option to tag the whole note, meaning that each numerical value does not need to be tagged. XBRL Europe and XBRL UK will be monitoring the outcome of this to ensure the consistency and readability objectives ESEF introduced can still be met by tagging the full table as one element.
It is not uncommon to see new reporting requirements go through frequent taxonomy updates in the first few years; supporting iXBRL tagging since its introduction in 2009, ARKK has seen a pattern of nearly annual changes to the Financial Reporting Council’s UK and Irish taxonomies and it’s inevitable ESEF and the UK SEF will follow the same pattern. With some filers only preparing to submit ESEF for the second time this year, more updates can be expected.
Accelerating ESEF filings
In addition to this extra requirement, last year saw some filers struggling with their final submission as they found trying to combine the xHTML tagging with a converted Excel template resulted in many iterations of the same return in an attempt to get the first submission spot-on. A better solution is to have the output file resemble the original PDF exactly, consolidating the conversion of tags into one complete process.
At ARKK we’ve successfully supported more than 450 ESEF submissions across 10 jurisdictions (and counting!). Our tagging team, many of whom have been tagging iXBRL returns since before the ESEF mandate was even released, are dedicated to knowing the taxonomies inside out. If you want to take learning the new ESEF updates off of your to-do list, get in touch today.
This content is provided by ARKK and did not involve IR Magazine journalists. For further information on ARKK please click here.
