iXBRL and ESEF

Structured reporting for the consolidated financial statements of UK listed companies

Structured reporting is a hot topic for anyone working on annual reports. New FCA rules require listed companies to publish their annual reports in a machine-readable format. The rules are complex and proving challenging to implement. We can help.  

The shift to structured reporting

What will change?

Listed companies need to prepare their annual report in XHTML format, tagged as machine-readable data. Investors and other stakeholders will be able to search the consolidated financial statements using computers as well as the human eye.

The rules we’re talking about are the FCA’s Disclosure Guidance and Transparency Rules (DTR 4.1) which stem from the amended Transparency Directive.

Where do we start?

Before making any updates or changes to the way you prepare your annual reports, the first step is to become familiar with the new rules and consider how the shift to structured reporting might affect your company.

Will existing iXBRL tagging for HMRC provide a solution?

Unfortunately not. Tagging consolidated financial statements is different. There are new rules and taxonomies that require new software. You must publish your report four months after the year end (a much tighter deadline than for HMRC). And any errors will be open to public scrutiny rather than a private matter with HMRC.  

Will the auditors be checking the new tagging?

In time, we expect there will be a mandatory role for the auditor. Already, the FRC has indicated that assurance required by law or regulation would be a permissible service to provide to audit clients. But we haven’t worked out the details yet.  

What are other companies doing?

Companies are learning about the requirement and speaking to service providers and their advisers. They might be looking to shorten and simplify their annual reports in readiness for the new requirement. Others are already taking practical steps—like preparing a mapping report to guide their tagging choices, or doing a dry run based on their prior year annual report. Software vendors are speaking with clients about how they can implement new systems and processes to work with iXBRL.

Does this apply in the UK?

The FCA implemented the requirement in the UK and has added it to DTR 4.1 in the Handbook. In November 2021, the FRC and FCA issued a joint letter to CEOs, reminding issuers of their obligations and highlighting expectations on quality. The Department for Business, Energy & Industrial Strategy (BEIS) has published The UK government’s position on the effect of the ESEF Regulation. The digitisation of financial statements is a global trend and we are not surprised at the level of interest structured reporting is generating in the UK.

Our point of view

Having freely-available, machine-readable access to the consolidated financial statements of every UK and EU-regulated listed company is a significant change. It will make it easier for regulators and other stakeholders to work with the data and compare it across a peer group, opening up new possibilities.

Ultimately, structured reporting is the application of a technical format. It doesn’t prompt new information to be produced; it’s about making existing information available in both human-readable and machine-readable forms. So it seems reasonable to view this as mostly a regulatory compliance exercise.

Preparing annual reports is challenging. Some will use ESEF as a springboard to improve their annual report processes, while others will bolt on ESEF compliance to existing approaches.  Quality and cost outcomes will be wide-ranging.

What are the next steps

Right now, it’s important to get to grips with the new regulation and what it means for you. You’ll want to consider the lessons already learned, identify areas for improvement, present the options and devise a plan. Doing it well can involve getting trained up on the requirements, understanding how existing processes work, knowing where judgements will be involved and having conversations with current and potential service providers.

As your ESEF processes mature, you’ll be able to provide more cost-effective, high-quality, digital information for the people who use your consolidated financial statements.

How we can help

Voluntary ISAE 3000 assurance

The independent seal of approval 

For entities with a listing in the UK on the London Stock Exchange, we offer private assurance, using ISAE 3000 as the applicable standard, to audit clients who have already filed their annual financial report in accordance with ESEF and wish to have independent assurance over that filing. This can help you show you have strong processes and controls in place when it comes to the quality of your annual ESEF compliance.

Review and recommend

Have you chosen the right tags?

We’ll check the quality of your tagging with our review and recommend service. We’ll detail the appropriate tagging for your disclosures, then compare our tags with yours (including any custom tags) and explain what should change. We’ll suggest which tags will convey the clearest accounting meaning, and take you through the report we produce. 

ESEF eLearning

Building ESEF with block tags

We’ve created three eLearning modules on the ESEF requirements. We explain the rules with examples, addressing areas where experience shows that troublespots can arise. Module 3 covers block tagging and nesting in detail. Common errors and problems that can arise with sign, scale & decimals, and calculations are brought to life using illustrations and knowledge checks. And once you’ve had some practice online, we can run follow-up workshops for the full blended-learning experience.

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ESEF Module 3 showreel

ESEF mapping report

A taxonomic blueprint for your tags

Our accountants can map the relevant parts of your consolidated financial statements to tags in the ESEF or UKSEF taxonomy. We’ll produce a tailored mapping report for you. This is your blueprint showing you which tags to choose and where they go, as well as which extensions you need and how to anchor them to the taxonomy. It will help guide your tagging decisions no matter which software you choose.

ESEF mapping report

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