18 December 2017 | ESMA32-60-204

Final Report on the RTS on the European Single Electronic Format

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Table of Contents 1 Executive Summary ....................................................................................................... 2 2 Background .................................................................................................................... 3 3 Implementing technical specifications ............................................................................. 4 4 Field tests ....................................................................................................................... 7 5 Annexes ......................................................................................................................... 9

5.1 Annex I - Legislative mandate to develop a draft RTS on ESEF .............................. 9 5.2 Annex II Draft RTS on ESEF ...............................................................................10 5.3 Annex III Study Qualitative, Quantitative and Technological Assessment of the

Appropriateness of the iXBRL Technology for the ESEF Assessment of Implementation Approaches ................................................................................. 395

5.4 Annex IV ESMA Field Test Report .................................................................... 434

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1 Executive Summary Reasons for publication Based on article 4(7) of the Transparency Directive 2004/109/EC (TD) as last amended by Directive 2013/50/EU, the European Securities and Markets Authority (ESMA) is required to develop a draft Regulatory Technical Standard (RTS) specifying the electronic reporting format in which issuers should prepare their annual financial reports (AFRs) from 1 January 2020. Contents Section 2 of this final report summarises the ESMA legal mandate, the steps taken in the consultation and its outcome. The consultation process and its outcome are set out in more detail in the Feedback Statement1 on the consultation on the RTS on ESEF, which was already published on 21 December 2016. This report should be read in conjunction with the Feedback Statement. Furthermore, this report explains in Section 3 the steps followed to develop the detailed technical specifications necessary for the implementation of the European Single Electronic Format (ESEF). Section 4 briefly summarises the field tests conducted for the purpose of testing the technical solution proposed in the draft RTS. Annex II contains the full text of the draft RTS. Next Steps ESMA has submitted this Final Report to the European Commission (EC). The EC has three months to decide whether to endorse the technical standard.

1 Feedback Statement on the Consultation Paper on the Regulatory Technical Standard on the European Single Electronic Format (ESEF), ESMA/2016/1668, 21 December 2016; https://www.esma.europa.eu/sites/default/files/library/2016-1668_esma_feedback_statement_on_the_rts_on_esef_0.pdf

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2 Background 1. Article 4(7) of the TD as last amended on 6 November 2013 assigns ESMA with the

responsibility to draft an RTS specifying a European Single electronic format (ESEF) in which all annual financial reports of issuers with securities listed on regulated markets shall be prepared. The RTS shall apply to annual financial reports containing financial statements for financial years beginning on or after 1 January 2020.

2. According to the TD ESMA is required to: i. make due reference to current and future technological options; ii. carry out an adequate assessment of possible electronic reporting formats; iii. conduct appropriate field tests.

3. Article 10 of the ESMA Regulation2 requires ESMA, where appropriate, to conduct public consultations on draft technical standards, analyse the potential related costs and benefits, and request the opinion of the SMSG.

4. ESMA has published a Consultation Paper (CP) on the draft RTS on ESEF on 25 September 20153. The feedback received on the CP was analysed and summarised in a Feedback Statement published on 21 December 2016. Based on the outcome of the consultation, the Feedback Statement set out the cornerstones of the draft RTS, which are as follows:

i. All annual financial reports shall be prepared in XHTML. ii. Where the annual financial report contains IFRS consolidated financial

statements, these shall be labelled with XBRL tags, which shall be embedded in the XHTML document using the Inline XBRL technology.

iii. For the first two years, only the primary financial statements shall be mandatorily marked up; afterwards the entire set of IFRS consolidated financial statements shall be marked with XBRL tags.

iv. The IFRS Taxonomy, issued by the IFRS Foundation has been specifically developed to mark-up IFRS financial statements in a structured electronic format. It is therefore appropriate to use the IFRS Taxonomy to mark up the IFRS consolidated financial statements.

2 Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority) 3 Consultation Paper (CP) on Draft Regulatory Technical Standards on European Single Electronic Format (ESEF) ESMA/2015/1463, 25 September 2015; https://www.esma.europa.eu/sites/default/files/library/2015/11/2015-1463_esma_consultation_paper_on_esef.pdf

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5. This report should be read in conjunction with the Feedback Statement. The Feedback Statement includes also a position paper by the Securities Markets Stakeholder Group (SMSG), which is the key ESMA stakeholder consultative body composed of 30 individuals from 17 Member States representing academics, consumers, financial institution employees, financial market participants, small and medium sized enterprises as well as users of financial information. According to Article 37(1) of the ESMA Regulation, ESMA shall require the SMSG to give its advice on any consultation related to RTS. Furthermore, the Feedback Statement also contains a Cost-Benefit Analysis (CBA) of the draft RTS.

6. According to Article 4(7) of the TD, ESMA should submit its draft regulatory technical standard to the Commission at the latest by 31 December 2016. However, due to significant budgetary restrictions, ESMAs Board of Supervisors decided in January 2015 to postpone the IT projects related to the requirements in the amended TD, including the work on the RTS on ESEF, beyond 31 December 2016. ESMA informed4 the European Commission that the submission of the RTS would be delayed.

3 Implementing technical specifications Assessment of implementation options 7. In addition to the cornerstones of the RTS that were already set out in the Feedback

Statement, further detailed implementing technical specifications had to be developed to ensure consistency, accuracy, completeness, comparability and further usability of the data in ESEF. In the course of this work, the following matters had to be considered:

i. Whether the IFRS Taxonomy should be extended with a regulatory extension taxonomy and if so whether it should be an extensive taxonomy (business extension) or a very limited and simple extension taxonomy (technical extension);

ii. Whether issuers should be allowed to extend the taxonomy by themselves and if so, whether they should have absolute liberty to do so or whether a framework should be developed to guide this activity (controlled extensions);

iii. Whether all information in the financial statements should be marked up in detail or whether entire sections in the financial statements should be marked up with one markup (block tagging) only.

8. To develop the implementing technical specifications, ESMA commissioned a study to assess different implementation approaches for ESEF based on a scoring model (the study is included in this Final Report as Annex III). In the first step, assessment criteria

4 Letter to the European Commission from 21 December 2016, ESMA/2016/1621 https://www.esma.europa.eu/sites/default/files/library/2016-esma-1621_letter_to_ec_regarding_postponement_of_esef_rts.pdf

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were defined and afterwards it was assessed to which extent the different implementation options would fulfil the defined criteria. The criteria had different weights to reflect their relative importance and are presented in Table 1 below.

Table 1 Criteria used in the scoring model

9. The outcome of this scoring model can be summarised as follows: i. A limited and simple technical regulatory extension taxonomy should be

prepared. ii. When preparing taxonomies, it is very difficult to foresee all the possible

ways in which issuers might present their financial statements. Therefore, issuers should be allowed to extend the IFRS Taxonomy if necessary. However, there should be guidance as to how issuers create extensions to the applicable taxonomy (controlled extensions), otherwise the data risks becoming difficult to be consumed.

iii. In the primary financial statements (statement of financial position, statement of profit or loss and other comprehensive income, statement of changes in equity and the statement of cash flows) each number should be separately tagged (i.e. marked up with machine-readable XBRL meta-data). Thus, the primary financial statements are marked up in detail. In the notes to the financial statements, entire sections could be marked up with one single tag (block tagging).

Development of the implementing technical specifications 10. Based on the outcome of the study assessing dif