Katsaus ESEF-raportoinnin käyttöönoton tilasta julkaistu
Current state of affairs in ESEF reporting in Finland
By Elina Koskentalo & Esko Penttinen, XBRL Finland
The European Single Electronic Format (ESEF) is the electronic reporting format in which publicly listed companies in the EU area shall prepare their annual financial reports in the future. ESEF requires companies to provide their consolidated annual financial statements tagged in inline XBRL (Extensible Business Reporting Language). The origins of the reporting mandate lie in the 2013 Transparency Directive, which set rules for financial reporting in financial markets. The European Securities and Markets Authority (ESMA) was assigned the responsibility to develop regulatory technical standards and to specify this electronic reporting format while the local supervisory authorities have supported the issuers locally in their ESEF implementations. Local supervisory authorities are also responsible for the enforcement of the ESEF requirements. The overall objective of ESEF is to make reporting easier for issuers and to facilitate accessibility, analysis and comparability of annual financial reports.
In order to have a better understanding how the Finnish market is responding to the ESEF requirements, XBRL Finland reached out to Finnish issuers (i.e., publicly listed companies) and service providers. Two surveys targeted at issuers probed the status of XBRL projects and issuers’ opinions towards ESEF requirements. These surveys were conducted in two waves (April 2019 and March 2020), the results of which can be accessed on the XBRL Finland webpages[1]. More recently, in January 2021, we asked ESEF service providers to indicate the status of their customers’ project status (complete/incomplete) and deployment model (in-house tagging/outsourced tagging). We received information from six service providers: Clausion, CtrlPrint, Intito, IRIS, Oracle, and ParsePort, covering altogether 122 issuers out of the roughly 150 issuers under the ESEF reporting requirement. The results of that enquiry are reported in this news piece.
Overall, the surveys targeted to issuers in 2019 and 2020 indicated that ESEF projects were progressing and that companies’ perceptions regarding ESEF were improving in the course of time. For example, respondents found that their employees are increasingly knowledgeable on XBRL[2] (average 2,9/5 in 2020 compared to 2,1/5 in 2019), and that it is less difficult to find expertise on XBRL in Finland (2,6 in 2020 compared to 3,3 in 2019). Continuing on a positive note, the cost of implementing ESEF seems to be in control (fewer respondents felt that implementing XBRL incurs considerable costs: 3,1 in 2020 compared to 3,4 in 2019). Furthermore, the results of the two issuer surveys indicated that the majority of the companies will choose to opt in for the minimum requirements of the ESEF. While 33% of issuers indicated that they would be willing to extend reporting to quarterly and half-year reports, at the moment, most issuers are not willing to pursue other voluntary extensions such as extending the XBRL tagging to management reports.
The latest enquiry conducted among service providers in January 2021 reveals that 43% of the customers of the six service providers mentioned above have already completed their ESEF projects. Depending on the viewpoint, it is either alarming or soothing to notice that relatively few of the issuers that have chosen one of the six service providers have not started their ESEF project (2%) or chosen their deployment model (15%). ”We are amazed to see how well especially the Finnish companies have adopted the XBRL format – and how most of them have been able to implement it quite easily”, tells ParsePort CEO Kim Eriksen.
Like in most information systems projects, there are many alternative ways to proceed with ESEF. One of the critical decisions to make from the issuer standpoint is to choose whether to tag the financial statements to the ESEF taxonomy using internal or external experts. Our survey indicates that 18% of the issuers have chosen to tag the financial statements by themselves, while 60% of the issuers have decided to go for the deployment model where an external party (either the technology service provider or a consultant) makes the tagging. “Maybe more issuers choose to tag themselves, when they gain more knowledge about ESEF as well as the tools in use”, speculates Taru Kettunen from Clausion. While service providers can assist in the first-year implementations, it is important to note that issuers are – in the end – responsible for their annual financial reporting. ”It’s crucial to understand that XBRL isn’t a one-time project but part of continuous financial reporting and therefore it’s important that the issuers gain the ability to understand and produce their own reporting by themselves”, reminds Kaisa Heikka from CtrlPrint.
While the mandatory ESEF reporting was initially planned to start for the 2020 annual financial statements that would be filed in 2021, due to Covid-19 and its repercussing disruptions in many areas of life, a one-year delay has been offered to the EU Member States to postpone the start date of the mandatory ESEF reporting. In Finland, the Ministry of Finance[3] and Financial Supervisory Authority (FSA)[4] have published their announcements on the ESEF postponement. For Finnish companies, this extension means that for the 2020 annual financial statements, this will be a year of voluntary reporting and the enforced, mandatory reporting will commence from the 2021 annual financial reports. Our results indicate that – from a technical perspective – a large majority of the Finnish issuers will be ready to report the 2021 annual financial statements when the mandatory reporting starts and it is safe to say that even many of them would be ready to report already their 2020 financial statements in ESEF format. ”From the perspective of the local Finnish Financial Supervisory Authority, we have been pleased to see such a wide range of software providers offering their services on our relatively small Finnish market”, says Riitta Pelkonen from the Finnish FSA. However, as always, it is a question of getting the remaining technology laggards to join the initiative in due time.
Helsinki, 20.1.2021
[1] https://fi.xbrl.org/wp-content/uploads/sites/17/2020/03/ESMA-XBRL-2020-Survey.pdf
[2] These questions were asked on a 1-5 Likert scale (1 = strongly disagree … 5 = strongly agree).
[3] https://vm.fi/en/-/valtiovarainministerio-valmistautuu-arvopapereiden-liikkeeseenlaskijoiden-esef-tilinpaatosraportoinnin-lykkaykseen
[4] https://www.finanssivalvonta.fi/en/publications-and-press-releases/news-releases/2020/fin-fsa-will-not-act-upon-non-compliance-with-the-requirement-to-publish-esef-financial-statements-in-2021/
