European Single Electronic Format (ESEF) reporting
Delay in implementation until “IP completion date”
ESEF introduces requirements for annual financial reporting in electronic format, brought in by the Transparency Directive Amending Directive (the Amending Directive) and implemented in the UK through new DTR 4.1. The Amending Directive requires ESEF reporting for annual financial reports for financial years beginning on or after 1 January 2020. However, on 5 November 2020, the FCA published Policy Statement 20/14 pushing back the date by 1 year so that ESEF will now apply for financial years starting on or after 1 January 2021.
Who does it affect?
Under the Amending Directive, issuers whose shares are admitted to trading on a regulated market must prepare their entire annual financial report in Extensible Hypertext Mark-up Language (XHTML), which will make a company’s annual financial reports machine readable and will replace the current pdf.format. Issuers who prepare consolidated annual financial statements in accordance with IFRS must tag certain disclosures in those statements using digital tags (technically known as Inline Extensible Business Reporting Language (iXBRL)) in accordance with the taxonomy contained in the Regulatory Technical Standard (RTS) made pursuant to the Amending Directive. Notes to the consolidated annual financial statements must also be tagged using iXBRL tags.
The requirement for publication of the annual financial report in XHTML web browser format isbeing pushed back to financial years starting on or after 1 January 2021 (which of course will be for publication from 1 January 2022). This change will now coincide with the requirement for issuers to tag notes to the consolidated financial statements, which requirement will also apply to financial years starting on or after 1 January 2022.
Issuers will still be able to publish and file their financial reports in ESEF voluntarily for financial years starting on or after 1 January 2020.
When do the new rules come in to force?
The new rules will enter into force on “IP completion date” as defined in the European Union (Withdrawal Agreement) Act 2020, that is 31 December 2020 at 11:00 pm. In order to enable issuers to submit annual reports in the ESEF standard, the FCA is upgrading the national storage mechanism facility and currently anticipate releasing the upgrade in January 2021.
This article was written by Victoria Younghusband. For more information, please contact Victoria on +44 (0)20 7427 6707 or at victoria.younghusband@crsblaw.com.