What does ESEF mean for EU-listed companies?
ESEF is a new format. For the first time, the consolidated financial statements of EU-listed companies will be freely available in the public domain in a machine-readable format. That means investors and other stakeholders will be able to search IFRS consolidated financial statements using computers, as well as the human eye.
Where should a company start?
Before making any updates, improvements or changes to current annual report preparation arrangements, the first step is to understand the requirements and consider how ESEF may affect your company. Become familiar with the ESEF rules and taxonomy. Review your current annual report preparation process. Get ready to select and deploy new software. Plan to update processes and controls.
Will auditors be checking the ESEF-compliant reports?
The European Commission's staff have suggested that the independent auditor should assure the new digital tagging. The Commission has asked the Committee of European Auditing Oversight Bodies (CEAOB) to explore how the audit of ESEF could be carried out in practice. There may be a mandatory requirement, which is for the regulators to decide. If not, it is possible that some listed companies will ask their auditors to check the ESEF tagging.
What are other companies doing?
ESEF is a catalyst to review the annual report preparation process. Some companies are already speaking with service providers and advisers. Changes to shorten and simplify the annual report in readiness for the new requirement may be on the agenda. Software vendors recognise the scale of the change and are speaking with current and prospective clients about how new systems and processes can be implemented to support ESEF.