ESEF Reporting: Which Workflow Is Right for You?
The European Single Electronic Format (ESEF) will bring a substantial change to how organisations prepare their annual financial reports. Therefore, it is time to think, discuss and decide how your team will move forward to meet this new requirement. The reality is that you cannot ignore the ESMA mandate.
A critical question we hear from customers regarding the ESEF is: how will it affect my annual reporting timeline and workflow?
In fact, at our ESEF roadshows in Paris and Amsterdam, we polled the senior finance managers in attendance, and 73% of respondents said that they could not accept any delay on their reporting timelines because of the new ESMA mandate. Therefore, it is critical to understand which options are available to limit any possible disruption.
Traditional reporting workflow
It is important to talk to your team now and make sure everyone is familiar with the new mandate, the changes associated with ESEF reporting and how it affects them personally. Additionally, now is the time to consider your reporting workflow, based on your vision for the design of your final products.
With this in mind, let’s look at a traditional workflow scenario—one that may be familiar to you.
In this scenario, you first consolidate your story and financials and share the data to your design agency in Word®, Excel® or InCopy®. You might implement an amend system to make editing easier or liaise with your agency by going back and forth with corrections.
The process to produce a minimal compliance report to fulfil the ESEF obligation in many companies will require the ability to change the document right up to the filing deadline. However, in this scenario, you will most likely need to bolt a tagging service on to your workflow, which dramatically reduces your reporting timeline. Once the file goes to the taggers, it is effectively pencils down—no amends can be made after this point. Therefore, it will be necessary to pull back the finish date by at least two weeks.
In addition to the time required for the tagging itself, any review of the tagging by the reporting team would also need to happen after the document is completed, but still before the deadline. Regarding the audit requirement, the CEAOB guidelines advise that the auditor should evaluate whether the tagged information is free from material misstatements. Therefore, again, this needs to happen post-tagging, which will greatly affect the timeline. Make sure everyone on the team understands this.
Additionally, be prepared to warn the board that they have to sign off on both the XHTML and the tags. It is important to remember that even though you may outsource the tagging, you do not outsource the responsibility of the appropriateness of the tags used. Therefore, the board and committees still need to understand the taxonomy and agree with the decision of the tag and/or the use of an extension.
If you decide to produce a minimal compliance report to fulfil your ESEF obligation and design a separate PDF, this could result in two separate audits—or the PDF might become merely a marketing document. If the content gets split between the reports, this invites risk because edits in one document might not be reflected in the other. Think through your process carefully, and be clear on your goals. Ask yourself and your team: what outcome do you want to achieve?
A connected reporting workflow
Below, you can see an example of how a connected reporting and compliance platform simplifies the 2020 annual reporting workflow.
Since it is a controlled, collaborative environment, everyone can work together on the same report at the same time. Designers can work within the system or within InDesign®. When interacting with InDesign, the designed elements flow back into the Workiva platform, enabling the XHTML with the iXBRL® and PDF to be identical. Auditors can access sections of the report as soon as they are ready. The board can be updated and involved throughout the process, preventing stressful, last-minute reviews.
The key point to remember here is that the iXBRL filing package, the inline viewer package for your website and the PDF are all exported from one main document so all formats can meet the same corporate design integrity that your investors expect. You will see no degrade in design quality, just increased transparency, improved compliance and a better user experience.
Additionally, with a connected reporting and compliance platform, your timeline is under your control and you are not dependent on a tagging provider. XBRL® tagging can happen during the report preparation process, and preparers can work right up until the deadline, all within the same platform. This process minimises risk, maximises your timeline and delivers a consistent output across all formats.
Interested to see how a connected reporting workflow can improve your reporting process? Download this checklist and workflow, and help your team not only ensure compliance with the ESEF, but also add value to your annual reports.
Word and Excel are registered trademarks of Microsoft Corporation in the United States and/or other countries. Adobe InCopy and Adobe InDesign are registered trademarks of Adobe in the United States and/or other countries. XBRL® and iXBRL® are trademarks of XBRL International, Inc. All rights reserved. The XBRL® standards are open and freely licensed by way of the XBRL International License Agreement.
ESEF Excellence Kit: Tackle ESEF, Future-Proof Your Annual Report
Follow the checklist and workflow to achieve ESEF excellence.