How to Use the ESEF Rules for Extensions and Anchoring
In my last blog post, I looked at tagging under the ESEF rules, and I shared tips on how to ensure you’re making the best decisions in element selection. From that blog, we know that issuers should be selecting elements based on the closest accounting meaning to the information being disclosed.
But, what should you do if the ESEF taxonomy doesn’t contain an appropriate tag for a particular disclosure?
An introduction to extensions and anchoring
First, an important note on tagging before we get into extending and anchoring themselves. While in many cases, reviewing line item concepts is sufficient, it is also important to explore where a dimensional tagging approach may also be appropriate before extending.
It is also worth making sure that you have considered the ESEF Reporting Manual Guidance 1.3.2, which discusses the use of elements from the base taxonomy with a wider meaning "if the marked up report does not contain another disclosure that fully or partially corresponds to the respective taxonomy element."
Remember, extending is done when a filer is unable to locate a standard element tagging approach that represents the accounting meaning. In this case, an extension, or an entity-specific element, should be created.
Since they are unique to an entity and it can be difficult to process what they mean, extensions can cause challenges in data consumption. To help address these challenges, the European Securities and Markets Authority (ESMA) introduced a concept called "anchoring" to identify the accounting meaning behind the extensions.
As such, issuers are required to anchor, or associate, extensions to a standard element (or elements) with the closest accounting meaning.
Key considerations for anchoring
While issuers have likely now heard about anchoring, it is helpful to recap the basics around the requirements and terminology:
- Extensions on the face financials must be anchored to a standard element (Paragraph 1.4)
- If an extension represents a subtotal and its contributors are presented in a direct calculation, the anchor is not required (Paragraph 1.4)
- Concept elements must follow wider-narrower anchoring requirements (Paragraph 1.4 and 3.3):
- All concept element extensions must be anchored to a wider anchor that represents its closest broader accounting meaning or scope of the extension (Annex IV, paragraph 9)
- Concept extensions that represent a combination of a number of ESEF elements should anchor the narrower accounting meaning elements. Note that the guidance suggests that only the significant components of the combination should be anchored. (Annex IV, paragraph 9)
- Dimension and domain extensions fall under the legal anchoring requirement and follow a different arcrole than concepts (Paragraph 3.3)
How does it work?
To help us better understand these key considerations, let's take a look at some examples.
In the example below, the filer has disaggregated, or separately disclosed, the current borrowings by type of short-term debt. In this scenario, extensions are created because no standard elements exist that separately represent types of short-term debt.
These extensions should be associated to a wider anchor to identify their closest accounting meaning. In this case, that represents "Repayments for current borrowings."
In contrast, had the filer disclosed an extension subtotal where the contributors are present, no anchor is required for the subtotal extension element. Here is an illustration:
While issuers should be anchoring all extensions to the element with the closest accounting meaning, as illustrated above, issuers should also provide additional anchors when the disclosure represents a combination of items.
Below, the filer has combined their current trade and other receivables along with their prepayments. There is no standard element that represents this combination, and an extension would be appropriate. Not only would the filer select the wider anchor to the element with the closest accounting meaning of that combination, but the filer should also anchor the significant components.
Is that everything you need to know?
Not quite! We will revisit this topic in our next blog because not only will it be helpful to explore this in more detail, but also because ESMA recently updated their ESEF Reporting Manual, which included changes to the guidance related to anchoring.
While this update does not change the overall legal requirement related to anchoring extension elements, we do still anticipate additional guidance and some impact on the software you use, even at this late stage.
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About the Author
Lisa Teofilo is a Senior Manager of Structured Data Initiatives at Workiva. She focuses on internal XBRL data quality initiatives, as well as leading efforts to ensure customers' filings are accurate and successful. Additionally, Lisa participates in XBRL industry working groups focused on taxonomy refinements and other data quality efforts. Prior to joining Workiva, she was at EY where she spent five years in public accounting, specialising in financial services. Lisa graduated from Illinois State University with her bachelor's in accounting and is a registered certified public accountant in the state of Illinois.