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The European Single Electronic Format (ESEF) - Part 3 – Stephanie Buhagiar Camilleri

10 Feb 2020 11:06 | Deleted user
The Accountant – What's Next?  –  Winter 2020 (MIA Publication)
Reference is made to the series of articles published on the European Single Electronic Format Reporting Regime (ESEF)1.
European listed companies (issuers of shares and bonds operating in regulated markets) will have to report their entire annual financial reports (‘AFR’) in ESEF starting with financial statements for 2020. The AFR will be prepared in XHTML format, and IFRS consolidated financial statements data included in the XHTML document will be marked up with XBRL tags. XBRL tagging will be done using iXBRL technology (InlineXBRL2).


The European Single Electronic Format becomes European Law
The last article, issued in Spring edition of the Accountant, referred to the publication on 21 March 2019 of the ESEF XBRL taxonomy files and related documentation to support issuers in the implementation of the requirements set out by the draft Regulatory Technical Standards (RTS) on ESEF.
On the 29 May 2019, the European Commission introduced rules to support the digitalization of corporate reporting.
The European Securities and Markets Authority (ESMA) has prepared an ESEF Reporting Manual and ESEF taxonomy files to help companies in their preparation, intended to be updated on a yearly basis in order to reflect possible updates to the International Financial Reporting Standards (IFRS) taxonomy.
A copy of the endorsed Commission Delegated Regulation (EU) 2018/815 (‘Regulation’) can be found on the Malta Financial Services Authority (MFSA) website under the Capital Markets section, sub-section Continuing Obligations, Commission Regulations. This Regulation has come into force with effect from 18 June 2019. It shall apply to annual financial reports containing financial statements for financial years beginning 1 January 2020 or after as provided under Article 8 of the said Regulation.
Preparers are encouraged to keep up with the informative updates which are being published on the ESEF reporting regime, including amongst others, a series of frequently asked questions. ESMA has issued its 3rd video tutorial addressing common questions received by NCAs and ESMA . Details of the 3rd video tutorial can be accessed through the MFSA website, under the ESEF section.
Auditors’ involvement on financial statements in ESEF
Background
The European Commission services issued a “Questions and Answers” document on the European Single Electronic Format (“ESEF”). Question 7 of this document specifically refers to the requirements emanating from the ESEF Regulation, a binding legal instrument, as being “statutory requirements” within the meaning of Article 28 (2)(c)(ii) of the Audit Directive. Therefore, in addition to existing requirements, statutory auditors of those companies falling within the scope of the Transparency Directive (“Issuers”), are to provide an audit opinion stating whether the corresponding financial statements comply with the requirements set out in the ESEF Regulation.
CEAOB guidelines
On 28 November 2019, the Committee of European Auditing Oversight Bodies (“CEAOB”), with a mandate of ensuring consistency between national audit oversight bodies at EU level, adopted guidelines (“CEAOB guidelines”) on the auditors’ involvement on financial statements in ESEF. Although the guidelines are non-binding and do not constitute an auditing standard, they are considered by the CEAOB as relevant for the auditors’ work on ESEF.
In addition to other guidance, the guidelines specify that the auditor shall determine whether the marking up of information in the electronic report is in compliance with the ESEF requirements. Based on the procedures performed, the auditor should reach a conclusion and express an opinion on the compliance of the marked-up information with the ESEF requirements.
In terms of reporting, the CEAOB acknowledges that specific national legal provisions would have to be considered; however, it is recommended that the conclusion on the Issuers’ compliance with ESEF requirements is provided in the audit report, albeit separate from the audit opinion. Furthermore, the Appendix, to the CEAOB guidelines, provides a summary of the ESEF requirements relevant for the auditors’ work.
A full copy of the non-binding guidelines issued by the CEAOB can be accessed from the MFSA website, under the ESEF section.

Stephanie Buhagiar Camilleri is a Certified Public Accountant and Auditor, currently employed as a Senior Technical Expert at the Securities and Markets function within the MFSA.
               
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