Corporate reporting – FRC report on implementation of ESEF

The Financial Reporting Lab of the Financial Reporting Council (FRC) has published a study on structured electronic reporting after reviewing reports that have already been filed by fifty listed companies across the UK and Europe. The study found that the majority of reports fell below the required standards and it sets out tips for companies when implementing structured electronic reporting.

Under DTR 4.1.14, for financial years starting on or after 1 January 2021 listed companies are required to publish their annual reports in “European Single Electronic Format” or “ESEF” (see our earlier blog posts here and here). Broadly, this means that issuers must publish their annual reports in an XHTML format and electronically tag the financial statements, using tags from a permitted core taxonomy.

Key recommendations in the report include:

• Board-level involvement – Boards and audit committees should set up robust governance procedures for the ESEF process, including deciding whether the company should seek internal or external assurance of tagging (given that the audit of tagging is not currently mandatory in the UK).
• Process – Companies should decide whether the XHTML format will be produced only once the content of the annual report is finalised or whether the two formats will be produced in parallel.
• Publication – Where companies continue to produce a PDF alongside the XHTML version, both formats should be made available at the same time and in the same place on the company’s website.
• Tagging – Companies should select carefully the most appropriate tag that reflects the underlying information, and only create custom tags (or “extensions”) when necessary. The UK National Storage Mechanism runs automated checks on filings when they are submitted – if errors are raised, these must be resolved before the filing can be submitted.