ESEF is a new financial reporting format that all issuers on a regulated market within the EU have to follow beginning 1st of Jan, 2020.
The European Securities and Markets Authority (ESMA) has already devised a set of rules to make their annual financial statements compliant with the ESEF reporting format.
One of its key provisions is that the ESEF report must include XBRL tags to make the consolidated financial data digitally available to the public for free.
XBRL is a globally recognized XML standard used for tagging financial data. It helps improve the accuracy and accessibility of financial data by presenting them in a standardized format.
XBRL tags are mainly created to uniquely define the contents of ESEF reporting, compliance, and performance.
It replaces human-readable financial reports with more effective, usable, and accurate electronic versions while making them comparable and sharable very fast.
Selecting and assigning XBRL tags in the annual report to properly define financial information based on the company’s labels will be a difficult affair. The selection of tags will make no sense unless they closely match the financial meaning of the information targeted.
When no regular tag is appropriate in the taxonomy to precisely represent any financial data, the ESEF reporting has the flexibility to create and anchor an extension to a regular XBRL tag/s that is very close to its financial meaning.
HOW XBRL TAGS ARE TO BE ACCURATELY SELECTED
It is necessary to select and assign accurate XBRL tags for the reported financial data of the company.
From preparing, validating, and publishing to analyzing, exchanging, and using financial details, XBRL tagging helps in every activity that would add value to the ESEF reporting.
During XBRL tag selection, a number of factors will have to be taken care of. They are as follows:
Authoritative references
Documentation or Definition
Standard label
Additional attributes like data type, period type, balance type, etc.
With a number of attributes already there to consider, selecting the wrong XBRL tag is very common. It needs thorough reviewing to meet the regulations of ESEF reporting successfully.
The review process is much more than matching the company label with the standard label of XBRL tags. It should take into account other factors like authoritative references, additional attributes to confirm 100% accuracy of ESEF data reporting.
REASONS WHY XBRL TAG SELECTION NEEDS REVIEWING
Scanning through the standard label won’t be enough for the accurate selection of an XBRL tag. Consideration of accounting standards and a detailed review of the different aspects of standard elements in taxonomy are also important.
This review builds confidence in reporting with ESMA beyond labeling or tag matching.
Minimal effort: With the XBRL tagging review, businesses are able to create and submit an accurate consolidated report, lowering their efforts.
Reduced report preparation time and cost: The expenses of ESEF reporting compliance gets automatically reduced due to less preparation time and enhanced data quality.
Reduced rate of extensions: Creating and anchoring extensions to standard tags should be within the limit; otherwise, it may make the report look complicated. The lower the rate of using extensions, the report looks the better. It also gives way to a simple and proper representation of the financial situation.
Reviewing XBRL tags is considered best practice before confirming the financial data to be ESEF compliant and submitting it with ESMA. Businesses should often go for it because it can be a great way to avoid errors and inconsistencies.
A global financial products and regulatory compliance service provider with experience in analytics will prove to be of great help.
No matter how long and tedious the process of preparing and reviewing regulatory documents is, it will automate and accurately manage it.
Ez-XBRL Solutions, Inc. is a licensed and registered financial solutions and regulatory compliance service provider with great experience in ESEF reporting, XBRL tag reviewing, documentation, and more.
To save time and money on XBRL tag reviewing, call Ez-XBRL Solutions, Inc. on (703) 745-2327!!
Article Source: https://ez-xbrl.com/blog/reasons-why-reviewing-xbrl-tag-selection-is-essential-to-esef-reporting/
2482