Why and What ESEF is for
A challange for more tan 5000 companies in Europe
The era of annual reports on the Internet has arrived: we must say goodbye to paper. The European Transparency Directive has among its objectives the European market for investors. Using the IFRS accounting model is necessary, but not sufficient: there are 23 state languages in Europe, and computers use their own binary languages.
The solution is the European Single Electronic Format (ESEF), promulgated by the European Securities and Markets Authority (ESMA). The annual report is prepared as a file, visible in any internet browser, in one of the 23 languages, while inside each figure is labelled with its corresponding IFRS item according to XBRL computer language. In this way, the items in the annual report can be read by computer with total precision, without doubts of interpretation, nor the delays and confusion of re-reading from paper. And no matter what language the annual report is in, the computer will present the figures in any of the 23 languages defined for the ESEF. And even better: with the figures already in his computer, the investor can already compare between companies quoted on European stock exchanges, and therefore optimise his portfolio according to his criteria.
It is a technological corollary of the efficient-market hypothesis (asset prices reflect all available information, Nobel Prize winner Eugene Fama) already implemented with similar technology in the SEC USA.
As an additional novelty in Continental Europe, the ESEF format is extensible, so that each company can create its own accounting items if it does not find a precise match in IFRS. It is no longer the typical closed and unattractive form: each regulatory annual report can now be edited with details, text and graphics.
The regulatory requirement is that the same annual report that is sent to the regulator is the one published for shareholders: thanks to the ESEF, there is no longer any need to produce a superb annual report on paper (or its equivalent in PDF) but to send the regulator a dry digital form.
ESEF will be mandatory for the annual reports of listed companies (issuers) in Europe, mandatory challenge for more than 5000 issuers. The European Securities and Markets Authority (ESMA) submits the ESEF technical regulation to the European Commission, which approves it and promulgates it in the Official Journal, being mandatory since then. The EU Transparency Directive is the legal framework for this model.
In the 23 languages of the European Union
Technologically, ESEF involves the move to internet-oriented publication with the standard web format xhtml (instead of the classic .pdf paper-oriented), plus the standard format iXBRL to facilitate the assimilation of figures and data from financial statements directly by computers, without the need for re-keying (reliability and speed). ESEF is ready to work in the 23 languages of the European Union.