27 Jun 2022
| Par Pierre Pottier, Invoke ESEF Product Manager | Invoke

In 2023, (based on 2022 data) a new regulatory requirement will be introduced: block tagging of the notes to your financial statements. Here is a short FAQ to answer your main questions on the subject.

  • ESEF Reporting
  • Invoke ESEF

→ What is block tagging?

This is the practice of tagging information contained in your report when it refers to items in a list of tags contained in the ESEF base taxonomy. The characteristic of block tagging is that information is marked up by zones: it is not a question of tagging each figure in your notes, but of identifying the text zone relating to a note tag.

→ When should you start block tagging?

Block tagging of the notes is mandatory for financial statements starting on or after 1 January 2022.

→ What are the mandatory tags?

Block tagging relates to the notes of your financial statements. A series of 252 tags have been identified by ESMA as mandatory. This implies that, as with the general information required in 2022:

  • If one of these tags corresponds to information present in your notes, it is mandatory to tag the latter.
  • If one of these tags does not correspond to any information present in the report or that is useful for the reader, it should not be used.

→ How many block tags should I use?

Not all of the 252 tags will be used. It has been estimated that between 50 and 120 tags should be used, depending on the issuer and its industry.

→ What is a block tag?

In your report, a tagged area may span several pages or apply to a note, a paragraph, a sentence or a figure. A block tag may also be spread over several zones, and the same zone may be tagged with several tags as deemed appropriate by the issuer. Please note that the ESEF taxonomy contains several thousand other tags, which are not mandatory, which you may choose to use as you see fit (as long as no suitable mandatory tags are available).

→ What are the different types of block tag?

The list of 252 mandatory tags can be divided into three main categories:

  • General information tags: basic information about the company.
  • Accounting policy description tags: used in relation to type of accounting items, for example, "Description of accounting policy for finance costs".
  • Accounting information tags: for example, "Disclosure of finance cost".

→ Should we create extensions for block tagging?

While it is not mandatory to set up extensions for block tagging, this practice is nevertheless recommended by ESMA, where the information concerned is considered useful to the reader and where no tag in the taxonomy seems to be suitable for tagging the area. Likewise, while it is not mandatory to anchor such extensions to a tag in the base taxonomy, experience and initial discussions recommend that this be done.

→ Block tagging vs. Detailed tagging

Block tagging differs from detailed tagging in that it does not involve tagging data down to the nearest word or figure, but rather, defining areas deemed relevant by the issuer for the reader's understanding.

Diagram explaining block tagging:

The tagging obligation is shown here in yellow. The exercise will thus be partly dependent on the judgement of the issuer and its exchanges with its statutory auditors to assess the level of criticality of the information to be marked up.

→ In practice, how do you go about block tagging?

The 2022 ESMA reporting manual, which was published in August 2022, provides some specific guidance concerning block tagging (section 1.9):

  • When a disclosure of the notes corresponds to more than one mandatory block tag of different granularity, preparers should use each of them and multi-tag the disclosure with the tags that correspond with their underlying account meaning. Titles and headers have to be tagged also (section 1.9.1).
  • When some disclosures of a table, placed on specific rows or columns, are concerned by a tag that has a narrower level of granularity than the rest of the table, this tag does not have to be applied on the selected rows or columns, but it has to be applied to the entire table (section 1.9.2).
  • ESMA confirms that if a disclosure does not correspond to any mandatory tag, such disclosure does not have to be tagged. Nevertheless, it does not limit the issuer to tag such disclosure with a tag that has a higher level of granularity, and the preparer can also apply a tag from the rest of the taxonomy (a tag that is not included in the mandatory tag list) if the underlying accounting meaning fits with it. If no tag seems to correspond in the whole taxonomy, preparers can also create an extension element to block tag such a disclosure.

The way of block tagging selected by the ESMA and the consequences that multi-tagging will involve (especially concerning the tag nesting) are currently discussed by European experts. We will give more information with practice cases in order to help preparers understand best block tagging practices during the next weeks.

→ What is the best way to prepare for the block tagging obligation?

We recommend anticipating the tagging of the 2022 financial report by working on the 2021 report, and discussing the subject with your statutory auditors. Given that block tagging is a new practice, it is important to discuss with the auditor in order to have their opinion on the way you want to block tag. The current release of your Invoke ESEF solution already allows you to define mandatory block tags and to select any zone of your document to apply the tag. You can mark up several zones with the same tag, or mark up the same zone with several tags.

Current features in the application, such as importing and exporting tags, as well as future functionalities that will be brought to you in the next version, will allow you to take advantage of the tagging done on the 2021 report, to prepare the tagging of the 2022 report.