Good knowledge and understanding of XBRL can turn your mandatory ESEF submission into an opportunity to transform the way your data is presented, and avoid common errors. Here, our ESEF Product Manager, Pierre Pottier, shares why XBRL education is so important, and how issuers can achieve a higher level of knowledge.
ESEF can be viewed as the first real electronic reporting submission; and it’s crucial that every actor in the submission process understands the possibilities and limitations of XHTML and XBRL to get the process right.
Until 2021, the online submission process wasn’t truly authentic; an online document would be produced, but with the characteristics of a physical document more suited for print. This is the first time that issuers face electronic constraints related to data, and it impacts every part and person in the submission process.
Having good knowledge or an ‘education’ in XBRL can help issuers overcome the constraints and successfully navigate the challenges of ESEF reporting. If every actor in the submission process has a good understanding of XBRL, then obstacles at every stage can be overcome.
Turning the report into a digital experience
Today, digital agencies and relation investor departments are required to work with XHTML documents, and there is much more to consider in terms of the structure of the document than before. Now, their work doesn’t end with providing a neat PDF; they have to consider what’s going on ‘behind the scenes’, such as whether the XHTML is well-structured or messy. Depending on their understanding of the format, this can be a problem or a positive opportunity to turn the report into a digital experience, complete with interactive elements. Currently XHTML and XBRL offers advantages in reporting, but looking to the future, reporting in this format could open up real opportunities for companies to provide more engaging, interactive material whilst still providing the structured data that is required.
Controlling the impact of tagging choices
Consolidation departments and auditors will also benefit from having a good knowledge of XBRL language and its limits, particularly in understanding the complexity and technological consequences of the tagging choices they make.
Having a good understanding of XBRL can help issuers avoid common but unnecessary reporting problems, too. Take the time spent on resolving 'problems' within a report, for example. Issuers without a certain level of knowledge of XBRL can spend (and ultimately waste) lots of time on ‘issues' that aren’t warranted, such as trying to delete warnings which are completely normal from a validation report.
A poor understanding of XBRL can also lead issuers to submit a report which has a low level of information within it; or worse, contains false information. This could be in the form of a report which doesn’t show any calculation inconsistency messages, but is not error-free.
So, how can issuers improve their understanding and achieve a certain level of XBRL education? The answer is communication and talking to those in the know.
Why communication with subject matter experts is key
With ESEF still in its infancy, the best way for issuers to successfully navigate the ESEF ‘jungle’ is by being transparent and sharing information that will help make the submission process smoother for everyone.
Consolidation working groups, XBRL task forces and other XBRL organisations are already communicating useful information and tips and tricks for the reporting process to help issuers prepare for submission.
Within organisations, every actor in the submission process – including external agencies – needs to communicate with one another to understand the specificities of their report. This is essential, as no two submissions will be the same. To support this, it’s also important to choose the right kind of reporting software to drive the process and avoid a black box effect.
And communication shouldn’t stop once the submission is complete; in fact, this is a vital time to reflect on the process, what went well and what didn’t, areas of improvement and most importantly, to anticipate changes next year.
A first step towards shared common practices in Europe
There is also the opportunity to create greater consistency in common practices over the coming year. From one country to another, tagging practices, calculation inconsistencies, warnings and other reporting activities are viewed and treated inconsistently. International initiatives are underway to help change country-specific habits to create standardised, Europe-wide common and best practices.
While ESEF undoubtedly presents challenges for issuers, it’s also a great test of the future of financial communication in Europe. The next couple of years will be a source of lessons to be learned for the future of ESEF and ESG reporting, and a great opportunity to define how it will look going forward.
Find out how Invoke can help with your ESEF submission.