Why XBRL is required?

European Securities and Markets Authority (ESMA) is an independent EU Authority that contributes to safeguarding the stability of the European Union’s financial system by enhancing the protection of investors and promoting stable and orderly financial markets. It achieves this by: assessing risks to investors, markets and financial stability, completing a single rulebook for EU financial markets, promoting supervisory convergence and directly supervising credit rating agencies and trade repositories.

In 2013 the Transparency Directive, which sets rules on harmonisation of transparency requirements of issuers, was amended to include, amongst others, a requirement for issuers to prepare their annual financial reports (AFRs) in a single electronic reporting format. ESMA was assigned the responsibility to develop regulatory technical standards (RTS) to specify this electronic reporting format.

ESMA has recently mandated European Single Electronic Format (ESEF). The ESEF is the electronic reporting format in which issuers on EU regulated markets shall prepare their annual financial reports in XHMTL format, which is human readable and can be opened with any standard web browsers from 1 January 2020. Where AFRs contains IFRS consolidated financial statements, these shall be labelled the XBRL ‘tags’, which make the labelled disclosures structured and machine-readable.

The objectives of the provision are to make reporting easier for issuers and to facilitate accessibility, analysis and comparability of annual financial reports.

Beneficiaries of XBRL or ESEF data:

Regulators:

  • Greater transparency through ease of analysis of the regulated entities filings
  • Increase data accuracy
  • Dramatically reduced the time to process filings from weeks to days
  • Rise in analyst productivity
  • Validate and review data much more efficiently and usefully than they have hitherto been able to do.

Corporate Community:

  • Cost savings in preparation, report creation, analysis. High flexibility through the use of dashboard based business rules. This leads to significant savings in man hours and lead time in compliance and consolidation
  • Faster availability of data into standard reports
  • Extracts data from accounting packages and makes it standardized and portable
  • Provides a common framework of definitions
  • Easy data handling due to standardization and automation, centralization of delivery
  • A pioneering status among enterprises in the use of XBRL. Image enhancement in the marketplace through Increase of quality and consistency of data

Auditors:

  • Automate financial statements handling, cutting out time-consuming and costly collation and re-entry of information.
  • Accurate and Quality Data
  • Facilitates audit trail

Equity Analyst/Investment Banker/Credit Analyst/Investors:

  • Easier access to financial data
  • Easier analysis and comparison of financial data
  • Utilizing a publicly available XBRL database of Risk Return filings or prospectuses, could easily, in a matter of minutes, identify funds for review based upon fund type, return history and expense information
  • Simplify the selection and comparison of data, and deepen their company analysis
  • Time required for analysis, validation and arranging financial information according to the needs is greatly reduced.

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