13 Oct 13/10/20 – ESEF: Potential Postponement
Yesterday, a lively series of ESEF presentations took place at a virtual meeting arranged by the Brussels based body, Accountancy Europe (https://www.accountancyeurope.eu/about-us/). The main focus of the meeting was to discuss the audit & compliance around the new ESEF mandate. However the main breaking news was an announcement that the European Council are considering an optional one year delay to the planned ESEF implementation schedule ie. Companies would have the option to implement ESEF under the original timetable or postpone this by one year.
The other key point, coming from the meeting, was whether the ESEF iXBRL tags, which every EU stock exchange company is responsible for applying to their Annual Financial Report (AFR), needs to be externally audited. Although there were no firm conclusions coming from the meeting some of the key recommendations/points highlighted were as follows:
- The CEAOB (Committee of European Auditing Oversight Bodies) recommends that ESEF tags applied to company accounts will need to be externally audited. It is now down to the national accounting/audit bodies in each country to implement this recommendation, as appropriate, based on existing national laws.
- A Company’s auditors should not put themselves forward to perform the tagging work themselves
- For the first two years, only the primary financial statements require ESEF Tagging; afterwards the entire set of IFRS consolidated financial statements shall be marked with iXBRL tags (sometimes referred to as ‘Block Tagging’). Under current rules, ESEF ‘Block Tagging’ will become mandatory for all accounting periods from 1st January, 2022.
- Accountancy Europe (AE) unites 51 professional organisations from 35 countries that represent 1 million qualified accountants, auditors and advisors. Their role is not to implement national accounting/auditing standards but to encourage discussion & debate across all impacted countries. With respect to ESEF, by running this event, AE wanted to move the debate forward around the external audit of the iXBRL tags.
- Alui’s view is that an external audit of the ESEF iXBRL tags will not be feasible for ‘first wave’ implementation companies ie. Those with a year end of 31st December, 2020. The main reason for this is that there simply isn’t the time to logistically implement such a directive given such short timescales. However, this ESEF audit requirement will be coming so our advice to companies is to start preparing for it as soon as practicably possible.