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ESMA Approves Single Electronic Format: InLine XBRL

 

ESMA—the European Securities and Markets Authority—gave an enormous boost to InLine XBRL by joining the growing ranks of global jurisdictions adopting this reporting standard. On December 21, ESMA published a feedback statement that adopted InLine XBRL—otherwise known as iXBRL—as the digital format that issuers in the European Union must use to report their company information starting January 1, 2020.

For the past few years, ESMA has indicated a desire to move towards a new European Single Electronic Format (ESEF). ESMA has already published the final draft Regulatory Technical Standards, which include a reporting manual and detailed instructions for issuers to facilitate the implementation of this standard.

ESMA Chair Steven Maijoor has said: “We believe that the vast pool of free, structured financial information that will emerge once electronic reporting starts will trigger technological innovation. The Inline XBRL format has the potential to bring financial reporting into the digital age.”

With the added support from ESMA, the popularity of InLine XBRL has grown so dramatically that by 2020 it’s widely expected that over 32 countries will be using iXBRL for receiving official company reports.

Why the Shift to iXBRL?

IXBRL has the advantage of combining human readable and machine readable formats into a single file. This reflects a growing global trend in the digitization and standardization of regulatory reporting. Moving toward data standardization is expected to 1) simplify the reporting process of collecting data, 2) reduce the cost of preparing and publishing information, and 3) increase the usability and reliability of information that has been reported by reducing errors. 

Experts believe that regulators and financial analysts everywhere will benefit from the adoption of the new iXBRL standard as companies move away from the rather extensive, error-prone and burdensome manual process of collecting data, to a more streamlined, efficient and machine-readable process.

To allow for structured electronic reporting using XBRL, ESMA’s ESEF uses an extension of the IFRS Taxonomy issued by the IFRS Foundation. This taxonomy provides issuers with a set hierarchical structure to be used to classify financial information.

ESMA XBRL taxonomies may contain labels in several languages, and so the new single standard will allow users to compare numerical information in the financial statements across issuers preparing their financial statements in different languages. As financial data reported today moves from static documents to machine-readable XBRL, information is easily transformed to other formats, such as SQL or Excel, avoiding onerous manual rekeying. That’s because the XBRL tags will be embedded in the XHTML document using iXBRL. 

ESMA is not alone in its embracing of iXBRL. In April 2017 the SEC proposed new rules to adopt InLine XBRL and replace the current two-file process, which includes submissions in both HTML and XBRL formats.

What’s more, starting in 2018, the SEC mandated EDGAR filing for foreign private issuers that reported using IFRS along with the technical specifications of the IFRS XBRL taxonomy. The annual financial report contains IFRS consolidated financial statements, which are labeled with XBRL tags, making the labeled disclosures structured and machine readable.

Using this data standard facilitates software-supported analysis, with easy comparison of different reporting periods, line items, and information presented across various companies.

Next Steps

Today, more than 450 foreign private issuers are working on tagging their annual reports using the SEC IFRS XBRL taxonomy. Within the next six-to-nine months, many of them will make these filings public on the SEC’s EDGAR database.

The submissions of foreign private issuers in the United States will give ESMA markets a peek at how their IFRS financial statements will look once they have been tagged in XBRL. These submissions should also serve as a good reference point, helping drive further global regulatory changes towards more streamlined, harmonized data standards. 

For more on ESMA’s adoption of iXBRL, please see https://www.esma.europa.eu/press-news/esma-news/esma-proposes-new-digital-format-issuers’-financial-reporting.

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