Going digital: FRC offers advice on structured reporting transition for ESEF filers
A highly useful new report from the UK Financial Reporting Council’s Financial Reporting Lab aims to support companies in the move towards high-quality digital reporting. Titled ‘Structured reporting: an early implementation study,’ it draws on a review of 50 early structured reports from across the UK and Europe as companies begin the transition to the Inline XBRL-based European Single Electronic Format (ESEF). These were either prepared voluntarily or originated in countries where ESEF requirements have already come into force this year.
As the report observes, ESEF will make digital data for thousands of companies available for automated extraction, analysis and comparison, and should ultimately make capital markets more efficient. However, the data will only be useful if it is of high quality. “The majority of reports across the sample fell short of the quality that is expected,” it finds, including more than 70% with tagging errors. “Although many issues were identified during the review, almost all issues could be solved with appropriate care and attention. A focus on quality by companies is crucial for a successful roll-out of structured reporting.”
It offers a range of helpful considerations and tips for companies, around three themes. First of these is process, including how to set up the structured reporting process and decisions that need to be made on approach. Second is usability and appearance, which among other points reminds preparers that the structured version becomes the official annual report and should be reviewed and tested carefully, and suggests making it available online with an Inline XBRL viewer. Third, and likely most interesting for our readers, is tagging and a range of common issues to avoid.
In order to fully realise the benefits of structured data, companies should, says the Lab, “be aware that producing a structured report introduces a risk of new types of errors. Plan a review process and look out for common issues such as wrong signs (+ or -) and calculation inconsistencies.” Other areas covered in its advice include choosing the correct tag, minimising unnecessary extensions, and avoiding using concealed facts. We’ve discussed many of these in our series on ‘ESEF Errors and Common Pitfalls’ – and we were pleased to see this referenced in the report. Several interesting additional points appear too, such as the need to tag zeros and dashes that represent zero.
With some clear and worthwhile insights on the transition to ESEF and structured reporting in general, this is a must-read – not just for filers but particularly for software vendors interested in user needs. You can also sign up for a webinar on 7 December.
