Starting from 2021, companies within the EU that are listed on a public exchange must publish their financial statements tagged using a markup language called XBRL. Phalanx Software, in collaboration with Grant Thornton Malta, can take your financial statements and tag them appropriately using XBRL.
ESMA, ESEF and XBRL
The European Securities and Markets Authority (ESMA), one of the European Union's independent authorities, is responsible for implementing the European Union's Transparency Directive of 2013. The Directive requires that public companies publish financial statements in conformance with the regulatory technical standards (RTS) issued by the ESMA.
The RTS specifies that the financial statements should be tagged using a markup language called XBRL. ESMA have published a taxonomy of XBRL elements, called the European Single Electronic Format (ESEF), that should be used when marking up documents. The ESEF taxonomy is based on the IFRS accounting taxonomy and the concepts within are familiar to anyone who is proficient with the language typically used within financial statements.
Advantages of XBRL
The main advantage of using a single, shared digital format for financial statements is that the information contained within is portable and allows anyone to automatically import the data into spreadsheets or analysis tools. Furthermore, the XBRL standard defines a way of embedding XBRL data inside of HTML documents (called inline-XBRL). This means that tagged financial statements, in HTML format, remain human-readable and accessible.
ESMA have recommended issuers to look at the financial statements, linked here, prepared by the Global Legal Entity Identifier Foundation which are correctly tagged according to the ESEF format. Notice that the linked financial statements are both human-readable and viewable in a standard web browser, and a viewer can highlight and describe the financial facts contained therein.
The base ESEF taxonomy issued by ESMA contains a comprehensive set of concepts. However, preparers of financial statements will frequently make reference to concepts which are not necessarily well-defined within the ESMA taxonomy or which apply exclusively to the issuer. For this reason, ESMA encourages preparers to issue a so-called taxonomy extension to define extra concepts not present within the base ESEF taxonomy. New concepts are then assigned semantic meaning using a process of anchoring where a new concept is associated with the closest related concept within the base ESEF taxonomy.
Phalanx Software, in collaboration with Grant Thornton Malta, have developed a tool that will take any HTML file containing financial statements and add the appropriate XBRL tags within the document itself. The tool will automatically look for the relevant facts within the document and tag them with the appropriate tags. The tool will also prepare a ESEF-compliant taxonomy extension that defines any custom concepts.
All of this is done in a reproducible manner by associating metadata with the source document. This means that if the financial statements need to be changed for any reason, such as to fix an error or mistake in the text, the tool can be executed again to retag the document using the previously defined metadata. The metadata can also be used to quickly tag financial statements issued in subsequent years.
For more information about this service, contact us for a free consultation. We will be able to go through your financial statements and offer you a demo of how they would look like after XBRL tags are added.