According to the ESMA, issuers should "tag" all information corresponding to the elements listed in Annex II of the Commission Delegated Regulation (EU) 2019/815 (the "Regulation") in addition to the consolidated financial statements and thus tag all information in the notes to the consolidated financial statements. Indeed, the Regulation contains a number of text block type elements that can be used to label longer passages such as notes to financial statement items and accounting policies.
In practice, processors will have to deal with various pitfalls of such processing, for example:
- the published information corresponds to multiple elements of different levels (narrower and broader elements). The designation should be made to the extent that it is consistent with the underlying accounting significance of the information;
- the labelling of the information that is presented in the summary tables;
- the designation of published information that does not correspond to any element in the Regulation. In such a case, the ESMA encourages the use of the elements listed in Annex VI of the Regulation or the creation of an extension element for the block label, as this information is useful for end users. The focus is on ensuring maximum consistency across reporting periods;
- the indication of information that corresponds to one element of the taxonomy and that is found in more than one part of the Annex.
Not only does the requirement to apply the extended taxonomy to the 2022 consolidated financial statements imply a greater time commitment for the preparation of financial statements in accordance with ESEF and related audit requirements, but the extension also places greater demands on knowledge of International Financial Reporting Standards (IFRS).
We strongly recommend that issuers prepare for these changes well in advance.