ESEF Compliance: How to Choose the Right Software

Since the beginning of 2020, any company listed on a regulated exchange in the European Economic Area (EEA) has been required to comply with the new European Single Electronic Format (ESEF). ESEF is a framework established by the European Securities and Markets Authority (ESMA) for formatting and filing annual financial reports (AFRs). Affected companies must use ESEF to report for all financial years that began on or after January 1, 2020.

Before ESEF, many companies provided their financial statements in a traditional downloadable PDF format. Although that file format is standardized, the detailed layouts of PDF-based financial reports varied. ESF changes all of this by requiring companies to produce their annual reports in a web-native XHTML format. It also prompted many listed companies to transition from manual reporting processes to more efficient automated procedures.

Read more about the importance of automation in disclosure management

Watch an on-demand webinar about why last-changes to reporting can be a thing of the past

Beyond ESEF Compliance

While ESEF compliance has been a catalyst for automation, many companies have discovered that there are far-reaching benefits to using disclosure management software to streamline financial reporting processes.

Most organizations routinely create multiple versions of their financial statements, for both internal and external use. In addition to standard profit and loss (P&L) and balance sheet reports, they also include a considerable amount of narrative content. That narrative needs to be consistent with the numbers, but it also needs to be consistent across the multiple report formats that the company produces. From monthly board packets to annual reports, from press releases to investor presentations, everything needs to be accurate and consistent. Errors and omissions can be embarrassing at best. At worst, they can lead to regulatory action, lawsuits, and lost revenue.

Mistakes are made far too often. Frequently, when the finance team makes last-minute changes to the numbers, it can be easy to overlook detailed edits. Small details can have big consequences, however. Forgetting to change a comparative word in one or more documents can result in a narrative that’s out of sync with the numbers.

Imagine, for example, that a last-minute write-off leads to a small loss in one of the company’s divisions. Forgetting to replace the word ”profit” with ”loss” can lead to a loss of confidence, casting doubt on your entire financial report. Making that change in one place (for example, in your quarterly report) but overlooking it in a corporate press release is equally embarrassing.

An automated disclosure management solution addresses these problems by offering a unified approach to reporting that includes both narrative and quantitative information.

The transition to ESEF represents an excellent opportunity to explore the benefits of standardized narrative report creation. This isn’t limited to annual financial reporting; it has applications across an entire range of statutory, management, and regulatory reporting categories. In fact, any recurring, multi-authored report that mixes numbers and text can be improved and streamlined using disclosure management software.

Here are some additional examples:

• Annual and Quarterly Reporting Treasury Reporting
• Management Accounts
• Regulatory Reporting (iXBRL, EDGAR)
• Budget Books/Decks
• Board Books/Decks
• Business Unit Performance
• Lender Reporting
• Line of Business/Central Service
• Function Reports
• Project Management
• Industry Specific Operational Reporting
• Profitability Analytics – Customer, Geography, Channel

Improving Workflows

If you’re considering an investment in iXBRL tagging software for ESEF compliance, it makes sense to look a bit further and explore more robust solutions that offer time savings, increased accuracy, and expanded flexibility. Automated disclosure management also adds a layer of controlled collaboration to the report creation process. Whether you are importing and tagging source data or managing the overall workflow for your reporting processes, collaboration tools ensure things move along efficiently and effectively.

The best solutions do this without disrupting the team’s preferred processes or requiring a steep learning curve. They allow your team to continue using tools like familiar Word, Excel, and PowerPoint to get the job done. At the same time, they automate the time-intensive and error-prone work of sourcing, copying, and pasting data and validating that they’re current, accurate, and consistent throughout the report.

Look for a solution that will roll forward your report content to automatically incorporate key changes into future reports. By maintaining consistency of XBRL tags from one period to the next, for example, your team can become far more efficient over the course of time. That reduces the time required to get reports out the door, freeing up resources to focus on narrative and analysis.

The Certent Disclosure Management Solution

Traditional reporting solutions provide all the data that an organization needs, but they don’t make it easy to produce the final product for internal or external users. Some may even allow for a small amount of narrative content. More often than not, however, the raw data and limited commentary simply can’t tell the full story behind the numbers.

Automated disclosure management software is a game-changer. Certent Disclosure Management (CDM) from insightsoftware allows companies to add rich, meaningful narrative, bringing context to their financial results. CDM supports internal decision-makers in understanding the full story behind performance. For external stakeholders, it fosters confidence in your reporting processes and reflects positively on your organization as a whole.

Find out how Vodafone is using Certent to streamline financial reporting

Using CDM, you can reduce the time spent creating internal and external narrative reports by up to 50 percent. You can produce and format regulatory, internal, and external reports working with the popular Microsoft Office products you already know well. With automation, your finance team can achieve greater economies of scale, sharing content efficiently across multiple reports and distributing information in multiple output formats, including Word, PDF, PowerPoint, Adobe InDesign, or XBRL/iXBRL. Your organization will save time and money by reducing proofing cycles with external printers and eliminating the 24-hour plus ”pencil-down” period.

CDM enables you to consistently and confidently deliver accurate information about your company’s results. Strong access controls and single sign-on ensure that only authorized users can change and approve narrative content, while workflow controls streamline and expedite the production cycle, ensuring accountability every step of the way.

CDM’s checklists provide simple guidance to keep everything on track, while an audit trail allows teams to see who made changes, and when. You can even use validation rules to link numbers or narrative in one part of a document to numbers and narrative in a different section, or even to a different document.

CDM provides direct connectivity to source data. You can add links to source data within your narrative content, ensuring that the numbers consistently align with the text, and that both match the source data from your ERP system. You can refresh that data at any time to automatically update the numbers and narratives as last-minute changes are made. This reduces the risk of manual errors and empowers you to make last-minute changes without stress.

The Way Forward

If you or your team are responsible for telling your company’s story on a periodic basis, you’re well aware that the numbers alone don’t provide a complete picture. Narrative is critical. For public companies, it’s a legally required element of your financial reports.

The transition to ESEF provides an opportunity to stop and assess your current processes. CDM delivers ESEF compliance, but it offers so much more. Communicate with both internal and external audiences consistently, accurately, and efficiently.

To learn about how CDM from insightsoftware can help simplify compliance with ESEF and streamline report creation more broadly, download our ebook, ESMA’s ESEF: A Roadmap to iXBRL Compliance.