Publishing Annual Reports Under the New ESEF Regime

The “comply or explain” principle underpinning many corporate governance and regulatory matters in the UK has much to commend it. It recognizes that one size rarely fits all. It puts the onus on companies to behave within the spirit and not just the letter of the law. But it can leave too much to interpretation, resulting in wide variance in implementation and practice. 

We’ve noted this effect at work as companies interpret the new regulations and guidance around the European Single Electronic Format (ESEF) for annual reports, which has come into play this reporting season for EU and UK companies with main market listings.  

The ESEF regulations require companies to produce their annual reports in an xHTML file format, with data in the main accounts ‘tagged’ in iXBRL - a collection of documents which is then typically bundled together in a zip file. If that’s gobbledegook to you, there’s more about the ESEF regulations here, but essentially an ESEF report can be machine-read, while the use of common taxonomies in the tagging allows for like-for-like comparison between different companies’ reports. The regulations aim to improve transparency, comparability and accessibility in annual reporting. This ESEF-compliant document is now the officially recognized version of a company’s annual report. 

The variance in interpretation lies not in the formatting of the document, nor in the obligation to file this with the National Storage Mechanism, but in how a company fulfils its obligation to publish the report and to make it available for 10 years, as is required under the FCA’s Listing Rules (DTR 4.1, for the truly curious).  

What should your business do? 

Our view - shared with the FRC in its guidance to companies issued in the run up to the new regime - is that companies should make the ESEF version available on their website, along with the PDF version which most users will prefer to access. Best practice is to go a step further and offer a version of the xHTML file with an embedded viewer, which will allow the user to view and interrogate the tagging in the file. You can see the different formats on the website of Investis Digital client Tetragon, here. 

However, when we recently reviewed the websites of companies who have published annual reports under the new regime, we found that fewer than half are making the ESEF document available, while only around a quarter have included the embedded viewer version. We reviewed one instance in which a company offers 21 different documents for download relating to its annual report - and yet does not include the ESEF document, which the law now says is the annual report. 

By all accounts it has been a long, sometimes painful, process to comply with the letter of the ESEF law. But to embrace its spirit – better transparency, accessibility and comparability in annual reporting – is easy. To invert the Chinese proverb: a journey of 1,000 miles ends with a single step. Publish the ESEF document on your website!  

Contact Investis Digital 

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For Additional Insight 

“The Evolution of Annual Reports,” Simon Gittings, Investis Digital, September 19, 2019. 

“3 Implications of the ESEF,” Investis Digital, June 17, 2019.