extension elements - High-quality ESEF reporting: How Extension Elements help

High-quality ESEF reporting: How Extension Elements help

A bit of context

The ESEF taxonomy (link) comprises over 5,000 accounting concepts and is primarily based on the IFRS taxonomy. Companies preparing their ESEF annual reports need to choose anything between 100-200 of those concepts that best describe their disclosures. And they need to map their disclosures to relevant ESEF taxonomy concepts in a process known as ‘tagging’.

In case of disclosures where none of the ESEF taxonomy concepts are an appropriate fit, companies may create extension elements or custom tags.

How to identify an extension element?

Here’s the main difference between taxonomy elements and extension elements. 

Where tags from the ESEF taxonomy have the prefix ‘ifrs-full’, extension elements have a company code or symbol as their prefix.

For instance, the ‘xyz’ portion in this example of a custom tag — ‘xyz_ElectricityAndNaturalGasRevenue — represents the company code or symbol.

Extension elements: How they help

If used correctly, extension elements can help companies present a better picture of their financial position to investors. They also allow companies to impart information that lies beyond the scope of the ESEF taxonomy concepts. However, companies need to take care not to use custom tags in instances where the right ESEF taxonomy fit is available. Such a practice not only raises questions about the quality of reporting but is also frowned upon by regulators.

Anchoring — Vital for easy comparability

‘Anchoring’ is a requirement that is unique to the ESEF mandate. Companies are required to ‘anchor’ their extension elements or custom tags to ESEF taxonomy elements with the nearest accounting meaning. Apart from helping companies to make unique disclosures, anchoring performs the crucial function of making such disclosures across a group of companies comparable.

Let’s take the above-mentioned example of a custom tag: ‘xyz_ElectricityAndNaturalGasRevenue’

Here, the custom tag can be anchored to the ESEF taxonomy tag that represents revenue: ‘ifrs-full_Revenue’.

The anchoring of a custom tag may involve an ESEF taxonomy concept with a ‘broader’ or ‘narrower’ scope. A taxonomy concept with a broader scope is one that covers the meaning of the custom tag in its entirety, while a concept with a narrow scope is one that relates to the custom tag to a limited extent only. The task of choosing the right taxonomy concepts to anchor custom tags with requires utmost care so that these company specific disclosures lend themselves to comparability when third-party tools analyze many XBRL documents together.

To conclude, it is useful to create extensions to describe disclosures that do not have an appropriate fit in the ESEF taxonomy. However, to maintain the quality of financial reports and facilitate comparability across companies (for investors), it is necessary to use extensions wisely and anchor them to an appropriate (narrow or broad) taxonomy concept.

Want to know how to use extension tags and anchor them appropriately? Have other questions about ESEF mandate compliance? Reach out to our experts.

Extension Elements, ESEF Taxonomy

Extension Elements, ESEF Taxonomy

Extension Elements, ESEF Taxonomy

esef ixbrl reporting - ESEF iXBRL reporting: Avoid the reversing signages pitfall

ESEF iXBRL reporting: Avoid the reversing signages pitfall

ESEF iXBRL reporting

It is a common observation that calculation errors account for the maximum number of errors in XBRL filings. This has been mainly observed in XBRL filings in the US, where companies end up assigning negative values to concepts that are expected to have a positive value in XBRL and vice versa, and this leads to calculation inaccuracies in the filings. Such errors take place because of a phenomenon called ‘reversing signages’ — a pitfall best avoided in your ESEF iXBRL reporting.

The way to avoid running into a reversing signages issue is to consider the balance type of any monetary element being reported in your ESEF iXBRL report. The balance type describes whether a monetary concept has a ‘debit’ or a ‘credit’ value.

The Balance type is a major attribute of any monetary element that helps to avoid calculation errors. It describes whether the used monetary concept is a ‘debit’ or a ‘credit’, and not only goes by its representation in the annual report.

Balance types play a vital role when a monetary element is used as a part of an XBRL calculation. Let’s consider three monetary concepts for instance — revenues, cost of goods sold, and gross profit. These concepts are part of a simple formula to find out profit: Revenue – Cost of Goods Sold = Profit.

ESEF iXBRL reporting

In an XBRL taxonomy, the balance type of profit and revenue is defined as ‘credit’ and alternatively, for cost of goods sold, the balance type is ‘debit’. When you establish a calculation relationship between these three monetary concepts, you derive the value of gross profit by deducting the value for cost of goods sold from revenues.

However, when a company shows the value of cost of goods sold as negative on the human-readable part of its ESEF iXBRL report, and simultaneously tags this value as a negative number in the machine-readable layer, the calculation relationship that already places a negative value on the element gets combined with the tagged negative value to create a positive calculation relationship. Cost of goods sold is then shown as a positive fact, which gets added to revenues rather than getting deducted.

Thus, it is essential to tag cost of goods sold as a positive value in XBRL, even if it is shown as a negative value on the human-readable face of the ESEF annual report. The appropriate balance type of the concept and its placement in calculation will ensure that viewers perceive it as a debit item that will be deducted from revenues.

ESEF iXBRL reporting

When the human-readable layer of an ESEF iXBRL report shows an item as negative (or in parentheses) for ease of representation to users, reporting teams make the mistake of tagging the item as a negative value. It is therefore important to watch for the balance type of an item in XBRL before deciding on the right sign for tagging. This will help you to avoid one of the most common errors companies make while preparing your ESEF iXBRL report.

While selecting tags from the ESEF taxonomy, it is, therefore, vital to have a good understanding of the balance types of elements and how they participate in calculation relationships. Having an XBRL validator built in with your report creation tool will help you to detect errors stemming from wrongly applied signs in your ESEF iXBRL report.

Want to know more about preparing flawless a ESEF iXBRL report?

ESEF iXBRL reporting, XBRL

ESEF iXBRL reporting, XBRL

ESEF iXBRL reporting, XBRL

esef ixbrl - ESEF iXBRL Mandate: How to prepare a quality instance document?

ESEF iXBRL Mandate: How to prepare a quality instance document?

UK-based companies that must comply with the ESEF mandate must submit their annual financial report in a digital format to the Financial Conduct Authority. To be specific, the ESEF iXBRL format has two components — an instance document and a company taxonomy. What must you know about the two components?

Instance document

Your instance document would be your annual report in a digital or iXBRL format. What does the digital format facilitate?

Answer: Your annual report can be read by a human and as well as a machine (computer). That’s because your iXBRL annual report will have machine-readable tags embedded against a human-readable layer. Simply put, your iXBRL annual report will look just like a PDF document, but your data will have machine-readable tags embedded so that the data can be read or recognized by a machine.

Therefore, when you prepare an instance document in compliance with the ESEF iXBRL mandate, you not only ensure that your data gets shared with your stakeholders, but they are also able to analyze it better by running peer or sector comparisons at a click.


Company taxonomy

A company taxonomy is a combination of the elements you adopt out of the ESEF taxonomy to present your data or disclosures. In other words, your disclosures and customized concepts and the inter-relationships between them make up the company taxonomy. The company taxonomy comprises four linkbases — Presentation linkbase, Calculation linkbase, Definition linkbase, and Label linkbase — that define the structure of an iXBRL document.

In this write-up, we focus more upon the instance document and one of the aspects contributing to its quality — tagging.

ESEF iXBRLFor a quality instance document

Your instance document creation involves linking each line item or disclosure in your annual report to a relevant ESEF taxonomy concept. If you fail to find appropriate taxonomy concepts to link some of your disclosures with, you will have to create custom tags or extensions. These custom tags will also have to be ‘anchored’ to taxonomy concepts with the nearest accounting meanings.


Adding quality to your tags

Tags help impart machine-readability to your instance document. It will help you to have a good grasp of the ESEF taxonomy as well as your own report so that you pick appropriate tags.

To understand how machine-readable tags look, here’s an example.

‘ifrs-full_Revenue’ is the IFRS tag for revenue and ‘ifrs-full_CurrentAssets’ is the tag for current assets. Every tag has three attributes: data type, balance type, and period type.

Data type: It helps denote whether the reported fact or element is monetary, depicts shares, or a percentage. For instance, the data type for the tag ‘ifrs-full_Revenue’ would be ‘monetaryItemtype’

Balance type: The classification of a monetary concept as ‘debit’ or ‘credit’ is denoted by the balance type. In the above example, the balance type for revenue is ‘credit’.

Period type: The attribute of an element that demonstrates whether it is measured as on a particular date or over a period is represented by Period type. Income statement concepts are an example of a ‘duration’ period type, since items reported on an income statement are measured annually. Similarly, since a balance sheet is reported on a particular date, balance sheet concepts will have the ‘instant’ period type.

UK corporation tax

Starting points to assure quality in your ESEF iXBRL instance document creation process

UK corporation taxFor compliance with Phase 1 of the ESEF iXBRL mandate, all numbers in your primary financial statements need to be tagged. In Phase 2 of the mandate, you must must tag your text disclosures, too. You are, however, free to take a comprehensive approach to ESEF iXBRL mandate compliance by tagging both your numbers and text right from Phase 1.
UK corporation taxWe recommended that you predominantly use ESEF taxonomy concepts during the tagging process and avoid creating custom tags unless absolutely necessary.
UK corporation taxThe tags you select for your primary financial statements must have a data, balance and period type relevant to the line items in your report.

To go beyond a ‘bare minimum’ compliance with the ESEF iXBRL mandate, focus on tagging all concepts in your financial statement with ESEF taxonomy elements. And ensure that the tags you select have the right data, balance, and period types. Furthermore, do not hesitate to tag even the text disclosures in your statements. The most important part: acquaint yourself with the ESEF taxonomy.

Need help preparing a quality instance document that is in perfect compliance with the ESEF iXBRL mandate?

ESEF iXBRL, ESEF iXBRL Mandate, iXBRL Mandate, ESEF Mandate

ESEF iXBRL, ESEF iXBRL Mandate, iXBRL Mandate, ESEF Mandate

ESEF iXBRL, ESEF iXBRL Mandate, iXBRL Mandate, ESEF Mandate