Draft bill on the implementation of electronic financial reporting according to ESEF

On 20 September 2019, the Federal Ministry of Justice and Consumer Protection, together with the Federal Ministry of Finance, submitted the draft bill (draft) of a law to implement the amendments to the EU Directive 2013/50/EU (Transparency Directive Amendment Directive) with a view to a uniform electronic format for annual financial reports to the associations and expert groups to be involved for consultation (Link to the draft bill – only in German).

The draft contains proposals for the implementation of Article 4 (7) of the Transparency Directive, according to which annual financial reports must be prepared in a uniform European Single Electronic Format (ESEF) with effect from 1 January 2020. Technical Regulatory Standards to specify this electronic reporting format are contained in the Delegate Regulation (EU) 2019/815 (ESEF Regulation).

The main content of the draft are proposed changes in the commercial law for capital market-oriented companies:

• Electronic preparation of annual and consolidated financial statements, management and group management reports and their so-called (consolidated) balance sheet oaths and (consolidated) management report oaths in Extensible Hyper Text Markup Language (XHTML) format
• Tagging of the affected IFRS consolidated financial statements on the basis of the ESEF taxonomy using the Inline eXtensible Business Reporting Language (iXBRL)
• Requirements for electronic signing of the relevant financial statements and management declarations

In accordance with the draft, the subsequent requirements on publication, auditing and enforcement are based on the electronic documents.

In company law, corresponding proposals are made for changes to the information requirements for shareholders in the meetings to receive or adopt/approve the annual/consolidated financial statements or to pass resolutions on other measures. In such cases, online publication should be mandatory and replace the obligation to display documents on business premises and to issue hard copies.

The securities trading law remains basically unchanged after the proposals, since the ESEF Regulation has direct effect for the preparation of annual financial reports (notwithstanding any exemptions) and its components.

The legislation is time-critical, as the new format requirements are to be applied for the first time to financial statements prepared for the financial year beginning after 31 December 2019. Comments on the draft bill are possible until 11 October 2019 at the latest.