European Single Electronic Format (ESEF)
With the advent of Act no. 20/2021 on the disclosure obligations of issuers of securities and flagging requirements the issuers of securities are required to publish their financial statements in a single electronic reporting format (ESEF). The obligation first applies to the financial year of 2021 and the first submission in the ESEF format will therefore be in 2022.
The single electronic reporting format is intended to simplify the preparation of annual accounts by issuers of securities, making annual accounts more accessible, and facilitating the analysis and comparison of annual accounts. With the introduction of this format, the data will be machine-readable. Comparable formats for issuers are used in the United States, and with the introduction of ESEF, they will become widespread in Europe.
Annual accounts in a single electronic reporting format shall be submitted to a central database (OAM), but in Iceland that is the OMX Nordic Exchanges Group OY which operates the database for the Central Bank of Iceland. The database can be found on the website www.oam.is.
Over time, all central databases within the EEA will be linked together, and the introduction of a single electronic reporting format for annual accounts is inter alia part of that project.
The single electronic reporting format and its implementation are discussed in detail in the ESEF Regulation of the European Union. The ESEF Regulation was implemented with the rules of the Central Bank of Iceland no. 1470/2021 on the disclosure obligations of issuers of securities.
The European Securities and Markets Authority (ESMA) has issued an ESEF manual for Issuers of Securities. Further information can also be found on ESMA's website.
Which issuers?
Issuers refer to issuers of securities that have been admitted to trading on a regulated securities market and whose home state is Iceland, cf. Article 2(1) of Act no. 20/2021.
Article 3 of Act no. 20/2021 contains exemptions from the Act as a whole and specifically from Section II of the Act, since the section deals with i.a. the annual accounts of issuers of securities and the use of a single electronic reporting format.
The Act does not apply to shares and UCITS in funds for collective investments, other than closed funds, cf. Article 3(1). The terms "shares and UCITS" and "funds for collective investments" are further defined in Article 4 of the Act.
The Icelandic state, municipalities and international organisations are also exempted from the obligation to publish annual accounts according to Section II of the Act.
If the conditions are met, a bond issuer is exempt from Section II. These conditions are:
i. only the issuer's bonds have been admitted to trading on a regulated securities market, and
ii. the nominal value of the issuer's bond per unit is at least EUR 100,000 in Icelandic krónur
If the issuer's bonds were admitted to trading on a regulated securities market before the entry into force of Act no. 20/2021 and are still outstanding, the benchmark is EUR 50,000 in Icelandic krónur. The act came into force on 1 May 2021 and the calculation is based on the exchange rate when the bonds were admitted to trading on a regulated securities market.
Official supervision
The Financial Supervisory Authority of the Central Bank of Iceland generally supervises the implementation of Act no. 20/2021 on the disclosure obligation of issuers of securities and flagging requirements, cf. Article 38, Paragraph 1. The Register of Annual Accounts, on the other hand, examines whether the information according to Section II is prepared in compliance with the relevant accounting rules, cf. Paragraph 3 of Article 38 of the Act.
Interim Financial Statements and ESEF
Attention should be drawn to the fact that the obligation to publish annual accounts in a single electronic reporting format applies only to annual accounts. With Act no. 55/2021, the wording of Article 10 of Act no. 22/2021 on the disclosure obligation of issuers of securities and flagging requirements have been changed and the obligation has been transferred to Article 6 of the Act, but that provision only deals with annual accounts. The obligation is now in accordance with the wording of EU Transparency Directive no. 2004/109 on which the law is based.