ESMA publishes the European common enforcement priorities for 2025 corporate reporting

On 14 October 2025, ESMA published its European common enforcement priorities for 2025 corporate reporting on its website.  

The regulator has identified specific key points relating to new standards and regulations, namely IFRS 18 – Presentation and Disclosure in Financial Statements, published in April 2024, which is mandatory for financial periods commencing on or after 1 January 2027, and the amendments to IFRS 9 and IFRS 7, which come into effect from 1 January 2026. The regulator also reminds issuers of the importance of connectivity between financial and non-financial information (published in the first sustainability statements under ESRS, where relevant).  

The specific priorities identified by the regulator for 2025 closing relate to three distinct areas: (i) geopolitical risks and uncertainties; (ii) segment reporting; and (iii) ESEF reporting.  

As in previous years, ESMA’s enforcement priorities also include a section on sustainability reporting, which covers subjects relating to ESRS such as the materiality assessment, the scope of sustainability reporting and the structure of the sustainability statement.  

Key priorities relating to new standards and regulations  

Anticipating transition to IFRS 18  

The regulator encourages companies to start assessing the impact of IFRS 18 to ensure the financial statements comply with the new requirements, before it becomes mandatory from 1 January 2027. It emphasises that application of IFRS 18 will have impacts on issuers’ information systems, budgets and financial reporting, including the presentation of financial performance outside the financial statements. Climate and connectivity Following on from previous recommendations on the effects of climate change, the regulator emphasises the importance of consistency between financial reporting and sustainability information (published in other documents, notably the sustainability statement). It also draws companies’ attention to the near-final illustrative examples published by the IASB in July 2025, which are aimed at helping companies to better understand how financial and sustainability information may be connected.  

Amendments to IFRS 9 and IFRS 7  

The regulator reminds issuers that the amendments to IFRS 9 and IFRS 7 – Contracts Referencing Nature-dependent Electricity come into effect for financial periods commencing on or after 1 January 2026 (early application in 2025 is permitted). These amendments:  

• clarify application of the “own-use” exception for power purchase agreements (PPAs); and 

• facilitate the use of hedge accounting by introducing the option of hedging a variable nominal amount for virtual power purchase agreements (VPPAs) and PPAs that are accounted for as derivatives as they do not meet the criteria for the own-use exception.  

The regulator once again emphasises that, if issuers are not applying these amendments early, they should provide disclosures in the notes on any material expected effects relating to PPA/VPPA contracts.  

Recommendations for IFRS financial statements  

Geopolitical risks and uncertainties 

1. Key judgements, estimations and governance  
   In the current economic and geopolitical environment, significant uncertainties may have an impact on entities’ financial position and performance. The regulator recommends that issuers should provide transparent, detailed and entity-specific information on the key judgements and assumptions used, to help readers of the financial statements to understand how these uncertainties affect their financial performance and statements (including going concern). With this in mind, the regulator notes that more detailed information may be necessary, beyond those explicitly required by IFRS.  
   In addition, the regulator urges companies to ensure that information on assumptions and sources used is consistent with the information included elsewhere in the annual financial report.  
2. Impairment testing of non-financial assets  
   Changes in the macro-economic environment may indicate that an asset or group of assets is impaired, requiring companies to carry out an impairment test additionally to the mandatory annual testing. The regulator encourages companies to disclose in the financial statements any indicators (internal or external) of impairment identified, as well as the judgements and assumptions used to identify these indicators.  
   When carrying out annual impairment testing, companies must estimate the recoverable value of CGUs (or groups of CGUs) and intangible assets with an indefinite useful life. Whether this recoverable value is measured as the value in use based on future cash flows, or the fair value less costs of disposal, it should be estimated based on reasonable and supportable key assumptions that represent management’s best estimate (IAS 36.134 (d) and (e)). This is why the regulator emphasises the importance of explaining significant changes in these key assumptions relating to the economic and geopolitical environment, and recommends using external evidence where possible when calculating the value in use (economic forecasts, analysts’ projections, sector studies, etc.). 
   In a crisis situation, it may also be a good idea for issuers to review their sensitivity analyses to assess reasonably possible changes in key operational and financial assumptions. The regulator also recommends specifying which reasonably possible changes in which key assumptions would cause the carrying amount of the CGUs to exceed its recoverable amount, leading to additional write-downs.  
3. Deferred tax assets  
   Uncertainties relating to the current economic environment can impact the judgements used in forecasting taxable profits and the recoverability of deferred tax assets (DTAs). Therefore, the regulator recommends that issuers recognising material DTAs should disclose the key assumptions used to determine if DTAs should be recognised, particularly if the company has suffered tax losses in the current or previous years (IAS 12.35, 81 and 82).  
4. Recognising revenue from contracts with customers  
   As in 2024, ESMA encourages companies to ensure that forecasts used to estimate margins at completion on long-term contracts are reasonable and supportable. It reminds issuers that changes in the estimate of the transaction price or progress towards completion should be recognised as changes in accounting estimates as defined in IAS 8, and disclosed if material.  
   The regulator also notes that issuers should apply IAS 37 when assessing if provisions for onerous contracts within the scope of IFRS 15 need to be recognised. In that case, the issuer must disclose its analysis along with the methodology used to determine the amount of the provision.  
   ESMA also encourages companies to pay close attention to changes in transaction prices and/ or sales volume. It recommends full transparency on the analysis carried out and the amounts involved. Readers will remember that IFRS 15 requires different accounting treatments depending on whether the change is deemed to be a contract modification (whether the accounting impact is prospective or otherwise) or a change in the estimate of the variable consideration.  
5. Provisions for restructuring costs 
   The regulator reminds issuers that, considering business sales, closure, changes in management structure or any major restructuring activities that could require the company to recognise a provision for restructuring costs, such a provision may only be recognised if all the criteria in paragraph 14 of IAS 37 are met.  
6. Inventories 
   The regulator recommends that, if issuers revise the methods used to estimate the net realisable value of their inventories, they should specify what changes have been made, the reasons for these changes, and whether additional write-downs have been recognised due to a decline in the net realisable value of inventories.  
7. Credit risk 
   Uncertainties arising from the current geopolitical context may have an impact on the valuation and risk profile of some financial instruments held by issuers. With this in mind, ESMA recommends that issuers should set out in their financial statements any changes in their financial risks. If there are any material adjustments relating to the current environment, issuers should disclose enough information to enable users to understand the nature of the changes to key assumptions, the reasons for these changes, and their impact on the total amount of expected credit losses and the classification (in “buckets”) of the corresponding assets.  

Segment reporting

1. Disclosure of revenues and expenses for reportable segments 
   ESMA refers back to the IFRS IC’s agenda decision of July 2024 on the income and expense items that should be disclosed for each segment. 
   The regulator emphasises that the material items required by paragraph 23 of IFRS 8 should be disclosed in segment reporting if they are (i) included in performance measures reviewed by the chief operating decision maker (CODM), even if they are not monitored individually; or (ii) regularly provided to the CODM. The regulator also adds that material items of income and expense that need to be disclosed are not limited to those listed in paragraph 98 of IAS 1, but should be identified by applying the materiality principles set out in IAS 1 and considering the issuer’s specific facts and circumstances. 
2. Information about geographical areas and major customers  
   ESMA emphasises the relevance of entity-wide disclosures on geographical areas (IFRS 8.33) and major customers (IFRS 8.34) in the light of uncertainties relating to the current macroeconomic and geopolitical environment. In addition, the regulator reminds companies that they must disclose information about revenues from external customers and non-current assets located in (i) the country where the company is domiciled, (ii) all foreign countries in total, and (iii) individual countries, if material. Materiality should be assessed considering both qualitative and quantitative factors. 
   In addition, to better reflect the level of dependence on certain markets (particularly for exports if foreign countries are subject to trade restrictions or tariffs), ESMA recommends that companies should disclose how revenues have been allocated to individual countries or geographical areas (e.g. based on where the sales were originated or the location of end-customers).  
   Lastly, the regulator draws attention that although paragraph 34 of IFRS 8 does not require issuers to disclose the identity of major customers, it does not provide exemptions from disclosing the amount of revenues from those customers and the segments to which they relate. 
3. Key principles of the standard and aggregation criteria 
   Readers will remember that paragraph 12 of IFRS 8 permits issuers to aggregate certain operating segments. In that case, ESMA notes that the issuer is required to disclose the judgements made when applying the aggregation criteria, particularly its analysis of similar shared longterm economic characteristics. The regulator outlines that, considering macroeconomic uncertainties, issuers need to ensure they have aggregated segment information appropriately and restate comparative information if the aggregation criteria are no longer met. 
4. ESEF electronic reporting 
   ESMA’s recommendations on European Single Electronic Format reporting focus on key enforcement priorities and common errors found in the statement of cash flows. 

Finally, ESMA also reminds issuers of the ESEF Reporting Manual, which was updated in October 2025 and incorporates some changes to recommendations aimed at facilitating application of the ESEF Regulation.