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Law360, London (November 6, 2020, 2:20 PM GMT) -- The Financial Conduct Authority has said that it will push back by one year European Union rules designed to ensure financial reports and accounts published by companies are machine-readable as businesses grapple with the coronavirus crisis.
The City watchdog said on Thursday that it will postpone the introduction of rules that will require British companies to follow the European Single Electronic Format regulation. The regime is designed to make it easier for investors to compare the performance of companies in the EU by ensuring that financial reporting is uniform and digital-friendly across the bloc.
British finance firms will have an additional year to comply with the rules, which will now come into force for the financial year starting January 2021. The rules were originally scheduled to come into force in the U.K. for the 2020 financial year.
The FCA said that it has pushed back the implementation of the rules to "to relieve the burden on issuers during the exceptional circumstances of the coronavirus pandemic."
The proposed delay means that rules requiring companies to publish their financial reports in XHTML web browser format instead of PDF format will be pushed back by one year. The XHTML, or Extensible HyperText Markup Language, format can be read by humans as well as standard web browsers, without the need for specialized tools.
But new requirements for finance companies to use digital tags will not be delayed, the FCA said. Digital tags are markers in written reports that create metadata, enabling them to be read by computers.
The FCA in July that it would delay the rule on digital tags because of the pandemic. But the regulator said on Thursday that it had received "mixed feedback to this proposal," with companies saying that pushing this back would be unnecessary.
As a result, this part of the EU regime will apply to U.K. companies under the existing timetable, meaning they must follow it during their 2022 financial year.
The regime, which was proposed in 2017, originally required companies to make their financial reports machine-readable from 2020 onward.
The FCA gave companies listed on the London Stock Exchange two extra months earlier this year to publish their audited annual financial reports because of the pandemic. The regulator said on Thursday that it plans to continue to allow companies to delay releasing their financial statements next year.
"At the moment, the disruption caused by the coronavirus, in our view, has not abated sufficiently to justify removing any of the reliefs," the watchdog said. "Our temporary relief for delayed publication of financial statements will, at a minimum, continue to be available to listed companies with financial periods ending before April 2021."
--Additional reporting by Lucia Osborne-Crowley. Editing by Ed Harris.
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