The European Securities and Markets Authority, the EU’s financial markets regulator and supervisor, has set out where national enforcers intervened in listed companies’ corporate reporting, what weaknesses they identified and what issuers should fix before the next reporting cycle.
The report covers enforcement and regulatory activity carried out by Esma and national enforcers across the European Economic Area in 2025. It focuses on three areas: financial reporting, sustainability reporting and digital reporting under the European Single Electronic Format (ESEF).
For finance teams, auditors and reporting specialists, Esma’s takeaway is clear: annual reports are improving, but generic wording, weak links between financial and sustainability information and technical filing errors remain firmly on supervisors’ radar.
Here are eight notable weaknesses that listed companies need to address in future annual reports.
IFRS action rate rises
European enforcers examined financial statements prepared under International Financial Reporting Standards from 628 issuers in 2025, representing 16% of all IFRS issuers in the EEA. Although the number of examinations fell from 685 in 2024, the action rate rose to 41% from 38%.
Esma stated that most actions concerned financial instruments, impairment testing, presentation of financial statements and operating segments. Of the 240 financial reporting actions, 153 related only to disclosure issues and 87 to recognition, measurement or presentation.
What to fix: disclosures must be specific, useful and linked to the company’s risks and judgements.
Boilerplate still bites
Esma found that most issuers provided tailored disclosures on accounting policies, judgements and significant estimates. But a meaningful minority still relied on generic wording, failed to align disclosures with risks or omitted key assumptions. Weaknesses were found in control assessments, revenue recognition, impairment assumptions, fair value measurement and estimation uncertainty.
What to fix: explain how accounting policies and estimates apply to the company’s own facts, not just repeat IFRS language.
Liquidity gaps remain
Esma found progress in liquidity disclosures, but weaknesses remained in supplier finance arrangements, covenant disclosures and cash-flow statements. Some issuers gave too little detail on covenant terms, breaches and classification risks. Others misclassified cash flows, used inappropriate net presentation or gave incomplete information on non-cash transactions.
What to fix: explain covenants, supplier finance arrangements, restricted cash and cash-flow classification clearly.
APMs need discipline
Enforcers carried out 434 ex-post examinations of management reports for alternative performance measures in 2025. The action rate rose to 16% from 14%. The most common problems involved definitions, reconciliations, explanations and labels. Esma also urged companies to reassess multiple versions of similar measures, such as different Ebitda variants, ahead of IFRS 18 from 2027.
What to fix: every APM needs a clear definition, reconciliation, explanation and accurate label.
Sustainability gets tested
2025 was the first year in which some issuers reported sustainability statements under the European Sustainability Reporting Standards. Around 2,000 issuers’ sustainability statements were within scope. Enforcers carried out 402 examinations, including 367 content examinations. These led to actions against 109 issuers, giving an action rate of 30%, compared with 28% in 2024.
What to fix: sustainability reporting must move beyond compliance language and become clear, structured and connected.
Climate draws scrutiny
For CSRD and ESRS sustainability statements, most enforcement actions concerned climate change reporting under ESRS E1 and general disclosures under ESRS 2. Esma found that most issuers gave satisfactory information on double materiality, but some disclosures remained generic. In some cases, terminology made impacts, risks and opportunities harder to map, while links with financial disclosures were often missing.
What to fix: show how materiality was assessed, what risks were identified and how sustainability disclosures connect to the accounts.
Taxonomy trips issuers
Under the Non-Financial Reporting Directive framework, most enforcement actions concerned Taxonomy reporting by non-financial companies. Esma also found that, where companies disclosed both transition plans and Taxonomy objectives, the two were not always consistent.
What to fix: Taxonomy KPIs, transition plans and financial statement references should align and be easy to trace.
ESEF is not admin
Digital reporting has become a supervisory issue. In 2025, enforcers examined 2,995 annual financial reports for compliance with the European Single Electronic Format, covering 76% of the relevant population. These reviews led to 266 actions, an action rate of 9%. Enforcers also reviewed ESEF markups for 613 issuers, resulting in a 13% action rate. Esma identified problems including incorrect taxonomy choices, incomplete markups, wrong signs and scaling, extension taxonomy issues and readability weaknesses.
What to fix: treat the ESEF report as the official annual report, not a technical afterthought.
Luxembourg in scope
Luxembourg had 85 IFRS issuers in 2025, down from 96 in 2024. The Luxembourg Financial Sector Supervisory Commission carried out 24 IFRS financial statement examinations and took 11 enforcement actions.
All Luxembourg actions required corrections in future financial statements.
What to fix: Luxembourg issuers also need sharper financial disclosures, cleaner sustainability reporting and reliable digital filings.
In summary, Esma does not say European reporting is failing. It notes progress. But supervisors want less boilerplate, clearer judgements, stronger links between sustainability and financial reporting, better APM discipline and cleaner ESEF filings. For finance chiefs, the annual report is now a compliance document, an investor document and a machine-readable file. All three need to tell the same story clearly.
The 70-page full report is here.
