Most US GAAP financial reporting professionals prepare their financial statements and SEC filings first, then prepare the XBRL exhibits that mirror the filing. Many accomplish this process using online guidance provided by a cloud based company with the output clearly focused on correct XBRL filings that are US GAAP compliant and meet all the rules established by the SEC. Although this process normally results in achieving the triple goals of timeliness, accuracy and efficiency, sometimes it might be wise to take a reverse approach, especially when taking on a new ASC or a new reporting technique.
The XBRL filings submitted to the SEC are in one sense an organized set of tagged data associated with various databases that help computers easily translate the data into input for analysis and financial statements. The raw material of the US GAAP Taxonomy (UGT) consist of authoritative literature (Accounting Standards Codification, or ASC from FASB), rules published by the SEC in the EDGAR Filing Manual, specific SEC reporting rules yet to be included in ASC, definitions of accounting concepts prepared by the FASB and reviewed by the SEC and prevailing accounting reporting practices. Companies make choices based upon available standard taxonomy elements as listed in the UGT to match their accounting practices and policies. If they do not find a fit upon reviewing the thousands of standard UGT tags, current rules allow companies to extend the taxonomy by making a new XBRL tag provided they follow the rules and best practices for creating EDGAR Filing Manual compliant tags.
Reverse the process?
Sometimes lost in the discussion about XML, XBRL, EDGAR Filing Manual, validation and acceptance of XBRL documents is the wealth of accounting found in each level of the standard XBRL taxonomy. Each taxonomy element has a standard label that is familiar to accountants and investors. For example, the income statement term Net Revenue could be associated with the XBRL label
us-gaap:SalesRevenueServicesNet. If selected, this element contains specific accounting guidance relative to definition and authoritative literature.
The definition “aggregate revenue during the period from services rendered in the normal course of business, after deducting allowances and discounts” specifies what kind of revenue and identifies that the number is net of allowances and discounts.
Further, the selection of us-gaap:SalesRevenueServicesNet taxonomy element means that the following authoritative literature is associated with the taxonomy selection.
Charts courtesy of XBRL Cloud, Inc.
With that in mind, let’s suppose something new has come to the attention of the SEC reporting team. Several companies in the same industry have elected new accounting treatment for something you were thinking about changing. Normally, you would look at the change, investigate the financial implications for your company, check with your external auditors, select/elect the new practice and create financial statements. Thinking about the changes in XBRL normally becomes and after thought just before your file your next 10-Q or 10-K.
How about reversing the process by looking at the accounting in the XBRL first, and then make the financial statement changes? Assume the change you are considering involves other comprehensive income. If you go to the FASB website, you will find a recently published document regarding other comprehensive income. The twenty-eight page outline provides helpful hints on how to format the recent changes into correct XBRL including the elements to use. Each element can be traced with a taxonomy viewer tool to expose definitions and references to the ASC.
Another way to accomplish this task is to look at the recent XBRL filings of close competitors. Within the interactive data files filed with the SEC, each element normally contains definitions and links to the ASC. Once you see the choices made by selecting one XBRL element over another, the accounting that is embedded in the taxonomy will become apparent. Armed with this information you and your SEC reporting team will be better prepared to make the right accounting election and improve your XBRL filings.
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