Looking at the US GAAP Taxonomy as an Accounting Guide
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.
2024 GAAP Financial Reporting Taxonomy Updates Overview
Element and Modeling Updates in the XBRL Taxonomy
The Financial Accounting Standards Board (FASB) taxonomy team has introduced several enhancements to the 2024 GAAP Financial Reporting Taxonomy (GRT). These updates address required Accounting Standards Updates (ASUs), common reporting practices, and projects aimed at improving the taxonomy’s utility.
Accounting Standards Updates in the XBRL Taxonomy
The 2024 GRT includes updates related to multiple ASUs. These updates encompass modifications to existing elements, deprecation of outdated elements, and the addition of new elements to meet current disclosure requirements. The key updates are as follows:
ASU 2023-01: Leases (Topic 842) – Common Control Arrangements
This update addresses common control arrangements in lease accounting, providing clearer guidelines and reporting elements for such arrangements.
ASU 2023-02: Investments—Equity Method and Joint Ventures (Topic 323)
This update introduces the accounting for investments in tax credit structures using the proportional amortization method, enhancing the transparency and consistency of reporting these investments.
ASU 2023-04: Liabilities (Topic 405)
Amendments to SEC paragraphs pursuant to SEC Staff Accounting Bulletin No. 121 have been incorporated, affecting the reporting of certain liabilities.
ASU 2023-05: Business Combinations—Joint Venture Formations (Subtopic 805-60)
This update focuses on the recognition and initial measurement of joint venture formations, refining the elements used for these transactions.
ASU 2023-06: Disclosure Improvements
In response to the SEC’s Disclosure Update and Simplification Initiative, this update includes codification amendments aimed at improving disclosure practices.
ASU 2023-07: Segment Reporting (Topic 280)
Enhancements to reportable segment disclosures have been made, providing more detailed and useful information for users of financial statements.
ASU 2023-08: Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60)
This update covers the accounting for and disclosure of crypto assets, introducing new elements for this emerging asset class.
ASU 2023-09: Income Taxes (Topic 740)
Improvements to income tax disclosures have been incorporated, ensuring more comprehensive and clear reporting of income tax information.
Employee Benefit Plans (SEC Form 11-K) in the XBRL Taxonomy
New elements were added to the US GAAP Employee Benefit Plan (EBP) taxonomy for the SEC Release Nos. 33-11070; 34-95025. This update requires the tagging of annual reports for employee stock purchase, savings, and similar plans filing SEC Form 11-K. The new elements can be identified by the prefix “us-gaap-ebp” and are contained in sections beginning with “9611” through a separate entry point from the US GAAP taxonomy.
Filer Action: XBRL Modeling Compliance
Filers are advised to review their current XBRL® modeling against the new standards and modified elements provided in the 2024 taxonomy. Ensuring compliance with these updates is essential for accurate and up-to-date financial reporting.
Specific Actions for Employee Benefit Plans
Filers should evaluate the new elements as they prepare their SEC Form 11-K to comply with this new mandate effective for filings beginning after July 11, 2025.
Technical Taxonomy Improvements in the XBRL Taxonomy
The FASB taxonomy team continues to make technical improvements to help filers with taxonomy implementation. The 2024 taxonomies provide enhancements to existing features.
Taxonomy Implementation Notes (TINs)
The FASB has introduced 393 new Taxonomy Implementation Notes (TINs) in the 2024 GRT. These TINs are categorized into four areas:
- Resource TINs
- Transition TINs
- Usage TINs
- Value TINs
The majority of the new TINs are Usage and Resource TINs related to FASB GAAP Financial Reporting Taxonomy Implementation Guides.
XBRL US DQC Rules Taxonomy (DQCRT)
The DQC Rules Taxonomy (DQCRT) includes rules from the XBRL US Data Quality Committee (DQC) to provide additional visibility to data quality validation rules for XBRL filings with the SEC. For the 2024 DQCRT, 24 additional DQC rules were added, bringing the total to 46 rules. The SEC EDGAR system validates these DQC rules included in the 2024 DQCRT.
Key Steps for Effective Taxonomy Migration
Comprehensive Element Review
- Deprecated Elements: Identify and replace any deprecated elements in your current taxonomy.
- New Elements: Integrate new elements that are relevant to your financial reporting.
- Modified Labels and Definitions: Update labels and definitions to match the latest standards.
Validate Data Types
- Updated Data Types: Ensure all data types are updated according to the 2024 taxonomy requirements. This step is crucial for maintaining data integrity and accuracy.
Leverage Technical Improvements
- Utilize TINs: Use the newly introduced TINs to guide your implementation process. These notes are categorized into Resource, Transition, Usage, and Value to provide detailed guidance.
- Apply DQC Rules: Make use of the DQC rules to improve the quality of your XBRL filings. The SEC EDGAR system will validate these rules, so adherence is essential for compliance.
Filer Action Plan
Evaluation
- Conduct a thorough evaluation of your current XBRL taxonomy implementation.
- Identify areas that require updates based on the 2024 GRT.
Implementation
- Replace deprecated elements with new or updated elements.
- Incorporate new elements and update data types, labels, and definitions.
- Apply the relevant TINs and DQC rules.
Validation
- Perform validation checks to ensure compliance with the updated taxonomy.
- Use tools and resources provided by FASB and XBRL US to aid in this process.
Continuous Monitoring
- Keep abreast of any further updates or guidance from FASB and the SEC.
- Regularly review your taxonomy implementation to ensure ongoing compliance and accuracy.
By following these steps, SEC filers can effectively migrate to the GAAP Financial Reporting Taxonomy, ensuring accurate and compliant financial reporting.
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FAQs
What are the key updates in the 2024 GAAP Financial Reporting Taxonomy?
The 2024 taxonomy includes updates for multiple ASUs, new elements for SEC Form 11-K filings (prefix “us-gaap-ebp”), and technical improvements like 393 new TINs and 24 new DQC rules.
How should filers approach deprecated elements in the 2024 taxonomy?
Filers should identify and replace deprecated elements with updated ones, and update labels and definitions to reflect the 2024 standards.
What are Taxonomy Implementation Notes (TINs), and how do they help filers?
TINs provide guidance for implementing the taxonomy correctly. The 2024 taxonomy includes 393 new TINs, mainly Usage and Resource TINs related to FASB GAAP Financial Reporting Taxonomy Implementation Guides.
What are the new elements for Employee Benefit Plans (SEC Form 11-K), and when do they take effect?
New elements for SEC Form 11-K filings are identified by the prefix “us-gaap-ebp” and are required for filings beginning after July 11, 2025.
How should filers prepare for the new XBRL US DQC rules in the 2024 taxonomy?
Filers should familiarize themselves with the 24 new DQC rules added in 2024, ensuring their filings align with these data quality validation rules enforced by the SEC EDGAR system.
How does DataTracks help in SEC reporting?
DataTracks provides robust financial reporting solutions, including automation tools and XBRL validation, to ensure accurate and compliant SEC filings, streamlining the SEC reporting process for filers.