In 2007, the Securities and Exchange Commission (SEC) mandated the use of the eXtensible Business Reporting Language (XBRL) for public company reporting, with the US GAAP Financial Reporting Taxonomy (Taxonomy) as a critical component for standardizing the reported data. SEC awarded the contract for building the Taxonomy to XBRL US and the same was completed in early 2008 for the first release.
New taxonomies commonly have an initial adjustment period. Once preparers start using a taxonomy, they may discover missing elements, structural issues, and definition and label adjustments. Similarly, software providers may identify architectural concerns that make it difficult to work with the taxonomy or enhancements that improve its suitability for purpose.
When the Financial Accounting Foundation and the Financial Accounting Standards Board (FASB) assumed responsibility for ongoing development and maintenance of the Taxonomy in 2010, the first three years were an intense period. The FASB Taxonomy team spent the startup years, 2010 – 2013, focusing on consistency reviews to establish a uniform style, and on improving the Taxonomy for both GAAP reporting requirements and common industry practices.
Today, with an experienced team and developed Taxonomy, FASB has an established and smooth-running process. The primary focus is on incorporating Taxonomy improvements for new GAAP reporting requirements and topics targeted for remodeling or requiring supplemental guidance. FASB is also involved in Taxonomy-wide projects that occur from time to time when such an improvement is identified as being broadly beneficial and when the benefits justify the cost.
The FASB also publishes and delivers to the SEC each year a proposed Taxonomy (Annual Update) designed to keep the Taxonomy and the SEC Reporting Taxonomy (SRT) current with GAAP and specific SEC reporting requirements for the SRT. To ensure the requirements are met, the Taxonomy team participates in regular status meetings with SEC staff.
Additionally, FASB solicits inputs during public review periods; especially from its Taxonomy Advisory Group (a cross-section of stakeholders from preparers to users), various industry resource groups, targeted outreach, and participation more broadly in the XBRL and financial reporting communities, e.g., XBRL US, XBRL International, Inc., and the International Accounting Standards Board.
The demands on the Taxonomy are significant with numerous stakeholders - from regulators and issuers to data aggregators and analytical tool providers, to software vendors. Therefore, building and maintaining a taxonomy requires a skilled team with expertise in standards and modeling, accounting, and technology, and great communication skills.
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