The Securities and Exchange Commission has approved the 2012 U.S. GAAP Financial Reporting Taxonomy as updated by the Financial Accounting Standards Board, giving public companies the green light to rely on the taxonomy to meet their XBRL filings obligations in 2012.

The 2012 GAAP Taxonomy contains updates that reflect changes in accounting standards since the 2011 Taxonomy was published, as well as other improvements based on companies' experiences using the taxonomy in prior years. FASB staff takes feedback from companies that have used the taxonomy to complete their XBRL filings, and it studies XBRL filings themselves to get a sense for how companies interpret concepts in the Taxonomy. Staff use that information to make improvements to the taxonomy that will lead to more comparable reporting across all public companies.

The taxonomy is a list of computer-readable financial reporting labels coded in XBRL, enabling companies to precisely tag each piece of financial data in a typical long-form financial statement with footnote disclosures. The FASB is responsible for updating the taxonomy annually to reflect changes in accounting standards and any other changes necessary to assure it adequately and accurately defines all of those individual pieces of data that companies must report.

Public companies are required to use an SEC-approved taxonomy to complete their XBRL filings. Through a three-tiered transition to bring companies into the XBRL filing process, the largest public companies began filing financial statements in XBRL in 2009. A second wave began filing in 2010, and the smallest companies began filing in 2011.

SEC staff members have advised companies to get up to speed on the new taxonomy as it will gradually phase out older taxonomies and remove them from its website. The SEC also has advised companies to search the taxonomy carefully to find tags appropriate to their financial statement line items before creating custom tags, or “extensions,” that make it more difficult to compare results among companies. The number of tags contained in the taxonomy has grown considerably as regulators and companies have tweaked and expanded the taxonomy to assure it contains enough appropriate tags.

Although foreign private issuers also are subject to the XBRL filing requirement, the SEC has given them a reprieve while it awaits a taxonomy for International Financial Reporting Standards. The IFRS Foundation has developed a taxonomy, but the SEC has not yet approved it for use in U.S. XBRL filings. The IFRS taxonomies produced to date have contained considerably fewer tags than GAAP taxonomies, leaving the SEC to await more detailed tags before approving a taxonomy.