The Securities and Exchange Commission has given its final approval to the 2017 GAAP Financial Reporting Taxonomy that public companies will use to prepare their XBRL financial statement exhibits.
The Financial Accounting Standards Board updated the GAAP taxonomy for use in filing 2017 financial statements via XBRL to reflect changes in accounting standards and other improvements meant to make it more user-friendly. The FASB also released nearly a dozen implementation guides that help explain use of the taxonomy in some specific areas of accounting.
The implementation guides address, for example, how to use the taxonomy in tagging items in financial statements associated with disposal groups and discontinued operations, insurance, liquidation basis of accounting, leases, defined benefit plans, notional amount disclosures, other comprehensive income, repurchase financings as well as repurchase-to-maturity transactions, retirement benefits, revenue recognition, segment reporting, and subsequent events.
The FASB updates the taxonomy annually for changes to accounting standards and for other improvements that will make it easier to use, based on user feedback and other input. The board issues a summary of major changes to the taxonomy to make it easier for users who are familiar with the 2016 GAAP Taxonomy to see where changes have occurred.
The board has endeavored the past few years to keep changes to a minimum so as to limit the transition companies must experience each year in navigating a new taxonomy. The board saw an uptick, however, in the number of new elements that needed to be added to the taxonomy in 2017 as a result of new accounting standards.
Most significantly, the new taxonomy includes new elements associated with the huge new accounting standard on revenue recognition, which takes effect in 2017, as well as the new standard on lease accounting, which goes into play the following year. The 2017 release also includes new elements for new standards dealing with the cash flow statement, income taxes, consolidation, stock compensation, investments, and derivatives and hedging.
The SEC must approve a taxonomy before companies are permitted to use it to file financial statements. While the SEC has approved annual taxonomy updates for companies reporting under GAAP, it began accepting an taxonomy for companies reporting under International Financial Reporting Standards for the first time this year. The IFRS Foundation has maintained and updated an IFRS Taxonomy but the SEC has never deemed it suitable for use in the United States until recently.
The SEC also proposed recently requiring all companies to file financial statements using inline XBRL, a process by which the XBRL exhibit is integrated with the traditional PDF display, enabling companies to file only once instead of twice in separate formats.