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XBRL and the Neglected Codification

July 2, 2009

The FASB codification launched for public use on July 1, 2009. Companies will be required to utilize the codification references in their SEC filings for fiscal periods ending after September 15, 2009. Third quarter XBRL Exhibits will need to reference the applicable codification section as well. Problem is that that the 2009 US GAAP taxonomy (the tags corresponding to the line items) is aligned with the pre-codification US GAAP.

As companies are telling their story electronically with XBRL, one of the valuable components of the XBRL contextual information is the underlying accounting standards used to account for the reported information. That connection gives users key contextual information that is valuable to understanding what is being reported. Without that connection a user’s understanding of the information being reported is hindered.

Users could utilize the online codification tool to translate between the former US GAAP references to the Codification section references. The online codification has a cross-referencing tool that connects the two methods of referencing US GAAP. But those extra steps make the processes of getting to the underlying accounting standards cumbersome and slow thereby rendering the XBRL data less automatable.

The FASB and XBRL US are working on a solution to the problem that they hope to publish later this month. The fix involves extending the 2009 US GAAP taxonomy so that the connection with the codification sections is made. There is also another hurdle to third quarter XBRL filings – the SEC’s electronic filing database won’t be able to accept the 2009 US GAAP taxonomy until later this month.

We are early in the US implementation of XBRL, so a few rough spots on the road to XBRL are not a total surprise. Let’s hope that in the future there is greater collaboration between XBRL International, XBRL US and US GAAP standard setters. We should also hope that when we transition to IFRS in this country that the XBRL taxonomies transition will occur in a planned and organized way.

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