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XBRL and the Codification…The Rest of the Story

August 12, 2009

As previously reported, the 2009 US GAAP Taxonomies are referenced back to the now out of date US GAAP hierarchy. XBRL US, the non-profit consortium that supports the implementation of XBRL in the United States through the development of taxonomies relevant for use by US public and private sectors, published a Taxonomy Extension that points to the US GAAP Codification. But be careful how you choose to use the codification extension.

The official Taxonomies to be used for SEC filings are located on the SEC website. If you use a taxonomy that is not listed on the SEC website you risk the EDGAR system being unable to recognize your electronic filing. XBRL US says this in its Codification Taxonomy Extension FAQs:

[The Codification taxonomy extension is] “for information purposes and are not recognized as part of the official 2009 taxonomy by the Securities and Exchange Commission (SEC). The Codification linkbase file SHOULD NOT be referenced as part of a company’s filing as it will not be recognized by the SEC EDGAR system. The Codification files can be used by both consumers of XBRL data and by filers as reference information to understand the origin of individual elements.”

In plain English XBRL US is saying don’t file your 2009 XBRL exhibit with the SEC using the Codification taxonomy extension. If you do, the SEC’s Edgar system won’t be able to accept your filing. You should verify that the 2009 US GAAP taxonomy element that most closely matches your financial data is properly tagged to your data. The best practice would also include a separate validation that each tag also agrees with the appropriate level of the Accounting Standard Codification (Topic, Subtopic, Section or Paragraph)

The FASB and XBRL US have been working together since 2006. It would have been nice if a smoother XBRL and Codification connection could have been worked out in advance. It seems that part of the challenge to a smooth transition may have been the SEC’s inability to enable quick integration of new taxonomies into the outdated EDGAR system. Fortunately both issues will be addressed by the 2010 US GAAP Taxonomies, which will be connected only to the Codification. I hope the SEC is planning for more timely integration of new taxonomies into the new IDEA system (under development but partly implemented) that will at first supplement and then replace EDGAR.

The Codification taxonomy extension is still useful to investors and the public as they digest XBRL filings after the Accounting Standards Codification effective date. However, XBRL software tool users will have to deal with one additional inconvenience. When you follow the link to the underlying US GAAP you may be taken to the Codification public login page. Anyone can obtain a free login to the basic Accounting Standards Codification tool, but it is a bit annoying to have this additional roadblock to seamless operation of XBRL files. Fortunately the 2010 US GAAP taxonomies will also fix this problem.

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One Comment leave one →
  1. September 3, 2009 3:40 am

    Hey Jeff

    Good blog. Not seen it till now, but thumbs up. I think the codification statements are somewhat unfair though — XBRL US and FASB have been working together on incorporating the codification links into the XBRL US taxonomy for three years as you point out. As it happens, the SEC timelines for XBRL filing and the FASB timelines for the public release of the codification project didn’t quite coincide.

    It would be good, of course, if the SEC’s systems were able to deal with the change slightly faster, but in the world of huge, mission critical government IT that’s not really very realistic. The release by XBRL US of the extension module that contains the codifications is sensible and pragmatic. It recognises that filers and their filing bureaus can deal with pointing at one taxonomy “entry point” that uses the codification extension module, and then file from a slightly different “entry point” which leaves it out, in a far more agile way than the government is presently able. XBRL is very modular. You can incorporate different modules of taxonomies for different purposes and XBRL US’s decision just takes advantage of this aspect of a powerful language.

    Cheers

    John Turner

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