In June 2018, the Financial Accounting Standards Board (FASB) staff issued two new Taxonomy Implementation Guides. It is critical that SEC registrants understand these guides, thereby ensuring they are communicating information properly when submitting XBRL-tagged financials to the SEC.
The two new guides are:
Proper XBRL tagging
The guides present example financial disclosures, explain the related taxonomy section and then show the appropriate tagging of the disclosures using the U.S. GAAP taxonomy. The guidance is critical to making sure that the XBRL-tagged data is providing the same financial meaning as is provided in the traditional paper-based financials. Accordingly, SEC registrants will benefit from understanding these guides.
Revenue from contracts with customers
The guide on Revenue from Contracts with Customers is necessary to addresses changes to the U.S. GAAP taxonomy resulting from the FASB’s issuance of the new revenue recognition standard ASC 606. The changes made to the taxonomy will result in changes to how registrants tag their financials, so this guide is necessary to communicate those changes.
The guide notably addresses the proper way to tag “Revenue” and “Cost of Revenue” on the face of the Income Statement. This is essential since the tags in this section of the taxonomy have been restructured due to the revenue recognition standard. This is a high-profile change to the taxonomy and, fortunately, five of the ten examples in the guide are dedicated to this key issue. The FASB staff has given this the appropriate attention in the implementation guide.
Dimensional Modeling for Disclosures of Consolidated and Nonconsolidated Entities
The guide on Dimensional Modeling for Disclosures of Consolidated and Nonconsolidated Entities is necessary to show registrants the taxonomy structures to tag amounts about relationships the registrant entity has with other entities. A simple example of this type of disclosure is “Accounts receivable at December 31, 20X1, includes $500 million due from ABC Company.” Certain registrants haven’t been attentive about how they are tagging these amounts, resulting in the risk that the tagged information provides a different meaning in the XBRL financials than in the paper-based financials. This guide will create consistency across companies and help companies convey the proper meaning in the XBRL financials.
Robust communication of needed guidance
The FASB staff created the guides with significant and proper diligence, resulting in guides that are a robust communication of how the taxonomy is designed for these topics. As a member of the FASB’s Taxonomy Advisory Group, I provided advice on the implementation guides prior to their issuance. As a member of Merrill Corporation’s experienced XBRL team, we provided input to improve the guides during the FASB’s commentary periods. As chair of the XBRL US Data Quality Committee, the committee created automated rules to detect non-compliance with the guides, to the extent it is possible to do so. SEC registrants should take advantage of the FASB staff’s diligence and robust communication by understanding the guides and applying them appropriately.
The two documents provide key guidance to help an SEC registrant understand how the U.S. GAAP taxonomy elements and relationships are structured. Registrants should read the guides to determine if their current XBRL tagging is appropriate and if changes are necessary for future tagging. Feel free to contact Merrill’s XBRL team or myself for assistance.