Most finance teams are done with much of the accounting work for the new U.S. GAAP revenue recognition standard – setting up systems; assessing contracts; and measuring, booking and reporting the revenue. Now it’s time to prepare the XBRL tagging for the new revenue disclosures.
Based on the significant effort already expended, the XBRL part sounds relatively easy. But watch out, there’s probably more XBRL revenue work to do than you originally thought. Even if the new revenue standard created only a small P&L impact, it’s likely there are many XBRL tagging changes necessary to properly reflect the revenue in the XBRL-tagged financials.
Changes to US GAAP Taxonomy
The reason for this is that the US GAAP Taxonomy changed, due to the new revenue standard (ASC 606). Many of the XBRL tags companies previously used to tag revenue and cost of sales are no longer applicable. In fact, many of the revenue and COGS tags previously used won’t even be available in the 2018 US GAAP Taxonomy.
For example, many filers will be required to use the new tag, “Revenue from Contract with Customer, Including Assessed Tax” to tag revenue amounts.
Ideally the US GAAP Taxonomy would stay the same, but accounting standards change, so the taxonomy must change. The revenue recognition standard required that certain new tags be created and the revenue section of the taxonomy be restructured.
Assess the impact on XBRL
For the first SEC filing in which a company adopts the new revenue standard, the company should assess the XBRL tagging and make the required changes to the XBRL. For many companies this won’t be just a cursory change. It will take a true assessment, an understanding of the taxonomy and a re-tagging (and likely a restructuring) of the applicable items.
Some early adopters of the new revenue standard already submitted financials to the SEC and, unfortunately, some of them did not update their XBRL tagging accordingly. Submitting incorrect tagged financial data to the SEC isn’t something I would recommend. So, this is a change that requires awareness.
To increase awareness, there is an XBRL US webinar on June 4, 2018 on this topic. I will join speakers from the FASB and XBRL US to cover the change. It’s a free webinar, so register here.
Also, contact Merrill Corporation or myself if you need further information about properly creating XBRL for this revenue recognition change.