How accounting changes get into the US GAAP Taxonomy
Special thanks to Anna Kwok, Senior Director of Professional Services at Workiva, for her help in preparing material on this topic. Anna is a member of the XBRL Taxonomy Advisory Group at the Financial Accounting Standards Board (FASB).
XBRL filers are generally familiar with the annual US GAAP Taxonomy (UGT) release cycle. But do you know what happens behind the scenes before changes appear in a new taxonomy? The complexity of the process may surprise you.
Let’s take the new accounting codification update on revenue recognition as an example, and walk through what the process looks like for developing the taxonomy.
- Step 1: Kickoff
The process starts at the beginning of the year, when the XBRL team at the FASB reviews the Accounting Standard Updates (ASUs) proposed for the year and identifies topics that will impact the UGT. The team tracks the status of an ASU until it receives an exposure draft.
- Step 2: Input collection
Once the team receives the exposure draft, it creates the proposed taxonomy modeling and develops the draft implementation guide. The team documents this process with memos that contain background information on the ASU, examples, and related modeling alternatives. These will be discussed with constituents, including preparers, service providers, data consumers, and academics, during the public comment period.
- Step 3: Public commenting
The proposed taxonomy modeling and implementation guide are available for public comment. The team gathers input through targeted outreach to end users and other stakeholders and presents the materials to the Taxonomy Advisory Group (TAG) for additional feedback. After this commenting process, changes are incorporated into the Development Taxonomy, which will go through the regular public comment period in the fall.
- Step 4: Implementation
The entire Development Taxonomy is published for public comment in the fall. After any changes from this process are incorporated, the taxonomy is submitted to the SEC for final approval and then added to EDGAR, so filers can use the updated taxonomy.
Check out our next blog as we follow an actual ASU, Revenue Recognition, through this process.