This article has been updated to correct an error regarding the date when FASB’s new codification of accounting standards will be effective for financial filings.
A solution is said to be coming soon to a thorny technical issue that some observers had feared could temporarily render electronic financial reports tagged in eXtensible Business Reporting Language less useful than had been hoped.
The issue revolves around the Financial Accounting Standards Board’s new codification of accounting standards, which is set to launch July 1 and be effective for financial filings made after September 15.
One key advantage of XBRL-prepared electronic reports is that each data-tagged line item displays references to the accounting and regulatory rules applicable to that item. That gives users of the financial statements valuable context for the reported number.
But the current XBRL taxonomy — that is, the set of tags corresponding to the line items — aligns with the precodification organization of the FASB literature. A new taxonomy incorporating references to the codification is scheduled to be released in early 2010. But to prevent users of data-tagged reports filed between Sept. 16 and the date of that release from seeing references to standards that don’t match up with the new codification, an extension to the current (2009) taxonomy is needed.
On Thursday, Mark Bolgiano, chief executive of XBRL US, told CFO.com that his organization and FASB are working on such a solution and that it will be ready in July. A FASB spokesperson told CFO.com that while the accounting standards board is “shooting” to have the fix ready by the end of the month, there is no specific scheduled date.
But unless that release were to be delayed beyond Sept. 15, what some saw as a potential problem will be averted for investors, banks, and other users of financial statements filed by any of the 500 largest public companies.
Earlier this year, the Securities and Exchange Commission required those companies to file financials with XBRL tags for periods ending June 15 of this year and later, and FASB announced in early June that the codification would be effective for fiscal periods ending after September 15. And any confusion about the accounting underlying the information in the reports could, of course, have caused some communications problems for finance executives.
Neal Hannon, senior consultant for XBRL strategies at The Gilbane Group, an information technology consulting firm, called the forthcoming solution “great news.” He said he had been concerned for months that the necessary programming might not prove doable, at least in a reasonable time frame.
Even if the fix were delayed, financial-report users would still be able to locate the accounting standards relating to specific line items. The board’s codification Website contains a tool that cross-references the old organization of generally accepted accounting principles with the new one. “It’s not as though people have to be completely lost,” said Tom Hoey, FASB’s codification project director. “They might just find it more cumbersome for a short period.”