The GAAP (Generally Accepted Accounting Principles) taxonomy yearly update was recently released, and the SEC is strongly promoting the usage of this recent release. The taxonomy is essentially a combination of both financial and business reporting terms, that has been generally agreed upon. The Taxonomy combined with the required reporting creates XBRL data. The 2016 update like its predecessors is still focused on stability, however the main focus shifted to simplifying the entire update. Elements that weren’t being fully utilized were eliminated, which allowed the amount of inconsistencies found within the update to be diminished. This updated version also allowed companies the most recent computer tags which improve the accounting standards.
XBRL formatted documents all contain computer readable data. The benefits of using these digital financial statements include:
- Digital financial statements help ensure effectiveness.
- Financial reports are able to be analyzed more rapidly and more efficiently.
- This also reduces processing costs, allowing the entire process to be more cost and time effective.
- Digital financial statements help eliminate errors, allowing the system to become more reliable.
- Using XBRL allows investors the chance to decide how to act on data in real time. This is time efficient especially when communicating to investors across the globe.
The Taxonomy is a set of data tags used for XBRL that affects a diverse group of preparers, software providers, regulators, accounting firms and end users. End users are considered anyone from data aggregators to individual users. Since the Taxonomy has to cover such a large and diverse group, an update that reduces costs and time spent is extremely beneficial. This new update not only reduces costs and time spent, but also reduces error and increases the reliability of the system.
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