Every year the Generally Accepted Accounting Principles (GAAP) releases update on its taxonomies, and the SEC strongly recommends using such updates. The taxonomy is a combination of both the financial as well as business reporting terms, which has generally been agreed upon. These Taxonomies when combined with the needed reporting creates the XBRL data. Normally, the yearly updates focus on the stability, although the primary focus remains the simplification of overall update. Elements that are not being fully utilized gets eliminated, which allows the amount of inconsistencies found within the update to be diminished. Apart from that, the updated version also allows the firms to use the most recent computer tags that significantly improve the accounting standards.
Benefits of GAAP
All the XBRL formatted documents contain computer readable data. Some of the benefits of using these digital financial statements are as follows:
Digital financial statements help ensure effectiveness. Financial reports are able to be analyzed more rapidly and more efficiently. Reduces time and costs, allowing the entire process to be more 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 GAAP Taxonomy is a set of data tags utilized for XBRL tagging, which make an impact upon a wide range of filers, software providers, regulators, accounting firms as well as end users. End users are considered anyone from data aggregators to individual users. The Taxonomy has to cover such a large and diverse group. Therefore, an update reducing the costs and time spent is highly beneficial. Additionally, it reduces the error, thereby increasing the reliability of the entire filing ecosystem.