Chethan Gorur is the Director of Interactive Data at Trintech, Inc. He is also Chair-Designate of the XBRL International Standards Board.

For many businesses filing their financial statements using XBRL to comply with the SEC mandate, the phrase “extension taxonomy” is a largely misunderstood term.  There is a narrow view that it is only about adding brand-new company-specific elements which do not exist in the base taxonomy (Ex: US GAAP 2009). While adding new elements is definitely one of the purposes for creating extensions, there are many other drivers for creating extension taxonomy. Even though some of the principles apply for other scenarios, this blog post specifically refers to extension taxonomies as they are used to meet the SEC XBRL mandate for operating companies.

The reality is that almost all of the XBRL filers to date have created a barebones extension taxonomy. Because you’ll be delivering your own unique extension taxonomy to the SEC – and a slightly modified version of the taxonomy with every quarterly and annual financial statement you certify – it’s important to understand the component parts of the document, and some basic rules to help guide you in developing it.

An extension taxonomy is not just about a new set of tags (or elements). Elements are actually very specific pieces of information, and the XBRL US GAAP Taxonomy Preparer’s Guide advises preparers to first determine if it is possible to use more general – and less specific – extension tactics. These higher-level tactics can be re-used in future periods, resulting in much less effort over time.

You can tackle creating extension taxonomy by thinking about it as an upside-down pyramid: begin with the most general set of extension tactics, and see if that suits your purposes. If not, move to a lower level, where more specific information is required. For the purposes of this blog post, we’ve grouped the twelve methods of extending the taxonomy under four, easily remembered headings, listed mostly by the increasing levels of impact that the tactic will have upon future re-usability.

1. Relationships Help Present Your View

It is recommended that companies perform the following at a minimum: (1) create new Relationship Groups, and (2) change the Ordering of existing relationships defined in one of the Industry Entry Points. These methods of extending the XBRL US GAAP Taxonomy have the most capacity for future re-use.

A new Relationship Group allows preparers to assemble custom presentation relationships between already existing elements, tables or existing groups.

Changing the Order is as simple as reordering the children in an existing list.

In some cases, simply modifying relationships within one of the existing Industry Entry Point taxonomies can be sufficient for a business to complete their own extension taxonomy. For example, you might need to modify the order of a list as follows: