By Campbell Pryde, President and CEO, XBRL US
The Financial Accounting Standards Board (FASB) released the proposed 2025 version of the Meta Model Relationships Taxonomy (Meta Model Taxonomy) for public review with comments due by November 29, 2024. The Meta Model Taxonomy is an important milestone in XBRL as it promises to revolutionize the way accounting standards can be used.
The FASB XBRL (eXtensible Business Reporting Language) Meta Model Taxonomy is a digital dictionary of financial reporting concepts used in the United States for tagging and structuring financial data, specifically tailored to align with U.S. GAAP (Generally Accepted Accounting Principles). The FASB “meta” taxonomy, is a higher-level framework that defines relationships and metadata around existing FASB taxonomy concepts and facilitates deeper data analysis and improved consistency in financial disclosures.
Benefits of the FASB Meta Model Taxonomy
- Enhanced Consistency and Comparability
- The Meta Model Taxonomy defines the attributes of concepts using relationships, which helps ensure that similar items across different financial reports are tagged consistently, aiding comparability and accuracy.
- It also provides a clear and structured semantic meaning, making it easier for preparers to consistently apply tags and giving users the ability to compare data across companies.
- Improved Data Quality and Validation
- The Meta Model Taxonomy allows the creation of more effective validation rules that can detect common errors and discrepancies in reporting, reducing the potential for misinterpretations or inconsistencies.
- This increased data quality enhances reliability for investors, analysts, and other stakeholders who rely on accurate data for decision-making.
- Streamlined Analysis and Automation
- With a robust Meta Model Taxonomy, data analysis tools can easily automate processing and analysis of XBRL data, allowing for quicker insights into financial statements.
- By capturing relationships and metadata around financial concepts, the Meta Model Taxonomy allows users to build more sophisticated analytical models, improving insights and reducing manual data handling.
- Alignment with Regulatory and Reporting Requirements
- The Meta Model Taxonomy helps to align the FASB taxonomy with GAAP standards, by linking the GAAP taxonomy to core accounting concepts.
- This alignment helps U.S. companies fulfill their reporting requirements in a way that is compatible with broader financial reporting and compliance standards.
What can you do with it?
The Meta Model Taxonomy is already used today to process certain DQC rules. For example, identifying all items that can appear on the income statement and checking that they are used appropriately.
It is also used to verify that items with the same meaning report identical values.
The enhancements made in the 2025 Meta Model Taxonomy massively increase the information included in the 2024 Meta Model Taxonomy. For example, the enhancements identify those items that are estimates and accruals. Large swings in these items can be indicators of earnings management.
The Meta Model Taxonomy highlights the inflows and outflows between stocks and flows, enabling the identification of cash inflow and outflow items. Additionally, it ensures that roll-forward calculations are correctly defined.
The Meta Model Taxonomy also assigns attributes to concepts to clarify their meaning, making it possible to distinguish between concepts such as losses versus expenses and gains versus revenues.
The association of accounting attributes to concepts allows analysis to be performed against the attributes of concepts rather than the concepts themselves. This means that as the taxonomy is updated and new concepts are added, existing rules and analytics will continue to work without the need to update for new concepts.
What are the next steps
The Meta Model Taxonomy is out for public review and comment until November 29, 2024. We encourage everyone to look at the Meta Model Taxonomy and think about how it can be used. We have included some XULE queries on our website that show how the taxonomy can be queried.
We also encourage other taxonomy editors to review the Meta Model Taxonomy to see how the same framework can be applied to their taxonomies.
